Error costs Everbright millions

4 executives banned from industry after computerized trading mistake

It took only three minutes. The operational error made by Everbright Securities two weeks ago has earned it a 523 million yuan ($85 million) fine from the nation's top securities regulator, for insider trading, release of misleading information, and muffed risk control.

That is the largest fine the regulator has ever given a securities brokerage in the history of the country's stock market.

China Securities Regulatory Commission announced the punitive measures on Friday after a two-week investigation of Everbright Securities' near hysterical trading behavior that shocked the domestic A-share market on Aug 16.

The brokerage will be fined five times its insider-trading-related gains, the CSRC spokesman said.

In addition, Everbright Securities' former president Xu Haoming, assistant executive Yang Chizhong, general manager of the accounting department Shen Shiguang and general manager of the strategic investment department Yang Jianbo were each fined 600,000 yuan. And they were all banned from the securities industry for life.

Xu resigned after the firm caused the biggest swing in the benchmark stock index since 2009.

Mei Jian, secretary of the board of directors of Everbright Securities, was fined 200,000 yuan for giving the media erroneous information on how the abnormal market fluctuation occurred, an error that influenced investors' decisions that day.

The CSRC also banned the securities company from proprietary trading for three months and suspended approval for new Everbright services.

The penalties may hurt the company's business and its brand reputation, possibly causing its shares to drop sharply next week, analysts said.

However, online chat rooms were abuzz with people saying the penalties were too lenient.

As of 9 pm on Friday, a survey on ifeng.com, a popular news portal, showed that more than 80 percent of 30,000 respondents thought that Everbright had manipulated the stock market and should be fined more.

Everbright's proprietary business mistakenly sent buy orders worth 23.4 billion yuan on Aug 16 to the Shanghai Stock Exchange, and finally completed transactions of 7.27 billion yuan, which lifted the Shanghai Composite Index by 5.96 percent in three minutes.

The company's four chief decision-makers decided to short-sell the stock index futures in order to hedge risks, before disclosing the information to the public market.