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Brokerage executive loses case suing top regulator


12-26-2014 16:54 BJT

A former Everbright Securities executive has lost a lawsuit against the country’s securities regulator. Yang Jianbo, a former general manager of the high-frequency trading unit at Everbright Securities, sued the China Securities Regulatory Commission, objecting to a lifetime ban from the industry and a 600,000 yuan fine for last year's Everbright trading error, which caused a huge accidental spike in the Shanghai equity benchmark.

The ruling was announced at the Beijing First Intermediate Peoples Court’s Weibo account, the official microblog account of the court. The trading error took place on August 16 last year, when Everbright Securities mistakenly executed a seven billion yuan order, buying long a commonly traded exchange-traded fund.

That caused an accidental spike of the Shanghai Composite by as much as 5.6 percent. The brokerage shorted its unwanted positions in the afternoon in attempt to undo its mistake. 

One of the arguments is whether the market mishap was public knowledge. Yang Jianbo says the transaction was not based on insider trading, because many news media have covered the news, making the information available to the public.

Everbright Securities shorted the stock index futures to manage risks after the fat finger incident. The related information has no bearing to 180 ETF company, nor with 50 ETF company.

But the defendant, China’s Securities Regulatory Commission, the country’s top securities regulator, says the information should be disclosed through designated media outlets, according to the law, but not regular news or company’s statement.

"I need to emphasize that Everbright Securities is the only party that knows all the trade information. It did not disclose the information as required, but used the information to trade. This is negligence and destroys fair play," said Luo Juan, from the China Securities Regulatory Commission.

Other contentious arguments include whether shorting the positions is for profits, and who should be responsible for the trading activities. In August last year, China Securities Regulatory Commission fined Everbright Securities 523 million yuan, and forbade four executives from entering the securities market for life.

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