For­mer Ever­bright exec goes to court

Ex-trader su­ing CSRC over life­time ban, case ad­journed to a later date

China Daily (Canada) - - BUSINESS - By CAI XIAO caix­iao@chi­nadaily.com.cn

The law­suit of a for­mer Ever­bright Se­cu­ri­ties ex­ec­u­tive against the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion went to trial on Thurs­day.

Yang Jianbo, for­mer gen­eral man­ager of the strate­gic trans­ac­tion depart­ment of the Chi­nese bro­ker­age firm, is su­ing the com­mis­sion af­ter it fined and banned him for life last year from the se­cu­ri­ties in­dus­try for in­sider trad­ing.

Yang said at the Bei­jingNo 1 Intermediate People’s Court that the com­mis­sion’s pun­ish­ment vi­o­lated the law and in­fringed on his le­gal rights. He asked the court to rule that the com­mis­sion re­voke the pun­ish­ment.

There are four main dis­puted is­sues be­tween Yang and the CSRC: whether the iden­ti­fied in­sider in­for­ma­tion is in­sider in­for­ma­tion; whether the be­hav­ior of Ever­bright Se­cu­ri­ties can be con­sid­ered in­sider trad­ing; whether Yang is a di­rectly ac­count­able per­son; and whether any il­le­gal gains from fu­tures trad­ing can be con­firmed.

Based on the Se­cu­ri­ties Law and a fu­tures trad­ing rule, the CSRC can con­firm that Ever­bright

The ac­cuser (Yang) is one of the di­rectly ac­count­able per­sons be­cause he took part in a meet­ing and made the de­ci­sion af­ter the ab­nor­mal trade was made.”

CRSC AGENT

Se­cu­ri­ties’ be­hav­ior is in­sider trad­ing, a CRSC agent told the court.

Ac­cord­ing to the agent, a flawed oper­a­tion by Ever­bright Se­cu­ri­ties had a big in­flu­ence on the stock mar­ket, but the in­for­ma­tion was not madepub­lic for a long time, so it can be iden­ti­fied as in­sider in­for­ma­tion.

“The ac­cuser (Yang) is one of the di­rectly ac­count­able per­sons be­cause he took part in a meet­ing and made the de­ci­sion af­ter the ab­nor­mal trade was made,” the CSRC agent said, adding that Yang also led traders in short sell­ing in­dex fu­tures and ex­change traded funds.

The ab­nor­mal trad­ing last Aug 16 caused the bench­mark Shang­hai Com­pos­ite In­dex to jump 5.96 per­cent in about three min­utes, with a large num­ber of pur­chase or­ders sent from Ever­bright Se­cu­ri­ties’ ac­count.

Ac­cord­ing to Yang’s in­dict­ment paper, at 11:05 am on that day, due to a flaw in trad­ing soft­ware, Ever­bright mis­tak­enly placed 23.4 bil­lion yuan ($3.84 bil­lion) worth of pur­chase or­ders for 180 ETFs, of which 7.27 bil­lion yuan were con­cluded.

Yang re­ported to the CSRC Shang­hai branch and the Shang­hai Stock Ex­change af­ter the in­ci­dent and later asked traders to short sell in­dex fu­tures and ETFs to hedge risks, ac­cord­ing to in­struc­tions from Ever­bright Se­cu­ri­ties, the in­dict­ment paper said.

The CSRC launched an in­ves­ti­ga­tion on Aug 18 into the in­ci­dent. On Aug 31, the com­mis­sion made a pre­lim­i­nary de­ter­mi­na­tion of penal­ties and in­di­vid­ual bans. The CSRC fi­nal­ized its rul­ing af­ter hear­ing Ever­bright’s re­sponse.

The CSRC an­nounced on Nov 15 for­mal penal­ties for in­sider trad­ing, levy­ing a fine of 523 mil­lion yuan and ban­ning four Ever­bright man­agers, in­clud­ing Yang, from the na­tion’s fi­nan­cial mar­kets for life.

Wu Xiaol­ing, the cen­tral bank’s for­mer vice-gover­nor, told China Daily ear­lier that the com­mis­sion pun­ished Ever­bright Se­cu­ri­ties be­cause of in­sider trad­ing. As a listed com­pany, it should ad­mit its mis­take im­me­di­ately and then hedge risks.

Xu Feng, a lawyer with the Shang­hai Huarong Law Firm, said Ever­bright Se­cu­ri­ties’s be­hav­ior dam­aged the in­ter­ests of com­mon share­hold­ers. He said the CSRC’s pun­ish­ment was the right thing to do and that it will be good for the mar­ket in the long run.

A Bei­jing-based hedge fund man­ager, who asked to re­main anony­mous, told China Daily that Yang’s penalty was too heavy since other of­fi­cials may have known the in­for­ma­tion be­fore Yang led his team to short the in­dex fu­tures and ETFs, and that more people should be re­spon­si­ble for the event.

The case was ad­journed to a later date.

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