Ex-Trader Sues China Securities Watchdog to Repeal Life Ban

A former Everbright Securities Co. (601788) trader said he filed a lawsuit against China’s securities watchdog seeking to overturn a lifetime ban from the industry imposed after errant trades by the broker roiled local markets.

Yang Jianbo was Everbright’s head of global markets overseeing the firm’s own money when faulty software sent out buy orders worth as much as 23.4 billion yuan ($3.9 billion) on Aug. 16, causing a more than six percent swing in China’s benchmark stock index.

He was barred from working in the securities industry after the China Securities Regulatory Commission said an investigation found that Everbright engaged in insider trading when it sold exchange-traded funds and shorted index futures to offset the erroneous trades before disclosing the mistake. The CSRC also fined Everbright a record 523 million yuan on Aug. 30, barred the broker from most proprietary trading, and issued lifetime bans for three others at the company.

“I am seeking to revoke the sanctions on me,” Yang, 36, who has been teaching at a university in Shanghai, said in a phone interview. “We are in a disadvantaged position because you can’t say anything even though you are wronged.”

Everbright doesn’t object to the penalty, Caixin reported today, citing the company’s response to queries from the financial news website. Yang has already left the company and his comments don’t represent its views, Caixin cited Everbright as saying.

Yang, who was also fined 600,000 yuan by the regulator, said he filed his lawsuit in Beijing on Feb. 8. Everbright Securities’s ex-president Xu Haoming was among the others banned from the securities industry.

The CSRC didn’t immediately respond to a phone call and a faxed query seeking comment. Two calls to Everbright were unanswered.

Yang’s lawsuit was reported earlier by Capital Week magazine.

Severe Penalties

Yang and the other three executives didn’t purposely conduct insider trading and the regulator’s decision to ban them from the industry for life is too severe, according to appeal statements the executives sent in response to the penalties, which was posted to the CSRC’s website Nov. 1.

Chinese policy makers, seeking to improve allocation of capital, have since 2008 allowed brokerages including Shanghai-based Everbright to offer short selling and margin trading, as well as betting on derivatives with their own funds.

The software used by Everbright’s proprietary-trading desk, which specializes in high-frequency trades, sent 26,082 unintended buy orders in just two seconds on Aug. 16.

The error renewed concerns over computer-driven trading, which has also led to volatile market swings in the U.S. Computer errors caused the Nasdaq Stock Market to halt transactions for about three hours on Aug. 22.

To contact Bloomberg News staff for this story: Aipeng Soo in Beijing at asoo4@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.