China Court Rejects Former Trader’s Bid to Overturn Lifetime Ban

A Beijing court upheld a regulator’s decision to ban a former Everbright Securities Co. employee for insider trading after the company mistakenly placed 23.4 billion yuan ($3.8 billion) in buy orders in 2013.

The China Securities Regulatory Commission had barred Yang Jianbo, 37, from the industry after deciding he violated rules against insider trading Aug. 16 last year when he executed trades to hedge against the buy orders. The Beijing No. 1 Intermediate People’s Court said on its official microblog today that it rejected Yang’s bid to overturn the ban.

Yang had argued that the securities regulator had no legal basis for viewing the trading mistake as a form of inside information. The Everbright error and its aftermath highlight challenges for brokerages and regulators posed by computer-driven trading.

The Everbright misstep drove a swing of more than 6 percent in the benchmark Shanghai Composite Index after a glitch saw the firm send 26,082 unintended buy orders in two seconds. Two weeks after the error, the regulator imposed a record penalty of 523 million yuan on the brokerage and temporarily barred the firm from most proprietary trading.

Yang, who has been teaching at a Shanghai university since being banned from industry, said during the court hearing that he hadn’t traded on inside information and the CSRC investigations weren’t handled in a professional way, according to the People’s Court Daily.

The CSRC said that China’s securities law gave it the power to determine what constituted inside information, according to a transcript posted on the court’s microblog. The trading mistake had a huge impact and Everbright should have informed the public about the mistake before it acted to hedge its positions, the CSRC said, according to the transcript.

— With assistance by Aipeng Soo

Before it's here, it's on the Bloomberg Terminal.