Sept. 6 (Bloomberg) -- Everbright Securities Co. posted an unconsolidated net loss of 523 million yuan ($85 million) last month after $3.8 billion in erroneous trading orders that roiled China’s equity market and drew a record regulatory penalty.
The country’s seventh-largest brokerage by market value incurred the unconsolidated loss, which doesn’t include contributions from its subsidiaries, after disposing of assets following the Aug. 16 error, Everbright said in a statement to the Shanghai Stock Exchange today. The figure is based on preliminary data and hasn’t been audited, the company said.
The loss adds to woes at state-controlled Everbright, which has been ordered by the China Securities Regulatory Commission to pay a record 523 million yuan for insider trading in the aftermath of the errors. The regulator, which is cracking down on misconduct, barred the company from most proprietary trading and banned four of its executives from the market for life.
Everbright sold exchange-traded funds and index futures on Aug. 16 before telling the market it had made the erroneous buy orders, the CSRC said Aug. 30. Investors in Guangzhou and Shanghai are suing for damages, claiming they suffered losses.
Everbright has closed all of the short positions in index futures it built to offset the erroneous orders, resulting in a 4.3 million-yuan loss, it said in a separate statement today.
The CSRC stopped accepting applications from Bosera Funds for new products and businesses for six months after it found that a fund manager was buying securities in advance of client orders, the People’s Daily online reported today, citing the regulator. The company will take measures in response to the CSRC penalty, it said in an e-mailed statement.
The watchdog’s investigation into the erroneous trades was its second probe of Everbright this year, following an investigation of alleged false information in an initial public offering. Regulators are seeking to restore confidence in a market whose benchmark index, the Shanghai Composite, has slumped 25 percent in the past four years, the second-worst performance of 45 developed and emerging-market equity gauges tracked by Bloomberg after Greece’s.
--Aipeng Soo. Editors: Nathaniel Espino, Darren Boey