China's Everbright Sec suspended from underwriting debts -statement

08/21/2013

BEIJING, Aug 21 (Reuters) - China's Everbright Securities has been ordered to suspend lead-underwriting any new debt financing instruments of non-financial enterprises in the country's inter-bank bond market, the company said on Wednesday, after a computer glitch caused a trading loss of $32 million.

The instruction from the National Association of Financial Market Institutional Investors (NAFMII), appointed by the central bank to help supervise the inter-bank bond market, did not say how long the suspension will last, according to a company filing to the domestic stock exchange.

NAFMII demanded Everbright to conduct a self-check of its business process, electronic system, internal compliance, risk management and staff management, and submit the findings to the association together with a restructuring plan by Aug. 30.

"The abnormal trading accident recently reflected big problems in your company's internal compliance and risk control. That does not meet the association's requirements for healthy risk management and internal control systems on lead underwriters," the company cited a document from NAFMII as saying.

That is the latest penalty for the brokerage after its mistaken purchase of more than $1 billion of mainland shares sparked a flash rally in the domestic stock market last Friday. Everbright incurred a $32 million trading loss as a result of the computer glitch.

The company's shares fell the maximum 10 percent limit in Shanghai after trading resumed for the first time since the incident and dropped by another 6 percent on Wednesday.

The China Securities Regulatory Commission (CSRC), which launched a formal investigation into Everbright, has barred the brokerage from selling the shares for the next three months, forcing it into a plan to sell some of its securities holdings to help cope with a possible funding crunch.

Everbright Securities has suspended Yang Jianbo, the manager of its strategic investment department, to cooperates with the probe into its trading system, the company told a domestic newspaper on Wednesday.

NAFMII, meanwhile, ordered Everbright Securities to take care of the debts it has already underwritten until they mature.

The company became a lead underwriter in the inter-bank bond market in November 2012 and the business has so far generated revenue of about 540,000 yuan, it added in the statement. (Reporting by Langi Chiang and Jason Subler; editing by David Evans)



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