In the toughest crackdown to date by Chinese regulators, Everbright Securities was fined 523 million yuan ($90 million Cdn) over a trading error made two weeks ago that caused wild swings in Chinese stock markets.
Everbright's CEO, who has already stepped down from the company, has been banned from the industry, and the firm is blocked from trading on its own account.
State regulators imposed the harsh penalties after a design flaw in Everbright's computerized trading system resulted in an avalanche of mistaken orders on the Shanghai Stock Exchange. The blame was placed on a fault in the computer system, rather than human error, such as a trader hitting the wrong button by mistake.
The error caused stock prices of some of China’s largest listed companies to swing wildly while market volume surged.
Partway through the chaos, the brokerage asked to cancel the trades, but the Shanghai Stock Exchange said on its website that any transactions that had been completed were cleared normally.
Everbright, established in 1996, is one of China's biggest securities firms and trading in its listed stock was suspended Friday as the China Securities Regulatory Commission handed down the penalty. Regulators said investors will be allowed to sue Everbright over losses blamed on the price swings, according to state media.
"Everbright Securities' lack of internal controls, chaotic management and its flawed software design are the reasons for the abnormal transactions," a commission official told reporters.
Four of Everbright's executives, including the manager of the firm's finance department and the head of computerized trading, face fines of $100,000, a ban on trading and further prosecution.
Shares of Everbright Securities fell by the daily limit of 10 per cent on resumption of trading.
China's securities regulator also rapped Everbright earlier this year for not providing enough information about the companies on whose stock it advised.
Its parent company, China Everbright Group, also faces trouble with U.S. regulators, over a probe into JPMorgan's hiring practices in China. JPMorgan hired the son of Everbright Group's chairman and then won advisory roles on several deals involving Everbright units.