Yang Jianbo, former Everbright Securities executive, is suing the China Securities Regulatory Commission after it fined and banned him for life last year from the securities industry for insider trading. Gong Lei / Xinhua

According to Yang's indictment paper, at 11:05 am on that day, due to a flaw in trading software, Everbright mistakenly placed 23.4 billion yuan ($3.84 billion) worth of purchase orders for 180 ETFs, of which 7.27 billion yuan were concluded.

Yang reported to the CSRC Shanghai branch and the Shanghai Stock Exchange after the incident and later asked traders to short sell index futures and ETFs to hedge risks, according to instructions from Everbright Securities, the indictment paper said.

Everbright's annual profit dented by CSRC fine

Everbright Securities fined for insider trading

The CSRC launched an investigation on Aug 18 into the incident. On Aug 31, the commission made a preliminary determination of penalties and individual bans. The CSRC finalized its ruling after hearing Everbright's response.

The CSRC announced on Nov 15 formal penalties for insider trading, levying a fine of 523 million yuan and banning four Everbright managers, including Yang, from the nation's financial markets for life.

Wu Xiaoling, the central bank's former vice-governor, told China Daily earlier that the commission punished Everbright Securities because of insider trading. As a listed company, it should admit its mistake immediately and then hedge risks.

Xu Feng, a lawyer with the Shanghai Huarong Law Firm, said Everbright Securities's behavior damaged the interests of common shareholders. He said the CSRC's punishment was the right thing to do and that it will be good for the market in the long run.

A Beijing-based hedge fund manager, who asked to remain anonymous, told China Daily that Yang's penalty was too heavy since other officials may have known the information before Yang led his team to short the index futures and ETFs, and that more people should be responsible for the event.

The case was adjourned to a later date.