Investors suing Everbright await court moves
Updated: 2013-09-11 07:31
By Shi Jing in Shanghai (China Daily)
Despite a rejection by a court in Guangdong province, investors claiming damages due to losses incurred after Everbright Securities Co Ltd's recent trading error are pinning their hopes on pending decisions by courts in Shanghai.
The Panyu court in Guangdong province on Monday rejected a suit filed by a 40-year-old investor surnamed Guo who was seeking 70,000 yuan ($11,431) in damages. The court said it does not have jurisdiction over the case.
Now, attention is focused on the two cases that were filed at different Shanghai courts.
Lawyer Yan Yimin filed a lawsuit on behalf of a 60-year-old investor surnamed Li on Sept 2, claiming about 100,000 yuan, at Shanghai's Jing'an District People's Court. The court's jurisdiction includes the district where Everbright Securities is registered.
Separately, Zhao Xigang, a lawyer at the Hangzhou-based Zhejiang L&H Law Firm, filed on Sept 3 a claim of 45,000 yuan on behalf of an investor surnamed Guo from Wenzhou against Everbright Securities, the Shanghai Stock Exchange and the China Financial Futures Exchange at the Shanghai No 1 Intermediate People's Court.
The courts originally said they would respond to the lawsuits within seven days after receipt of the writs.
However, on Monday, Yan was notified by the Jing'an District People's Court that the decision on whether to hear the cases or not had been delayed. Zhao received a similarly worded message from the Shanghai No 1 Intermediate People's Court on Tuesday.
"Court officials told me the case was complicated and therefore they have to consult higher authorities on the matter," said Yan.
"According to legal proceedings, the court should give us a response as to whether to place the case on file on Tuesday. But they said they will take a longer time to study this case," said Zhao.
Meanwhile, the details of how retail investors were drawn into the mad rush for shares in the market turmoil that followed Everbright Securities' trading error on Aug 16 are beginning to emerge.
In the writ filed to the court, a copy of which was obtained by China Daily, Yan said that his client, surnamed Li and a retired worker in Shanghai, first heard rumors of Everbright Securities' unusually large buy order of shares of Citic Securities Co Ltd. According to the document, she hesitated at first because she knew that the market would swing back violently if the sharp rally was later attributed to an error rather than to "bullish" factors.
But after Mei Jian, secretary of the board of directors of Everbright Securities, denied any trading mistake at lunch time, Li bought 91,300 shares of Citic Securities at 11.9 yuan each, with a total transaction value of more than 1 million yuan.
Mei was later fined 200,000 yuan by the China Securities Regulatory Commission and later resigned from the company.
The benchmark Shanghai Composite Index slumped after Everbright Securities admitted that there was a problem in its arbitrage system at around 2:22 pm on Aug 16 and the index continued to drop during the next two trading days. Li claims that she had to sell all the 91,300 shares of Citic Securities on Aug 20 to cut her losses. She said in the writ that her losses totaled 99,302.35 yuan, including expenses.
Everbright Securities sold a total of 7,130 stock index futures contracts on Aug 16 - the day the "fat finger" incident happened - citing losses stemming from the mistake. The China Securities Regulatory Commission later confiscated the company's estimated gains of 87.21 million yuan it made by short selling the index futures and fined the company 523 million yuan for insider trading.
The stock brokerage was said to have liquidated all the index futures contracts between Sept 2 and Sept 6, incurring a loss of 4.3 million yuan.
(China Daily 09/11/2013 page14)