Mar. 15 (NBD) - The China Securities Regulatory Commission (CSRC) on Wednesday slapped a domestic logistics company with fines totaling 5.67 billion yuan (898.0 million U.S. dollars) for stock manipulation.

The penalty, the largest ever issued by the CSRC, fell on Beibadao (Xiamen) Logistics Group ("Beibadao").

Record fine of $898mln imposed

According to the CSRC, Beibadao reaped a huge amount of illegal profits by manipulating the share prices of three Shenzhen-listed companies, Jiangsu Zhangjiagang Rural Commercial Bank Co., Ltd. (Zhangjiagang Rural Commercial Bank), Jiangsu Jiangyin Rural Commercial Bank CO., Ltd. (Jiangyin Rural Commercial Bank) and Guangdong Hoshion Aluminum Co., Ltd. (Hoshion Aluminum).

According to the CSRC, the logistics company formed a team of traders who used more than 300 different accounts to trade on over 100 computers simultaneously. During the investigation, the management team of Beibadao were uncooperative. Worse still, an investigator was scratched by an accountant who attempted to destroy evidence.  

The penalty is almost six times of Beibadao's illegal profits, the regulator said.

However, the punishment isn’t the first multibillion-yuan fine handed down by the CSRC since the crackdown on illegal practices began. NBD noticed that last March, Xian Yan, chairman of P2P Financial Information Service, was fined 3.47 billion yuan (549.6 million yuan) for stock manipulation, and was permanently banned from the stock market.

Multiple account trading detected

Shares of Hoshion Aluminum surged 95.53 percent from Feb 6 to Feb 15 of 2017 and shares of Zhangjiagang Rural Commercial Bank climbed collectively 135.19 percent from Feb 6 to Feb 21 of 2017. In addition, shares of Jiangyin Rural Commercial Bank grew 114.21 percent from Feb 10 to Feb 28.

In contrast, the growth rate of the Small/Mid Cap Innovation Index in Feburary last year was only 4.48 percent.

Those three stocks were seriously manipulated.

On Feb 8 of last year, shares of Hoshion Aluminum grew to daily limit. After running through public trade information, NBD found that the largest and the second largest traders both came from Xiamen. On that day, two Xiamen-located Donghai Securities stores bought approximately 26.25 million yuan (4.2 million U.S. dollars) and 22.20 million yuan (3.5 million U.S. dollars) shares of Hoshion Aluminum. On Feb 14 and 15, the two Xiamen-located Donghai Securities store also bought large quantity of shares of Zhangjiagang Rural Commercial Bank and Jiangyin Rural Commercial Bank.

A private equity fund manager who wanted to remain anonymous told NBD that stock rally of Zhangjiagang Rural Commercial Bank was downright weird and was noticed by many. Some thought at the time that the eye-catching rally was highly likely to be punished by the CSRC. But no one expected that Beibadao will be imposed a record fine, which is a warning for potential market violators.

Email: tanyuhan@nbd.com.cn