MEXICO CITY (Reuters) - Mexico’s securities regulator has imposed one of its biggest fines ever for market manipulation on steel company Industrias CH, owned by billionaire Rufino Vigil Gonzalez, government data showed.

FILE PHOTO : Screens display foreign exchange rates inside Mexico's Stock Exchange building in Mexico City, Mexico November 23, 2017. REUTERS/Henry Romero

Industrias CH was fined 2.96 million pesos ($159,764) at the end of November for making “prohibited trades” under a law banning simulating price or volume, or effectively trading with itself, according to publicly available data on the website of Mexican banking and securities regulator CNBV.

Industrias CH investor relations manager Jose Luis Tinajero and subsidiary Simec were also fined, and the database entries for their fines were more specific, citing “various buy and sell trades that constituted simulation trades in terms of traded volume.”

Such trades, known as “wash trades” in other markets, are a tactic in which an investor buys and sells a security at the same time to create the illusion of greater demand.

Providing limited details on its website, the CNBV did not explain why the company was simulating trading volume or how it determined the trades were problematic. It did not respond to questions submitted by Reuters for clarification.

Tinajero and Industrias CH Chief Executive Sergio Vigil Gonzalez, who is also Rufino’s brother, declined to make any comment about the CNBV fines.

On Monday afternoon, Industrias CH filed a notice with the stock exchange saying it had appealed the fines before the CNBV on Jan. 10. Mexican law grants up to 120 working days for the CNBV’s board to review an appeal from the date of its filing.

A spokesperson for the CNBV told Reuters that it could not comment on the case before the period for appeals concluded.

The Industrias CH fine is the largest of 19 fines given out since 2014 under the manipulation article of Mexico’s market law, according to a Reuters review of the data. A new law took effect in 2014.

Tinajero and Simec were fined on the same date, Nov. 30. Tinajero was fined 1.35 million pesos ($72,866)for “instructing” the trades that simulated volume, the database showed. Simec was fined 545,049 pesos ($29,419).

James Cox, a law professor at Duke University specialized in corporations and securities, noted the fines were fairly low compared to the United States, but that they could set an important precedent in Mexico.

“The real message that is important is that the government has brought an enforcement action, and not just brought one, but has made a determination that there was a violation,” Cox said.

Zachary Brez, an expert on market manipulation at New York-based law firm Kirkland & Ellis, said that in some cases brokerages can trade with themselves unintentionally, when traders or computer programs from the same firm cross orders. Other cases are more serious, where an investor plots self-trades to boost volumes or fix prices, he said.

“When you are doing it intentionally, that is the real violation,” Brez said. “It is a version of fraud, by showing volume where it isn’t.”

Rufino Vigil Gonzalez, who is currently ranked Mexico’s 11th richest man by Forbes, owns nearly 67 percent of Monterrey-based Industrias CH, which he took over in 1991. The company acquired Guadalajara-based steel maker Simec in 2001, according to the companies’ websites.

In the early 2000s, Industrias CH saw low volumes and failed to trade on many days. Volume later improved but it got a significant boost by the company’s share repurchase program since at least 2013, according to a Reuters comparison of Thomson Reuters data on volume and data from the Mexican exchange on buyback programs.

The CNBV did not specify the basis on which the companies made the trades.

Three current and former officials at Mexico’s stock exchange said unusual trading in Industrias CH around 2014 drew the attention of exchange officials, who believed volumes were manipulated to keep the company on Mexico’s S&P/BMV IPC index.

Significant volume is a key metric needed for inclusion in stock indices, which are mimicked by funds. Inclusion in the index guarantees more investment in a company’s stock.

Mexico’s S&P/BMV IPC index is the benchmark for more than $2.5 billion in passive stock funds and $9.8 billion in active funds, investment research company Morningstar Inc data showed.

Since at least 2013, ICH said in filings to the Mexican stock exchange that their share repurchase program aimed to “generate greater liquidity in its stock, buying shares when needed and selling shares when there is over demand for them.”

Industrias CH made it onto the S&P/BMV IPC index in 2012, and Simec in September 2015, according to S&P Dow Jones Indices, which now manages the index. The CNBV database shows the manipulation fines relate to trading in 2014.

Three days were noted in the database, Jan. 2, 2014 for the Simec fine, Sept. 9 for Tinajero’s fine and Nov. 4 for Industrias CH’s fine.

Company buybacks accounted for 59 percent of total volume of trading in Simec shares from 2014 through the end 2015, the period when it made it on the IPC index, according to data from the Mexican stock exchange and Thomson Reuters data. Company buybacks accounted for 37 percent of all trading in Industrias CH for the same period.

The United States has a 25 percent cap on daily trading volume by share repurchase programs, but Mexico does not have such strict limits.

Both companies were removed from the IPC in June 2016 after the Mexican exchange suspended trading in their shares for failing to file earnings statements on time.