SFC reprimands and fines Bright Smart Securities International (H.K.) Limited $2.8 million for internal control failures in monitoring suspicious trades

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27 Jul 2026 The Securities and Futures Commission (SFC) has reprimanded and fined Bright Smart Securities International (H.K.) Limited (BSSIHK) $2.8 million for failing to implement adequate and effective internal control procedures to monitor and detect wash trades conducted by its clients (Notes 1 and 2).

The SFC’s investigation revealed that between 1 November 2023 and 13 September 2025, BSSIHK allowed execution of 1,021 pairs of wash trades involving 736 stocks and warrants through 615 clients’ accounts due to the firm’s inadequate internal controls.

The SFC also found that since BSSIHK relied primarily on post-trade monitoring and manual review to identify suspicious trading activities prior to March 2024, clients were able to conduct wash trades before detection.

Although BSSIHK introduced a pre-trade interception arrangement in March 2024, the controls remained inadequate. This is because the new arrangement depended on manual intervention to prevent wash trades rather than automated controls and its manual-driven intervention to block these trades was triggered only after a second instance of wash trading was detected.

Furthermore, multiple wash trades in the same client account within a single day were counted as a single instance, thereby failing to capture and address repeated misconduct within the same trading day. As a result, clients were able to execute multiple pairs of wash trades on a single day without restriction.

The SFC considers BSSIHK’s failure to maintain adequate and effective internal control procedures to monitor and detect wash trades conducted by its clients was in breach of the Code of Conduct and contrary to the best interests of market integrity.

In deciding the disciplinary sanction, the SFC has taken into account all relevant circumstances, including:

Although BSSIHK had been reminded to strengthen its relevant internal control systems and similar deficiencies were repeatedly identified in the firm’s operations in the past, it failed to fully rectify the deficiencies in each instance;

BSSIHK has taken steps to enhance its systems and controls to prevent future breaches, and has undertaken to engage an independent reviewer to verify the effectiveness of the enhanced measures; and

BSSIHK’s co-operation in resolving the SFC’s concerns.

End

Notes:

BSSIHK is licensed to carry on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 7 (providing automated trading services) regulated activities under the Securities and Futures Ordinance.

A wash trade is a transaction that does not involve any change in beneficial ownership of the shares, i.e. a person buys from himself. Such trades can create a false or misleading appearance of trading activity, thereby distorting the actual supply and demand of the shares in question.

Details of the relevant regulatory requirements are set out in the Statement of Disciplinary Action.

A copy of the Statement of Disciplinary Action is available on the SFC website Page last updated 27 Jul 2026