The Securities and Futures Commission said on Monday that it has reprimanded and fined Bright Smart Securities International (H.K.) (BSSIHK) HK$2.8 million for failing to implement adequate and effective internal control procedures to monitor and detect wash trades conducted by its clients.
The SFC's investigation found that between November 1, 2023 and September 13, 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.
A wash trade is a transaction that does not involve any change in beneficial ownership of the shares. Such trades can create a false or misleading appearance of trading activity, thereby distorting the actual supply and demand of the shares in question.
Since BSSIHK relied primarily on post-trade monitoring and manual review to identify suspicious trading activities before March 2024, clients were able to conduct wash trades before detection, SFC said.
Although BSSIHK introduced a pre-trade interception arrangement in March 2024, the controls remained inadequate, as 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, SFC added.
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, SFC said, adding that as a result, clients were able to execute multiple pairs of wash trades on a single day without restriction.
The SFC considers that 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.
