Four major brokerages face penalties: employees engaging in stock trading, cross-department roles in proprietary trading and investment banking, and failures in due diligence.

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Cailianpress News, April 4 (Reporter Gao Yanyun): It’s another Friday, another day when fines are released in dense succession—4 securities firms received 5 penalty notices in a single day.

On April 3, regulators in multiple locations disclosed penalty notices. Bohai Securities was taken by the Tianjin Securities Regulatory Bureau to issue a warning letter; Dongxing Securities, Zhongshan Securities’ Beijing branch and practitioners Meng Wei were taken by the Beijing Securities Regulatory Bureau to issue a warning letter; Xiangcai Securities was taken by the Hunan Securities Regulatory Bureau to issue a warning letter.

The above firms’ areas of noncompliance still remain concentrated in two major segments: investment banking bond underwriting and the brokerage business. The details are as follows:

First, an individual employee at Bohai Securities borrowed other people’s securities accounts to trade stocks, and held positions across departments at the same time;

Second, Dongxing Securities had issues such as insufficient due diligence, failure to deliver on information disclosure, and not exercising strict controls over internal compliance in multiple bond issuance projects;

Third, Zhongshan Securities’ Beijing branch and employee Meng Wei failed to properly manage suitability for investors and provide risk warnings, made misleading statements in customer service, and failed to fully retain service records (audit trails) for its investment advisory business;

Fourth, Xiangcai Securities had insufficient disclosure of risks in its brokerage business, inadequate oversight of branch institutions, and did not promptly investigate complaints and therefore failed to discover employees’ violations.

Under a “normalized, look-through” strict regulatory framework, securities firms’ compliance defenses are facing an all-round test.

Bohai Securities: Employee borrowed other people’s accounts to trade stocks and served across departments

The penalty notice disclosed by the Tianjin Securities Regulatory Bureau shows that Bohai Securities has gaps in its management of practitioners.

Bohai Securities has the following problems: first, during their employment, certain employees previously engaged in borrowing other people’s securities accounts to buy and sell stocks; second, certain employees previously held positions simultaneously in the proprietary trading department and the investment banking department.

In light of the above issues, the Tianjin Securities Regulatory Bureau took supervisory and management measures against Bohai Securities by issuing a warning letter, and recorded it in the integrity file for the securities and futures market. The regulator requires the company to take it as a lesson, thoroughly identify and rectify the problems, strengthen management of practitioners, and effectively improve personnel management to prevent such issues from happening again.

Dongxing Securities: Insufficient due diligence on bond issuance projects, failure to deliver on information disclosure

As an established securities firm, Dongxing Securities was specifically singled out by the Beijing Securities Regulatory Bureau for compliance problems in its bond underwriting business.

During the issuance process of projects including “24 Shimen 01,” “Hangtou 01 You,” and “Hangtou 01 Ci,” Dongxing Securities had issues such as insufficient due diligence, failure to prudently verify the accuracy of issuance documents, incorrect information in the entrusted management report and working papers, failure to deliver on information disclosure, and insufficient strictness in compliance and internal controls, among others.

The Beijing Securities Regulatory Bureau decided to take administrative supervisory measures against Dongxing Securities by issuing a warning letter, and required the company to take it as a lesson, seriously identify and rectify the problems, establish and improve internal control systems, and effectively enhance its compliance management level.

Zhongshan Securities: Inadequate suitability management and risk warnings

Zhongshan Securities’ Beijing branch and its practitioner Meng Wei were jointly penalized by the Beijing Securities Regulatory Bureau for violations in its brokerage business.

During Meng Wei’s practice period at Zhongshan Securities’ Beijing branch, there were issues including inadequate investor suitability management, inadequate risk warnings, and misleading statements in customer service.

The above conduct reflects that Zhongshan Securities’ Beijing branch had incomplete internal controls and inadequate compliance management. In addition, Zhongshan Securities’ Beijing branch failed to fully preserve service records (audit trails) for its investment advisory business.

Based on this, the Beijing Securities Regulatory Bureau took administrative supervisory measures against Zhongshan Securities’ Beijing branch and Meng Wei by issuing warning letters.

Xiangcai Securities: Insufficient disclosure of risks in brokerage business, inadequate oversight of branch institutions

Xiangcai Securities, meanwhile, was issued a warning letter by the Hunan Securities Regulatory Bureau for conducting brokerage business in a nonstandard manner.

In the process of developing its brokerage business, Xiangcai Securities had insufficient disclosure of business risks and inadequate oversight of branch institutions and practitioners in areas such as recruitment, marketing activities, and investment advisory business. During the handling of relevant complaints, it also failed to properly investigate matters such as nonstandard handling of past business, and failed to promptly identify employees’ violations.

The Hunan Securities Regulatory Bureau requires Xiangcai Securities to attach great importance to this, seriously rectify the above issues, and submit a written rectification report within one month from the date it receives the decision. The Hunan Securities Regulatory Bureau will continue to monitor the rectification situation during daily supervision.

Regulatory Observation: With the strict regulatory framework established, it forces the industry to prioritize “quality”

Friday’s penalty notices are a snapshot of the normalized strict regulation in the securities industry. In the first quarter of 2025 to 2026, the “normalized, look-through, and systematic” regulatory framework for the securities industry has been fully established.

From the data, in the first quarter of 2026, nearly 30 securities firms and practitioners received more than 70 penalty notices. The investment banking and brokerage businesses have become “high-incidence” areas for violations. The regulatory logic shows clear features of “increasing enforcement intensity, precise accountability, and full-chain coverage.”

On the one hand, regulatory penalties show a trend of “precise and heavier punishment.” Although the number of penalty notices may fluctuate, the severity of penalties has been significantly upgraded, and large fines appear from time to time. On the other hand, the “dual-penalty system” is fully look-through: it not only holds the institutions accountable, but directly penetrates to individual practitioners, and even imposes lifelong bans from the market on senior executives. The scope of regulation also extends from traditional businesses to the full chain, including bonds and over-the-counter derivatives, and strengthens “retrospective accountability”—even violations in past projects are hard to escape being pursued.

In the industry’s view, regulators are using a high-pressure stance of “teeth with thorns” to force securities firms to shift from “scale expansion” toward “quality first.” In the future, compliance capability will replace mere performance metrics and become the core competitiveness of securities firms. Only by turning compliance from a “cost item” into a “strategic item” and building a full-process risk control system can securities firms move steadily forward during the period of strict regulation.

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