Four brokerage firms face penalties, employees involved in stock trading, cross-department roles in proprietary trading and investment banking, due diligence failures

Caixin News, April 4th (Reporter Gao Yanyun) — It’s Friday again, and once more a day of intensive penalty disclosures, with four securities firms receiving a total of five fines in one day.

On April 3rd, multiple local securities regulatory bureaus announced penalty notices, with Bohai Securities issued a warning letter by the Tianjin Securities Regulatory Bureau; Dongxing Securities, Zhongshan Securities Beijing Branch and employee Meng Wei received warning letters from the Beijing Securities Regulatory Bureau; Xiangcai Securities was issued a warning letter by the Hunan Securities Regulatory Bureau.

The violations by these securities firms remain concentrated mainly in two areas: investment banking bond underwriting and brokerage services, specifically:

1. Bohai Securities employees borrowing others’ securities accounts to trade stocks and holding concurrent positions across departments;

2. Dongxing Securities having insufficient due diligence, inadequate information disclosure, and weak internal controls in multiple bond issuance projects;

3. Zhongshan Securities Beijing Branch and employee Meng Wei failing in investor suitability management and risk warnings, providing misleading service statements, and incomplete records of investment advisory activities;

4. Xiangcai Securities’ brokerage business lacking sufficient risk disclosure, poor branch management, delayed complaint investigations, and failure to detect employee violations.

Under the “normalization and penetrating” strict regulatory framework, securities firms’ compliance defenses are facing comprehensive tests.

Bohai Securities: Employees Borrowing Accounts and Cross-Department Roles

The penalty notice from Tianjin Securities Regulatory Bureau shows vulnerabilities in Bohai Securities’ personnel management.

The issues include: first, some employees have borrowed others’ securities accounts to buy and sell stocks during their tenure; second, some employees held concurrent roles in proprietary trading and investment banking departments.

In response, the Tianjin Securities Regulatory Bureau issued a warning letter to Bohai Securities and recorded the case in the integrity archive of the securities and futures market. The company is required to learn from the case, thoroughly investigate and rectify problems, strengthen personnel management, improve management standards, and prevent similar issues from recurring.

Dongxing Securities: Insufficient Due Diligence and Inadequate Disclosure in Bond Projects

As an established securities firm, Dongxing Securities was named by the Beijing Securities Regulatory Bureau for compliance issues in bond underwriting.

During the issuance of projects “24 Shimen 01,” “Hangtou 01 You,” and “Hangtou 01 Ci,” Dongxing Securities had problems such as inadequate due diligence, failure to carefully verify the accuracy of issuance documents, errors in entrusted management reports and working papers, insufficient information disclosure, and weak internal controls.

The Beijing Securities Regulatory Bureau decided to issue a warning letter as an administrative regulatory measure and urged the company to learn from the case, conduct thorough investigations and rectifications, establish sound internal control systems, and enhance compliance management.

Zhongshan Securities: Inadequate Suitability Management and Risk Warnings

Zhongshan Securities Beijing Branch and employee Meng Wei were penalized by the Beijing Securities Regulatory Bureau for violations in brokerage activities.

During Meng Wei’s practice at Zhongshan Securities Beijing Branch, there were issues such as inadequate investor suitability management, insufficient risk warnings, and misleading statements in client services.

These behaviors reflect poor internal controls and compliance management at Zhongshan Securities Beijing Branch. Additionally, the branch failed to fully retain records of investment advisory services.

Based on this, the Beijing Securities Regulatory Bureau issued warning letters to Zhongshan Securities Beijing Branch and Meng Wei.

Xiangcai Securities: Insufficient Risk Disclosure and Poor Branch Management

Xiangcai Securities was issued a warning letter by the Hunan Securities Regulatory Bureau due to unstandardized brokerage operations.

During its brokerage activities, Xiangcai Securities failed to adequately disclose risks, and its management of branch recruitment, marketing, and investment advisory services was inadequate; it also failed to promptly identify employee violations during complaint handling and related procedures.

The Hunan Securities Regulatory Bureau requires Xiangcai Securities to take these issues seriously, implement rectifications, and submit a written correction report within one month of receiving the decision. The bureau will continue to monitor the progress during routine supervision.

Regulatory Observation: Establishing Strict Supervision and Forcing Industry “Quality First”

Friday’s fines exemplify the normalization of strict regulation in the securities industry. From 2025 to the first quarter of 2026, a comprehensive “normalization, penetration, and systematization” regulatory framework has been fully established.

Data shows that in Q1 2026, nearly 30 securities firms and their personnel received over 70 penalty notices, with investment banking and brokerage services being the most affected areas. The regulatory approach features intensified penalties, precise accountability, and full-chain coverage.

On one hand, penalties are increasingly targeted and severe. While the number of fines may fluctuate, the severity of punishments has significantly increased, with hefty fines appearing regularly. On the other hand, the “dual penalty system” penetrates deeply, holding not only organizations accountable but also directly targeting individual practitioners, even imposing lifetime market bans on senior executives. The scope of regulation extends from traditional businesses to bonds, over-the-counter derivatives, and other full chains, with strengthened “retrospective accountability,” making past project violations difficult to escape scrutiny.

Industry insiders believe that regulators are using a “biting and thorny” high-pressure stance to push securities firms from “scale expansion” toward “quality prioritization.” In the future, compliance capability will replace simple performance metrics and become the core competitive advantage of securities firms. Only by transforming compliance from a “cost item” into a “strategic item” and building a comprehensive risk control system can firms remain stable and far-sighted in a period of strict regulation.

(Caixin News, Reporter Gao Yanyun)