Hong Kong Listed Broker Gets Monetary Penalty for Misleading Advertisement

Hong Kong’s main financial regulator, the Securities and Futures Commission (SFC), has issued a financial penalty against a regulated financial services firm. Bright Smart Securities International, part of the BS Group of companies, was fined for publishing an advertisement with incorrect and misleading information in a number of leading Hong Kong publications.

The SFC has issued a reprimand against domestic Multi-Asset brokerage firm, Bright Smart Securities International (H.K.) Limited (Bright Smart). The firm was found guilty of breaching section 194 of the Securities and Futures Ordinance, whereby Bright Smart incorrectly disclosed details of its unregulated bullion trading unit alongside its regulated firm.

The SFC, the main Equities and derivatives watchdog, regulates a number of products, however in the Order, the SFC states that the bullion trading is not a regulated asset class. The regulator states that Bright Smart had incorrectly used its regulated entity when advertising its services and referring to gold.

The advertisement was published in a number of Hong Kong newspapers including, Apple Daily, Metro Daily, Oriental Daily and the Hong Kong Economic Times. A translation of the advert reads: “The gold bullion business in the market is not regulated, but the listed company, Bright Smart, is regulated!" (Bright Smart Bullion is a wholly owned subsidiary of a large listed company Bright Smart Securities, [and is] regulated by the SFC).

Details in the Order state: “In deciding the disciplinary sanction, the SFC has had regard to the SFC Disciplinary Fining Guidelines and taken into account all relevant circumstances, including the false and/or misleading information contained in the Advertisement may cause members of the public to mistakenly believe that the gold bullion business of BS Bullion is regulated and less risky than the gold bullion business carried out by other firms, the SFC has reprimanded and fined Bright Smart for publishing false and misleading advertisements in November 2004, Bright Smart promptly removed the reference to BS Bullion being regulated by the SFC” upon ISD’s enquiry, and that Bright Smart has co-operated with the SFC in resolving these disciplinary proceedings."

The SFC’s objection was in relation to the fact that Bright Smart, the securities division, had the bullion trading unit advertised on the top of the promotion.

Bright Smart issued a voluntary announcement today in response to the fine, it states: “The Board wishes to state that the inclusion of such false and/or misleading information in the said advertisement was an inadvertent mistake and none of the above sanctions has any material adverse financial impact on the Group and neither of them would cause any disruption to the business and operations of the Group. The Group would be more cautious in scrutinising contents of its advertisements in the future and seek professional advice where appropriate."

Gold is a popular financial instrument used by investors in Asia, with Hong Kong being one of the most liquid trading centres. The SFC regularly monitors the activities of brokers and individuals who promote bullion services without the necessary regulators. In 2013, the SFC investigated a case against two bullion agents who were soliciting investors into an unregulated collective investment scheme, the two were convicted by the Eastern Magistrates Court. Under SFC rulings, collective investment schemes can only be promoted by authorised firms and individuals.