The individual involved was no Warren Buffett. Neither was the person licensed by the Hong Kong or mainland regulators.

Christfund is no megastore in terms of business and political clout. Its biggest connection with the mainland is the seat its founder has on one of the national consultative committees.

So why did a thousand mainlanders want a single person to trade Hong Kong stock on their behalf?

First, put aside the fact that Beijing has yet to say yes to mainlanders trading in Hong Kong stocks. The regulators have been lax on this in recent years given the flood of liquidity on the mainland.

A mainlander can easily open a trading account in Hong Kong. All he or she needs is a mainland identity card, proof of address for the last three months and the money.

The trading can be done via the internet or over the phone. Brokers, including many state-owned firms, offer trading platforms tailor-made for mainland clients.

In short, there's no longer a need to hide. So why entrust one person to do it?

The SFC's statement provides no answer. Neither do we have any information that suggests any wrongdoing by Christfund other than having insufficient internal controls.

A chat with brokers, however, revealed that the practice isn't rare. It's so common that one bluntly asked me: 'Have you been living in a cave?'

It all comes down to our regulators' difficulty in going beyond the Lo Wu Bridge. Here are two examples.

A professional market manipulator wants to push up the price of a stock. To ensure it doesn't register on the regulators' radar screen, he will hire dozens of subordinates to open various nominee accounts and trade up the stocks.

In the old days, these nominees were largely Hong Kong-based. The risk here was that should the regulator smell anything fishy, it is empowered by law to ask the brokers for the address of the nominees and to get them to explain the abnormal dealing.

Being in Hong Kong, it is difficult for the nominees to ignore the SFC.

Now, imagine the nominees are living somewhere on the mainland.

They are not required by law to answer the SFC's letters. The commission can't do much about that other than seek help from its mainland counterpart.

The difficulty is also multiplied by the size. 'Instead of tens of nominee accounts, we are now talking about thousands,' a broker with knowledge of these operations said.

To appreciate the scale, one can look at the insider trading by jailed mainland billionaire and Gome founder Wong Kwong-yu (also known as Huang Guangyu). In 2007, he was about to acquire a firm listed in Shanghai.

Before announcing the deal, he collected the identity cards of 85 people, including a security guard at his office tower, to open nominee accounts within days of each other. He bought a total of 1.4 billion yuan (HK$1.60 billion) worth of shares in the acquisition target before being rumbled by the mainland authorities.

'It's much safer [to operate with mainland nominees] than the old scheme,' the broker said. No wonder market manipulators have largely switched to mainland nominees in the past three to four years.

It is understood the commission has found no evidence to suggest this was the case with the 1,000 accounts in Christfund.

Another operation is the so-called stock picker scheme. The picker will always claim excellent insider connections and knowledge of the Hong Kong market. He or she will ask for the full discretion to trade on the investors' behalf in return for a fee or a cut of the profit.

It doesn't matter that he or she is not licensed in Hong Kong.

While the nouveau riche of the mainland are sophisticated enough to arrange their own access to the stock market, the majority of mainland investors cannot.

The fact that they will go along with the suggestion that an account will be opened in their name with a Hong Kong broker creates a false sense of security.

They will happily sign away their discretion over stock picks and even agree to use the picker's address, leaving themselves with no trading statement or any idea of what happened to their money. All the picker needs is a Hong Kong broker who asks no questions.

We are not talking about peanuts here. In one case, a stock picker raised more than HK$60 million from hundreds of people, including some factory workers in Shenzhen.

This week's SFC statement did not say whether a stock picker was involved in Christfund's case. 'There is no evidence of any dishonesty on its part or its senior management in its business activities,' the statement said.

Although the reason behind the SFC action remains a mystery, one thing is for sure; both types of operation mentioned above will cost Hong Kong dearly if left unchecked.

Just imagine the factory workers losing their shirts and demonstrating outside the SFC offices in Central only to be told there is nothing they can do about the stock picker.

It's true that our regulators' hands are somewhat tied, but we should at least ensure our brokers apply the same standards of investor protection to mainland clients.

Loss of business should be no excuse.