Hong Kong brokerage Bright Smart suspends mainland Chinese clients’ accounts ahead of new CSRC regulation

Move comes after CSRC said last month it would implement a new regulation from February 28, which could introduce tighter scrutiny of cross-border trading in shares

Account suspensions will not have any impact on business and income, Bright Smart says

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Hong Kong’s Kowloon area. The suspension of mainland accounts would hit many local brokerages hard, as mainland customers are an important source of income for them. Photo: AFP

Published: 8:55pm, 13 Feb 2023Updated: 11:22pm, 13 Feb 2023

Bright Smart Securities, one of Hong Kong’s largest stock brokerages, will suspend the accounts of all mainland Chinese customers set up in China from Thursday, it said in a stock exchange filing on Monday.

The move comes after securities watchdog China Securities Regulatory Commission said on January 16 that it would implement a new regulation from February 28, which could, among other curbs, introduce tighter scrutiny of cross-border trading in shares.

Other Hong Kong brokers may follow suit, according to industry players. The suspension of mainland accounts would hit many local brokerages hard, as mainland customers are an important source of income for them.

“More of the 600 local brokers may follow in the footsteps of Bright Smart, in light of the CSRC tightening control over mainlanders trading Hong Kong and overseas stocks,” said Tom Chan Pak-lam, the permanent honourable president of industry body Institute of Securities Dealers in Hong Kong. “Mainland brokerages’ subsidiaries in Hong Kong may be the worst hit, as they have more mainland customers referred by their parent companies. Most local firms are more focused on Hong Kong-based clients.”

A Bright Smart branch on Nathan Road in Kowloon. Photo: Google

Hong Kong’s brokerages had a poor 2022, with more than 72 per cent suffering a loss last year, according to a survey of local brokers by the Hong Kong Securities Association. The survey, released on Monday, also shows that 60 per cent had no plans for expansion, while 28 per cent said they would scale down business this year. About 3 per cent said they planned to exit the market altogether. Only 9 per cent said they would expand in 2023.

But the new CSRC regulation might not have a big implication for all brokers. “It will all depend on whether the firm in question relies on mainland customers [or not],” said Robert Lee Wai-wang, a lawmaker for Hong Kong’s financial services sector and CEO of local brokerage Grand Capital Holdings.