Galaxy Securities Fined Multiple Times This Year Over Branch Compliance Lapses

Reporter: Chen Yanqing, Shenzhen Business Daily · Duchuang Client

The Zhejiang Securities Regulatory Bureau has recently issued two administrative regulatory decisions, imposing regulatory measures on Galaxy Securities' Zhejiang Branch, its Taizhou Yinzuo North Street Business Department, and the head of that business department. This marks another compliance penalty against a branch within the Galaxy Securities system this year, highlighting ongoing internal control challenges at grassroots outlets of major securities firms.

Violations Identified

According to information disclosed by the Zhejiang Securities Regulatory Bureau, the Taizhou Yinzuo North Street Business Department of Galaxy Securities was found to have committed two violations:

• Missing records in the promotion phase of securities investment advisory services: The process of recommending investment advisory services was not fully documented, failing to meet regulatory requirements for such businesses.
• Weak compliance awareness among employees: Some employees did not cooperate with on-site regulatory inspections, violating relevant regulations on the supervision and management of personnel at securities and fund operating institutions.

These issues reflect inadequate overall compliance management at the business department and constitute violations of relevant provisions under the Measures for Compliance Management of Securities Companies and Securities Investment Fund Management Companies.

Responsibility and Rectification Orders

Wu Tao, the head of the business department, bears direct responsibility for these issues. The regulatory authorities have ordered both the business department and Wu Tao to make rectifications.

The parent Zhejiang Branch received a warning letter from regulators due to insufficient oversight of subordinate branches and inadequate compliance management. Relevant records have been entered into the securities and futures market integrity database.

Regulators explicitly stated that the business department must:

• Deeply learn from this violation
• Comprehensively strengthen internal compliance management and risk control systems
• Focus on enhancing behavioral management of employees
• Effectively improve overall internal control standards

Wu Tao is also required to systematically study relevant laws and regulations in the securities industry, proactively enhance his own compliance awareness, and improve his ability to fulfill compliance management duties.

Broader Regulatory Pattern

Reviewing regulatory penalty records this year, Galaxy Securities, its subsidiaries, and multiple business departments across various regions have repeatedly triggered regulatory warnings.

In April this year, the Hunan Securities Regulatory Bureau issued a warning letter to Galaxy Securities' Changsha Shaoshan North Road Business Department. Investigations revealed that:

• Some client managers engaged in off-site business development
• Attendance management failed
• Excessive incentives were set during initial public offering (IPO) fund sales

These findings indicated obvious loopholes in internal risk control and business management.

In April and July, relevant personnel at Guangzhou and Ningbo business departments of Galaxy Futures, a wholly-owned subsidiary of Galaxy Securities, also received regulatory warnings for violations including unfair competition through commission rebates and providing trading advice without proper qualifications. These cases highlighted weaknesses in risk management along subsidiary lines. Regulators required relevant branches to submit rectification reports within specified timeframes and continuously improve their internal control systems.

Focus Areas of Violations

Multiple penalties involving Galaxy Securities, its subsidiaries, and business departments this year have mainly concentrated in retail business segments such as wealth management, fund distribution, and futures brokerage. Issues are highly focused on basic compliance aspects including:

• Personnel management at branches
• Business incentive mechanisms
• Business documentation trails
• Customer marketing controls

Industry Observations

Industry observers believe that documentation trails for investment advisory services, off-site business development by employees, and fund sales incentives are key areas of recent regulatory inspections. Once branches prioritize performance over compliance, they easily trigger regulatory accountability.

Market analysts point out that current regulation in the securities industry continues to maintain a strict tone, with regulatory focus shifting downward to frontline business departments, targeting rectification of employee marketing behaviors, financial product sales, and investment advisory service practices. For securities firms, branches cannot rely solely on post-event rectification; they need to embed compliance controls throughout the entire chain of business assessment, personnel management, and marketing incentives, avoiding situations where branches relax risk control baselines to boost performance.

Source: Shenzhen Business Daily · Duchuang