A360
Key Takeaways✦ Atlas AI
01
China restricts cross-border securities.
02
Brokers face penalties, operational limits.
03
Capital outflow controls are tightening.
Atlas AI
China Intensifies Crackdown on Cross-Border Securities
China's securities regulator, in conjunction with seven other government agencies, announced on Friday a significant crackdown on unauthorized cross-border securities activities, targeting foreign brokers soliciting Chinese clients without onshore licenses. This action, which includes a two-year grace period for firms to cease illegal operations, aims to tighten control over capital outflows and channel outbound investments through approved channels.
The China Securities Regulatory Commission (CSRC) specifically identified online brokers such as Tiger, Futu, and Longbridge for operating without proper authorization. Following the announcement, shares of Futu and Tiger parent UP Fintech Holding experienced declines exceeding 30% in U.S. premarket trading. Clients of these affected brokers will be restricted to selling existing holdings and withdrawing funds, with no new investments permitted during the wind-down period.
This regulatory enforcement extends previous scrutiny, which intensified in late 2022 with a ban on overseas institutions opening accounts for mainland investors. The move also impacted U.S.-listed shares of prominent Chinese companies, including PDD Holdings, Alibaba, and JD.com, which saw declines between 3.5% and 6% in pre-market trading.
The Hong Kong Securities and Futures Commission (SFC) simultaneously reported deficiencies at 12 brokers, indicating a broader regional effort to enhance regulatory compliance.
