China’s regulator tells Futu and UP Fintech to stop seeking mainland clients
SHANGHAI/HONG KONG (Reuters) – China’s securities regulator said on Friday that online brokers Futu Holding and UP Fintech Holding have been operating illegal securities businesses and will be barred from opening new accounts by mainland Chinese investors, sending their shares tumbling.
The long-awaited official punishment comes more than a year after Chinese official media warned that New York-listed Futu and UP Fintech, which do not hold licenses in China, face regulatory risks.
Reuters previously reported that Chinese officials planned to ban online brokers such as Futu Holdings Ltd and UP Fintech Holding Ltd from offering offshore trading services to mainland clients.
The announcement also came a day after Futu, backed by Chinese internet giant Tencent Holdings, delayed its listing plan in Hong Kong. The company said it is “clarifying certain matters regarding the group with the Hong Kong Stock Exchange”, in a filing with the Hong Kong Stock Exchange on Thursday night.
Futu listed shares fell 25% and UP Fintech shares fell 32.3% in pre-market trading.
Futu and UP Fintech Hong Kong have conducted cross-border securities business involving domestic investors without regulatory consent, in violation of Chinese laws, the China Securities Regulatory Commission (CSRC) said in a statement.
The CSRC will ask the brokerages to take corrective action, such as to stop soliciting new business from mainland investors, the watchdog said.
While existing Chinese customers will still be allowed to trade through existing platforms, new money must not flow into these accounts illegally, the CSRC added.
Futu and UP Fintech do not have brokerage licenses in the mainland, but Chinese citizens can open accounts online after submitting personal information related to ID cards and bank cards.
In 2021, a Chinese central banker had warned that online brokers not licensed in China were acting illegally if they served Chinese clients via the Internet.
It was not immediately clear how the new measures would affect the brokers’ future operations.
In statements late on Friday, Futu and UP Fintech said they would cooperate with the CSRC and correct their operations accordingly. Futu said it would actively engage with regulators and identify specific compliance measures to offer cross-border securities services for onshore investors, while UP Fintech said 90% of its new clients now come from markets outside mainland China, including Singapore, Hong Kong and the United states.
Futu, which has licenses in Hong Kong, Singapore and the United States, said in its 2020 annual report that it primarily serves the emerging affluent Chinese population and a large number of its customers were mainland Chinese nationals.
(Reporting by Shanghai newsroom and Xie Yu from Hong Kong, editing by Louise Heavens)
