In a significant regulatory action, China's securities regulator has ordered three online brokerage firms—Tiger Brokers (NZ) Limited, Futu Securities International (Hong Kong), and Longbridge Securities (Hong Kong)—to cease their unauthorized cross-border securities operations targeting mainland Chinese investors. The China Securities Regulatory Commission (CSRC) accused these firms of conducting trading and marketing activities within China without the necessary licenses, effectively disrupting market order.
Regulatory Crackdown Details
The CSRC, backed by eight government agencies including the central bank, foreign exchange regulator, public security, and the cyberspace administration, has initiated enforcement actions against these offshore brokers. The regulator stated that both the onshore and offshore arms of these companies engaged in marketing, order processing, and fund transfers across borders without approval. As part of the crackdown, authorities plan to confiscate all illegal gains, though the total amount has not been disclosed.
Existing clients of these platforms have been granted a two-year window to sell their holdings and withdraw funds. However, they are prohibited from making new purchases or transferring additional money into their accounts. The CSRC emphasized that this move is part of a broader effort to clean up the entire cycle of cross-border securities activities, from marketing to account opening, order execution, and fund flows.
Market Impact
The announcement had an immediate impact on financial markets. Futu Holdings and UP Fintech Holding Limited (the parent company of Tiger Brokers) saw their shares plummet by over 30% in U.S. premarket trading. Other Chinese stocks also felt the pressure, with PDD Holdings declining approximately 6% and Alibaba Group Holding Limited losing about 4%. Hang Seng futures dropped 0.7% following the news, which came after the close of Hong Kong and mainland markets.
The crackdown comes at a delicate time for China's capital controls. According to Bloomberg Intelligence, approximately $1.04 trillion in so-called 'hot money' exited China in 2025, the largest annual outflow since at least 2006. This regulatory action is seen as an effort to stem such outflows and maintain financial stability.
Company Responses
Tiger Brokers responded by stating that compliance remains its top priority and that it will work closely with regulators. The company noted that its business continues to operate as usual. Futu Securities said it had already stopped accepting new applications from mainland investors and had rejected tens of thousands of non-qualifying applications. At the end of the first quarter, mainland investors represented 13% of its client base. Longbridge Securities did not respond to requests for comment.
Hong Kong SFC Actions
In a related development, Hong Kong's Securities and Futures Commission (SFC) instructed 12 securities brokers to review and close accounts opened with suspicious documents. The SFC cited poor due diligence, possible forged paperwork, and weak cross-border correspondent links. Eric Yip, Executive Director of Intermediaries at the SFC, warned that 'firms should not grow business at the expense of know-your-client standards.'
Legal Alternatives for Investors
Despite the crackdown, regulators have confirmed that legal channels for mainland investors to invest overseas remain open. These include the Stock Connect program linking Hong Kong, the Qualified Domestic Institutional Investor (QDII) quota for licensed mainland firms, and the Wealth Management Connect in the Greater Bay Area. These avenues provide legitimate pathways for cross-border investments while ensuring compliance with regulatory requirements.
Outlook and Risks
Looking ahead, there is a risk that broker revenue, client liquidity, and Hong Kong trading flows could be negatively affected if a significant number of mainland-linked accounts are limited to selling only over the two-year transition period. Additionally, the CSRC has indicated that the named firms have the right to defend themselves, make representations, and request hearings before any final penalties are imposed. The regulator's intensified focus on this issue signals a determined effort to enforce capital controls and protect market integrity.
