China to crack down on ‘illegal’ cross-border securities activities
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Buildings are seen in the central business district in Beijing on May 12.
PHOTO: AFP
SHANGHAI/HONG KONG - China announced a major crackdown on cross-border investment on May 22 and penalties for brokers it accused of illegally moving money to foreign markets, sending their shares plunging.
The move intensifies scrutiny of capital outflows, which are strictly controlled by China, and sent shares of popular Chinese companies listed abroad lower because the affected brokers’ clients will be limited to selling shares, not buying.
The China Securities Regulatory Commission (CSRC), which launched the crackdown with seven other government agencies including the central bank, said in a statement it was targeting overseas firms and their local partners operating without approval.
The CSRC plans to impose penalties on online brokerages Tiger, Futu and Longbridge for soliciting business in China without an onshore licence, the statement said, with illegal gains to be forefeited although no financial amount was mentioned.
A Tiger spokesperson said the company “has always placed compliance as a top priority”.
It noted the CSRC statement, would cooperate and “all business operations remain normal”.
Futu said it had high compliance standards, had previously stopped adding accounts for mainland applicants and rejected tens of thousands of applications that did not meet requirements. At the end of the first quarter, mainland investors accounted for 13 per cent of its customer base.
Longbridge did not immediately respond to a request for comment.
No new investments allowed during two-year wind-down
The firms will be given a two-year grace period to wind down illegal activities, the regulator said, during which time customers will only be allowed to sell existing holdings and withdraw funds, with no new investments allowed.
Shares in Tiger parent UP Fintech Holding and in Futu Holdings notched falls of more than 30 per cent in pre-market trade. Longbridge is not listed.
US-listed shares, of Chinese companies Alibaba and PDD Holdings, the operator of online marketplace Temu, fell sharply in pre-market trade with PDD down about six per cent and Alibaba falling four per cent.
The regulators’ announcement came after markets closed on the mainland and in Hong Kong on May 22. Hang Seng futures fell 0.7 per cent.
“In short term, these actions may cool down some trading and speculative activities in Hong Kong,” said Mr Steven Leung, director of institutional sales for UOB-Kay Hian in Hong Kong.
The crackdown on May 22 widens years of scrutiny, which stepped up late in 2022 when the CSRC banned overseas institutions from opening accounts for mainland investors.
It is aimed at protecting “healthy development of the capital market, channel outbound investments via legal channels, and protect investors,” the CSRC said.
In Hong Kong, where most of the accounts in question are located, the financial hub’s Securities and Futures Commission, also said on May 22 it discovered “significant deficiencies” after conducting a review of 12 brokers operating in the market.
Hong Kong’s SFC said it will require brokers to close accounts opened with questionable or forged documents and make stricter checks for new accounts and their funding sources.
The city had claimed top spot globally in the first quarter after companies raised HK$209.9 billion (S$34 billion) in equity capital, according to KPMG.
Share sales to retail clients constitute a sizable portion of brokers’ revenue, with Futu and Tiger acting as underwriters of stock offerings for more than 80 and 45 listings since the start of 2025, exchange filings showed. REUTERS
