China Regulator Opens Cases Against Three Offshore Brokerages

China’s securities regulator has opened enforcement actions against three offshore brokerages for providing securities services to mainland investors without required approvals. The China Securities Regulatory Commission said on May 22 that it had issued administrative penalty pre-notification letters to Tiger Brokers (NZ) Limited, Futu Securities International (Hong Kong) Limited, Longbridge Securities (Hong Kong) Limited, and related entities.

The regulator accused the firms of conducting unlicensed securities brokerage, margin financing, public-fund sales, and futures brokerage inside mainland China.

Chinese agencies announced a two-year implementation plan to phase out unauthorized cross-border securities, futures, and fund operations. During the period, offshore firms may not accept new buy orders or fund inflows from mainland investors; only sell orders and withdrawals are allowed.

After the period ends, the firms must close mainland websites, trading software, and supporting servers. The CSRC said investor assets would not be affected and that affected institutions must communicate with mainland clients to arrange account handling.

Holdings, listed on Nasdaq, said the CSRC proposed confiscation of illegal gains and fines totaling about 1.85 billion yuan, or roughly $271 million, plus a personal fine of 1.25 million yuan against founder and CEO Li Hua. UP Fintech Holding, parent of Tiger Brokers, said its subsidiaries received penalties totaling about 308.1 million yuan and confiscation of income of about 103.1 million yuan, along with a 1.25 million yuan fine against CEO Wu Tianhua.

Futu shares closed at $89.76, down 27.5 percent, and UP Fintech shares closed at $4.36, down 25.5 percent, on the day of the announcement. The CSRC stated that the campaign began in December 2022 and now expands to cover marketing, account opening, trading instructions, fund transfers, internet platforms, and promotional content.