Chinese regulator asks Futu and UP Fintech to stop soliciting mainland customers

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SHANGHAI/HONG KONG – China’s securities regulator said on Friday that online brokerage firms Futu Holding and UP Fintech Holding had carried out illegal securities activities and would be banned from opening new ones. accounts to mainland Chinese investors, sending their shares plummeting.

The long-awaited official sanction comes more than a year after Chinese state media warned that New York-listed Futu and UP Fintech, which do not have licenses in China, face regulatory risks.

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Reuters reported earlier that Chinese authorities plan 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 Hong Kong listing plan. The company said it was « clarifying certain matters regarding the group with the Hong Kong Stock Exchange », in a filing to the Hong Kong Stock Exchange on Thursday evening.

U.S.-listed shares of Futu fell 25% and UP Fintech shares fell 32.3% in premarket trading.

Futu and UP Fintech Hong Kong conducted cross-border securities activities involving domestic investors without regulatory consent, in violation of Chinese laws, the China Securities Regulatory Commission (CSRC) said in a statement.

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The CSRC will ask brokerages to take corrective action, such as stopping soliciting new business from mainland investors, the watchdog said.

Although existing Chinese customers are still allowed to trade through the existing platforms, new funds should not be illegally paid into these accounts, the CSRC added.

Futu and UP Fintech do not have brokerage licenses on the mainland, but Chinese citizens can open accounts online after submitting personal ID and bank card information.

In 2021, a Chinese central banker warned that unlicensed online brokers in China were acting illegally if they served Chinese customers over the internet.

The impact of the new measures on brokers’ future business was not immediately clear.

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In statements Friday evening, Futu and UP Fintech said they would cooperate with the CSRC and rectify their activities accordingly. Futu said it will actively communicate with regulators and find specific compliance measures to provide cross-border securities services to onshore investors, while UP Fintech said 90% of its new clients now come from markets outside China. mainland, including Singapore, Hong Kong and the United States.

Futu, which is licensed in Hong Kong, Singapore and the United States, said in its 2020 annual report that it mainly serves the emerging affluent Chinese population and that many of its customers are mainland Chinese citizens. (Reporting by Shanghai Newsroom and Hong Kong’s Xie Yu, Editing by Louise Heavens)



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