China Penalizes Nasdaq-Listed Brokers in Cross-Border Trading Crackdown

Author: Miles Brown…

China Penalizes Nasdaq-Listed Brokers in Cross-Border Trading Crackdown

The China Securities Regulatory Commission (CSRC) announced it will impose penalties on two Nasdaq-listed online brokerages and a private firm for conducting cross-border securities business in mainland China without the required licenses.

Scope and Rationale

The regulator plans to confiscate all illegal gains linked to Tiger Brokers' New Zealand subsidiary, Futu Securities' Hong Kong unit, and Longbridge Securities' Hong Kong unit. These entities are accused of unauthorized activities such as marketing, promotion, and processing of trading instructions on the mainland.

Market Impact

American depositary receipts of Futu Holdings and Up Fintech Holding (Tiger Brokers) tumbled 28% and 25%, respectively, on Friday. Longbridge stated it will comply with regulatory requirements, noting it is licensed by Hong Kong's Securities and Futures Commission and client funds remain secure.

Multi-Agency Crackdown

The CSRC emphasized it will make supervision "sharp-toothed and thorny," vowing to crack down severely on overseas institutions illegally offering securities services in China. The move coincides with a joint directive from eight government agencies, including the central bank and the Ministry of Public Security, which bans foreign entities from providing unauthorized services like account opening and fund transfers to mainland investors. Domestic banks assisting such activities will also face penalties.

Impacted Symbols

Symbols affected by this headline and their sentiment signals

FUTUNegative

Futu Holdings Limited

China's regulator decision to confiscate illegal gains from Futu Holdings' Hong Kong unit for unlicensed cross-border activities and new crackdown measures threaten the company's core business model, causing a 28% drop in ADR prices.

Impact score95%

TIGRNegative

UP Fintech Holding Limited

The confiscation of gains from UP Fintech's New Zealand subsidiary for unlicensed cross-border securities trading and the joint regulatory crackdown directly impact the company's operations, leading to a 25% ADR price plunge.

Impact score95%

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