China's Securities Regulator Asks Futu and UP Fintech to Stop Soliciting Mainland Clients

China's securities regulator said on Friday that online brokerages Futu Holding and UP Fintech Holding have conducted unlawful securities businesses, and will be banned from opening new accounts from mainland Chinese investors, sending their shares tumbling.

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

According to an earlier report, Chinese officials were planning to ban online brokerages 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 listing plan in Hong Kong. The company said it was "clarifying certain matters concerning the Group with the Hong Kong Stock Exchange", in a filing to the Hong Kong bourse on Thursday night.

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

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

Although existing Chinese clients will still be allowed to trade via existing platforms, new money must not flow into these accounts unlawfully, the CSRC added.

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

In statements late on Friday, Futu and UP Fintech said they would cooperate with the CSRC and rectify their business accordingly.

(Source: Reuters)