China’s securities regulator has imposed a two-year wind-down period for offshore brokers serving mainland investors through cross-border channels, accompanying the order with substantial penalties. The China Securities Regulatory Commission announced fines totaling approximately 331 million dollars against Futu Holdings and UP Fintech, operators of popular trading platforms, while also naming Longbridge Securities without specifying a penalty amount.
Futu faces roughly 271 million dollars in proposed penalties, while UP Fintech must pay nearly 60 million dollars. These one-time charges severely impacted reported earnings, cutting Futu’s first-quarter net income by over sixty percent and pushing UP Fintech into loss territory. However, both firms reported strong underlying operational metrics, with revenue growing over twenty-four percent and client assets continuing to expand significantly.
The enforcement targets a business model the CSRC declared illegal in 2022, when it first banned new mainland client acquisitions. The current action forces existing mainland customers into withdrawal-only mode over the next two years. For Futu, mainland clients represent thirteen percent of funded accounts but contribute twenty percent of revenue, indicating these accounts generate above-average profitability that will now gradually erode.
The crackdown forms part of broader Chinese regulatory efforts to control cross-border capital flows and tighten oversight of financial services reaching mainland investors through offshore structures. Affected firms must now accelerate geographic diversification strategies while managing the controlled unwinding of a lucrative client segment.
FXnCO Insight
Brokers relying on grey-area cross-border access to restricted markets should treat this enforcement as a clear signal that regulatory tolerance is narrowing globally, not just in China.
Source: Finance Magnates