The China Securities Regulatory Commission (CSRC) announced that it has confiscated all “illegal gains” of the three securities firms Tiger, Futu, and Changqiao both domestically and abroad, citing their involvement in illegal cross-border business activities. Prior to the announcement, the stock prices of Futu and Tiger plunged significantly in pre-market trading.
According to the official Chinese media, on May 22, the CSRC stated that the “illegal cross-border business activities” of Tiger Securities (New Zealand) Limited, Futu Securities International (Hong Kong) Limited, and Changqiao Securities (Hong Kong) Limited violated Chinese securities, fund, and futures laws and regulations, disrupting market order. The decision to confiscate the illegal gains of Tiger, Futu, and Changqiao and impose severe penalties on them has been made.
Following this news, both Futu and Tiger’s U.S. stock prices plummeted in pre-market trading, with Futu falling by over 12% and Tiger Securities plunging by more than 16%, dropping nearly 40% at one point.
The official media also mentioned that the CSRC, along with the Ministry of Industry and Information Technology and the Ministry of Public Security, among other eight departments, jointly issued an implementation plan to rectify illegal cross-border operations of foreign securities, futures, and funds institutions within a two-year timeframe.
As per the plan, during the rectification period, overseas institutions are prohibited from providing illegal services such as buy transactions and fund transfers for existing investors within China, only allowing one-way sell transactions and fund withdrawals. At the end of the rectification period, foreign institutions are required to completely shut down their domestic websites, trading software, and related servers, preventing them from providing trading services for existing investors within China illegally.
Tiger, Futu, and Changqiao are all mainstream cross-border internet securities firms serving Chinese investors. Many in the investment community view companies like Futu Securities and Tiger Securities as China’s “online brokerage Robinhood Markets,” popular trading platforms allowing individuals in China to trade in overseas markets including the United States.
On December 30, 2022, the CSRC had already launched a crackdown on overseas securities firms engaging in cross-border operations, targeting companies like Futu Securities and Tiger Securities. In May 2023, under pressure from authorities, Futu Securities and Tiger Securities announced the removal of their mobile applications in China.
Media reports suggest that the continued crackdown by Chinese authorities on cross-border internet securities firms is linked to concerns about capital flight. The Wall Street Journal noted that cross-border internet securities trading operates in a gray area because the markets these companies operate in, such as Hong Kong and Singapore, are regulated, and they cater to Chinese mainland customers, requiring adherence to distinct sets of rules.
In recent years, as the Chinese economy has stagnated, the political pressure from the Chinese Communist Party has intensified, exacerbating capital outflows.
Since last year, Chinese authorities have significantly strengthened regulation of overseas investment activities. Reports have emerged of numerous Chinese individuals engaged in “stock trading” activities on overseas platforms receiving notices to pay overdue foreign income taxes, involving a number of securities firms including Hong Kong’s Hui Li and Futu.
A prominent figure on social media, known as “Uncle Bao,” disclosed that two of his friends who invested through Hong Kong and U.S. securities firms have been pursued by authorities to pay over 2 million RMB in taxes.
The Chinese tax research institution “Ming Tax Research Center” revealed in May last year that since 2024, a large number of high-net-worth individuals have consulted on how to declare foreign income, indicating that relevant policies are being implemented rapidly. The report highlighted that tax authorities have established a comprehensive regulatory network covering “fund flow, contract flow, and information flow” through the “Golden Tax Phase IV” system, coupled with monitoring of forex fund flows, data reporting from overseas investment platforms (like Futu and Tiger Securities), and automatic exchange of information under CRS.
Some analysts believe that this move reflects the authorities’ increasing restrictions on individuals’ foreign investments amid financial constraints and pressure from capital outflows. Chinese dissident Zhu Gaofeng, who fled to the United States, told The Epoch Times that China’s economy may be worse than people imagine.