Crackdown on Illegal Cross-Border Securities Activities Begins; Longbridge and Futu Respond to Existing Account Arrangements

``` On May 22, the China Securities Regulatory Commission (CSRC) and seven other departments jointly issued the “Implementation Plan for the Comprehensive Rectification of Illegal Cross-Border Securities, Futures, and Fund Operations.” On the same day, regulatory authorities initiated investigations according to law into Tiger Brokers, Futu Securities, and Longbridge Securities for illegally conducting securities business in China, and issued prior notices of administrative penalties. In response to these regulatory measures, the involved brokerages issued statements on the same day and provided clarification on subsequent operational arrangements. Wallstreetcn has learned that Longbridge Securities has issued a notice to clients, committing to rectify operations in strict accordance with regulatory requirements and to promote relevant arrangements in compliance with laws and regulations. Concerning market concerns over fund security and account functions, Longbridge Securities stated that its licensed entity in Hong Kong is regulated by overseas regulators, and that it will continue to serve clients as required; clients can trade and transfer funds as usual, and account services are temporarily unaffected. In terms of fund transfers and asset security, Longbridge Securities stated that client funds are completely separated from company operating funds and are kept in independently managed bank accounts; U.S. and Hong Kong stocks held by clients are respectively custodied by the Depository Trust & Clearing Corporation (DTCC) in the U.S. and the Hong Kong Securities Clearing Company Limited. Additionally, Longbridge Securities also reminded investors to be alert to various types of scam messages impersonating customer service representatives. Futu Securities has issued a statement, pledging to steadily advance compliance work strictly in accordance with regulatory requirements. Previously, it had completely ceased opening accounts for mainland Chinese applicants and continued to invest in combating false account openings. As of the end of Q1 2026, the proportion of mainland Chinese clients with assets at the firm had dropped to 13%. Regarding existing mainland clients, Futu Securities stated it will assist investors in an orderly manner with reference to industry practices, and will announce specific plans as soon as the regulatory details are released. Currently, all business operations are normal. Tiger Brokers has also responded via media, stating that it has noted the relevant notice, will strictly cooperate with related work, always prioritize compliance, and that all business operations are normal at present. The unified responses from these three cross-border brokerages stem from regulators’ comprehensive crackdown on illegal business activities. Reports indicate that the above-mentioned institutions, without obtaining relevant business licenses, carried out securities trading promotions and handled trading instructions in China, generating revenue and thereby committing illegal securities business operations. They are also suspected of illegally conducting public fund sales and futures brokerage business. Therefore, the CSRC intends to confiscate all illegal gains and impose penalties according to law. The implementation plan that accompanies the administrative penalties further clarifies the whole industry’s rectification path, stipulating that after two years of concentrated rectification, all illegal cross-border activities by overseas institutions must be fully eliminated. Compared with earlier standardization moves, this rectification extends to the entire chain. The ban not only covers marketing and account opening, but also explicitly includes the handling of trade instructions, fund transfers, and other business processes. For cross-border brokerages, how to handle existing business is the market’s main focus. The plan sets a two-year period for concentrated rectification. During this period, overseas institutions are forbidden from illegally providing mainland existing investors with the ability to buy or transfer-in funds; only one-way selling and fund transfers out are allowed. This means existing investors’ cross-border investment accounts in China are entering a countdown to withdrawal. At the policy implementation level, regulators have left room for a smooth transition, making it clear that already-opened accounts will not be forcibly closed and funds and securities assets will not be forcibly liquidated. After the concentrated rectification period ends, overseas institutions must completely shut down mainland websites and trading software. Cross-border brokerages had already begun cutting off mainland business channels previously. By mid-2025, under regulatory guidance, Longbridge Securities, Huasheng Securities, and several other Hong Kong brokerages had adjusted mainland resident account opening eligibility by cancelling the previously used proof-of-assets account opening channel, and instead required proof of overseas residence or work such as utility or rental bills. From cancelling the proof-of-assets account opening channel to now specifying that only selling but not buying is allowed during the two-year transition, the logic of eliminating illegal cross-border business remains consistent. This rectification also highlights the strength of interdepartmental cooperation. The foreign exchange authority is coordinating with the Ministry of Public Security and the central bank to crack down on illegal cross-border fund transfers by onshore investors; the Cyberspace Administration and Ministry of Industry and Information Technology are responsible for handling network information and illegal internet application violations, respectively. A multi-pronged approach forms a joint force, indicating that the longstanding cross-border compliance issues are being addressed in an orderly manner. While outlawing illegal businesses, the asset rights and interests of mainland investors will be protected through an orderly exit mechanism. Risk Warning and Disclaimer The market has risks, and investment must be cautious. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular situation. Investment is at your own risk. ```