SHANGHAI (Reuters) – Unauthorized online brokers in China carry out illegal activities if they serve Chinese clients via the Internet, a Chinese central banker said, in the first official comment on recent reports pointing out the regulatory risks facing them companies such as Futu Holding, listed in the United States. and UP Fintech Holding.
“Cross-border online brokers are driving in China without a driver’s license. They are carrying out illegal financial activities,” Sun Tianqi, head of the financial stability department of the People’s Bank of China (PBOC), said in a speech, according to a report. transcription. published Wednesday.
Futu and UP Fintech face regulatory risks as China’s new personal data privacy law takes effect on November 1, the official People’s Daily said in an analysis on its website on October 14.
Nasdaq-listed Futu and Fintech stocks have since plunged, fearing the sector might be next in Beijing’s regulatory sights. China has launched a wave of crackdowns targeting industries ranging from tech to cryptocurrency to real estate.
Speaking at the Bund summit in Shanghai this weekend, PBOC’s Sun said that some online brokerage firms, with only overseas licenses, primarily serve investors from mainland China, allowing them to trade deals. US and Hong Kong stocks.
Without identifying the companies, Sun said that 80% of the accounts of a brokerage registered in Cayman Islands were opened by clients from the mainland, while the ratio is 55% for another brokerage registered in Hong Kong. .
âFinancial licensing has national borders,â Sun said.
“Overseas institutions holding only overseas licenses operating in Mainland China constitute illegal financial activity.”
The transcript of Sun’s speech was posted on the Forum Finance 40 website, which hosted the summit.
Futu said in its 2020 annual report that it primarily serves the emerging affluent Chinese population and that a large number of its customers are mainland Chinese citizens.
Futu said he did not expect to engage in securities brokerage business in China by redirecting users and clients to opening accounts and transactions outside of China, but said he there were regulatory risks.
(Reporting by Samuel Shen and Andrew Galbraith; editing by Robert Birsel)