China tightens offshore stock access in Futu, Tiger case

China tightened its campaign against offshore brokerage channels on 22 May as the China Securities Regulatory Commission prepared penalties against Futu Holdings (FUTU), UP Fintech’s Tiger Brokers (TIGR) and Longbridge for operating on the mainland without a license. Up Fintech ADRs fell as much as 47% in premarket trading and Futu shares dropped 35%, according to Bloomberg.

This is a market-structure story as much as a broker-compliance one.

The proposed action aims at offshore channels that mainland investors had used to buy foreign securities outside Beijing’s approved schemes. Bloomberg reported that the CSRC plans to confiscate illegal gains from the firms’ domestic and overseas entities and impose severe penalties. The regulator said the companies marketed services, processed trading orders and offered other securities business within mainland China without approval. It also said the firms have the right to a defense and a formal hearing before any punishment is finalized.

Beijing had already warned the sector.

Futu and Tiger were pushed to remove trading apps from mainland app stores in 2023 after a late-2022 directive to stop taking new onshore investors, Bloomberg said. The latest step shifts the campaign from rectification orders toward formal penalties. That raises the regulatory risk for brokers whose remaining growth still depends on mainland investors reaching overseas stocks through offshore entities.

Additional detail from the South China Morning Post suggests the cleanup is broader than the three named firms. The paper reported that the CSRC and seven other government bodies opened a two-year campaign against illegal cross-border securities, futures and fund business, while Hong Kong’s Securities and Futures Commission told licensed brokerages to review account-opening controls and check for suspicious or forged documents.

Regulators are also trying to close access points without forcing an abrupt liquidation of existing holdings. SCMP said mainland clients who already hold offshore accounts may continue to sell securities, but they will be barred from buying new positions or remitting fresh funds during the cleanup period. The same report said the official routes for mainland investors remain Stock Connect, qualified domestic institutional investor funds and wealth-management connect. Those are the channels Beijing can supervise directly.

The companies’ responses showed how much adjustment had already been under way. Tiger said in a statement that it would comply with regulatory requirements and that operations remained normal. Futu said it had already halted new mainland account openings. It also said mainland investor assets had fallen to 13% of total client assets in the first quarter, according to SCMP.

The policy line is clearer now. Anadolu reported that the campaign was approved by the State Council and targets unauthorized offshore investment services for mainland investors. In that framing, the case is less about punishing a few brokers and more about forcing overseas stock access back into channels that fit China’s capital-account rules.

For investors, the revenue question is only part of the story. The larger issue is whether Beijing is ready to police offshore stock access with the same intensity it applies to other cross-border financial channels. If the answer is yes, Chinese-facing brokers will need to show that future growth can come from markets and client pools that sit fully inside the regulatory perimeter.