“Heavy Spotlight”—China’s CSRC plans to confiscate all illegal income, both domestically and overseas, from Tiger, Futu, and Changqiao

Xinhua News Agency reports that the China Securities Regulatory Commission (CSRC) plans to confiscate all illegal gains of Tiger Brokers, Futu Securities, and Longbridge Securities related entities both domestically and abroad, and to impose strict penalties according to law. The three brokerages are suspected of illegal cross-border operations, violating Chinese securities, fund, and futures laws and regulations. This marks the most significant escalation since the CSRC banned new account openings at the end of 2022, shifting from "curbing new growth" to "liquidating existing holdings," with Longbridge Securities being publicly named for the first time.
(Background: China's eight major departments jointly issued new regulations: issuing and trading virtual currencies are considered illegal financial activities)
(Additional background: Huang Renxun's visit to China was useless! China actively refused to buy H200, what are they planning behind the scenes?)

Key Summary

• The CSRC plans to confiscate all illegal gains of Tiger, Futu, and Longbridge related entities both domestically and abroad and impose strict penalties
• The three brokerages engaged in cross-border securities business with Chinese investors without approval, deemed illegal operations
• In 2022, the first action only banned new accounts; this time, the crackdown has escalated to recovering all gains, with Longbridge being named for the first time

When the CSRC first took action against cross-border brokerages at the end of 2022, they did two things: ban soliciting Chinese investors and prohibit opening new accounts. At that time, Futu (Nasdaq: FUTU) and Tiger Securities (Nasdaq: TIGR) both plummeted about 30% before the US market opened, but the trading rights of existing clients were preserved, leaving a way out. Three years later, the rules have completely changed: not only are new accounts banned, but all previously earned money must be fully recovered.

All three brokerages named, Longbridge included for the first time

The three firms targeted this time are not minor players. Futu Holdings, backed by Tencent, is one of Asia’s largest online brokerages. Tiger Securities’ parent company, UP Fintech, is invested in by Interactive Brokers and Xiaomi, with its New Zealand subsidiary Tiger Brokers (NZ) Limited explicitly listed in the punishment notice. Longbridge Securities also has Xiaomi ties; during the three-year regulatory storm, it was never publicly named, but this time, it was directly included in the confiscation list.

The common issue among these platforms: they all used Hong Kong or overseas licenses to provide US and Hong Kong stock trading channels to Chinese investors via the internet, but none obtained approval from the CSRC, deemed as illegal securities business operations.

Three-year escalation of crackdown

In October 2021, the CSRC first publicly stated that cross-border operations constitute illegal business activities. In November of the same year, senior executives of Futu and Tiger were summoned for interviews. On December 30, 2022, the CSRC officially ordered to "effectively curb new growth and orderly resolve existing issues," banning new account openings while retaining trading rights for existing clients. In 2023, Futu and Tiger successively removed their apps from major Chinese app stores and shifted their focus to overseas markets.

Now, the CSRC’s use of the phrase "proposed decision" indicates that the process has entered formal administrative penalty procedures. The statement about "confiscating all illegal gains of relevant domestic and foreign entities" is noteworthy, as it affects not only Chinese domestic branches but also physical entities in Hong Kong, New Zealand, and other regions, which are included in the scope of recovery.

Frequently Asked Questions

Why is the CSRC punishing Tiger, Futu, and Longbridge?

The three brokerages provided cross-border securities trading services to Chinese investors via Hong Kong or overseas licenses without approval from the CSRC, which is considered illegal securities business operations, violating the Securities Law and related regulations.

How does this punishment differ from that in 2022?

In 2022, only new customer solicitation and account openings were banned, allowing existing clients to continue trading. This time, the escalation involves confiscating all illegal gains and imposing strict penalties, with Longbridge Securities being named for the first time, covering both domestic and foreign entities.