A 40% plunge: What is the background of the three major brokerage giants heavily fined?

Source: Phoenix Net "Storm Eye"

Today, the China Securities Regulatory Commission, Ministry of Industry and Information Technology, State Administration for Market Regulation, Cyberspace Administration, and other eight ministries jointly issued the "Implementation Plan for Comprehensive Rectification of Illegal Cross-border Securities, Futures, and Fund Activities," to fully regulate the illegal securities, futures, and fund activities conducted by overseas institutions within China. The three leading overseas internet securities firms, Tiger Securities, Futu, and Changqiao, have been identified as key targets for rectification.

Currently, the CSRC has filed investigations against the three institutions and issued a pre-penalty notice, proposing to confiscate all illegal gains and impose severe penalties. Following the policy announcement, the capital market reacted swiftly, with Tiger Securities and Futu Holdings dropping nearly 40%, and market panic spreading significantly.

In response to this joint regulatory crackdown by the eight ministries, all three brokerages issued official statements immediately.

Futu stated that this regulatory standard is a unified requirement for the entire industry, and the company will strictly implement compliance rectification work. It also revealed that the platform has already fully suspended account opening applications for mainland Chinese users, rejecting tens of thousands of non-compliant applications over the past two years; for existing mainland clients, the company will assist users in coping with adjustments and safeguarding assets according to industry norms. Currently, as the regulatory details have not yet been fully implemented, specific rectification timelines have not been announced, but updates will be provided promptly. As of the end of Q1 2026, the proportion of mainland assets held by Futu clients has been significantly reduced to 13%, with decreasing dependence on the mainland market.

Additionally, tonight, Futu Holdings announced that it has received investigation notices and pre-penalty notices from the China Securities Regulatory Commission and its Shenzhen branch. The proposed total fine is approximately 1.85 billion yuan. Furthermore, a personal fine of 1.25 million yuan is proposed for the company's founder and CEO, Mr. Li Hua.

Tiger Securities responded that it has noted the regulatory notices, and currently all business operations are normal. The company always prioritizes compliance and will actively cooperate with regulatory authorities, maintaining regular communication.

Changqiao Securities responded in the APP community that the company has not yet received an official regulatory notice, and user account and asset security are fully guaranteed. The platform's services are operating normally, and updates will be shared promptly.

Joint Action by Eight Ministries, Illegal Cross-border Brokers Face the Strictest Regulation

This rectification action has clearly defined regulatory red lines, explicitly prohibiting all overseas institutions from engaging in securities, futures, and fund-related marketing, account opening, transaction processing, capital transfer, and other operational services within China. It also strictly forbids domestic entities from assisting overseas institutions in illegal operations, such as website setup, trading software development and operation, customer service, and other supporting activities.

To maximize the protection of the legal property rights of existing investors, the plan sets a two-year concentrated rectification transition period, providing investors with ample buffer time.

During the rectification period, accounts already opened by investors will not be forcibly canceled, and assets such as funds, stocks, and funds within these accounts will not be forcibly cleared. However, only one-way sell transactions and fund transfers are supported; new buy-ins and fund inflows are prohibited.

After the two-year rectification period, the three overseas institutions must fully shut down their domestic websites, trading software, and all supporting services, completely ending all trading services for domestic investors.

Regarding the specific criteria for existing clients, Phoenix Finance learned from industry insiders that all mainland investors who have opened accounts are considered existing clients.

This major rectification is not a temporary regulatory move but a comprehensive upgrade of domestic financial compliance governance.

In fact, as early as December 2022, the CSRC clarified that overseas institutions operating cross-border without proper qualifications are illegal, stopping new account openings for Tiger, Futu, and other institutions, and banning them from soliciting new domestic clients.

By 2025, some overseas brokerages were found to be circumventing regulations and engaging in illegal operations, prompting regulatory authorities to launch special rectification supervision.

This joint issuance of a special plan by the eight ministries establishes a long-term, coordinated regulatory mechanism, marking the transition of illegal cross-border securities activities into a full-chain, normalized, and zero-tolerance crackdown phase. It also signifies that the era of wild growth for leading cross-border brokerages relying on internet advantages and low barriers to capture the domestic Hong Kong and US stock retail markets has come to an end, with domestic operations facing termination.

Regulatory authorities are also guiding domestic investors to abandon illegal investment channels and participate in overseas investments through compliant channels such as Stock Connect, QDII, and Cross-border Wealth Management.

Futu, Tiger, Changqiao, Who Are They?

The three institutions heavily penalized this time—Futu, Tiger Securities, and Changqiao Securities—are currently the largest and most active internet brokerages for Hong Kong and US stocks among domestic users.

The core reason for the penalties is that these three institutions did not obtain licenses for securities brokerage and securities margin trading, and they engaged in securities trading marketing, transaction processing, and other related securities services within China to generate revenue, violating Article 120 of the Securities Law, constituting illegal securities business operations.

Additionally, their related entities both domestically and abroad violated the Securities Investment Fund Law (Article 97) and the Futures and Derivatives Law (Article 63), constituting illegal public fund sales and illegal futures brokerage activities.

It is noteworthy that all three brokerages are backed by major domestic internet giants, with close capital and ecological ties to Tencent, Xiaomi, and Alibaba respectively.

Futu Securities is officially known as Futu Securities International (Hong Kong) Limited, owned by Futu Holdings, a NASDAQ-listed company founded by early Tencent core employees. Tencent is a key strategic shareholder and an important platform for Tencent’s overseas securities business, with its Shenzhen subsidiary supporting various domestic operations. As of the latest financial report, Tencent still holds a 20% stake in Futu.

Tiger Securities is operated by Tiger Securities (New Zealand) Limited, also NASDAQ-listed, founded by core members of NetEase Youdao’s technical team. Xiaomi Group is an important investor, and before its IPO, Xiaomi held 14.1% of Tiger Securities.

Leveraging Xiaomi’s ecosystem of capital and traffic, the company conducts domestic marketing, software operations, and transaction processing through its Beijing subsidiary.

Changqiao Securities is a licensed brokerage in Hong Kong, with a core team mainly from Alibaba and Ant Group, with a clear Alibaba affiliation. Relying on Alibaba’s ecosystem of technology and traffic, it rapidly grew by expanding into the domestic market through its Zhejiang subsidiary, serving domestic clients, with industry-leading growth in recent years.

In terms of operational scale, Futu is the clear leader among the three. Its total revenue for 2025 reached HKD 22.85B (about USD 2.9 billion), a year-on-year increase of 68.1%; registered users reached 29.18 million, with 3.37 million asset clients; total annual trading volume was HKD 14.68 trillion (about RMB 13.56 trillion), up 89.4% year-on-year.

Tiger Securities and Changqiao Securities follow closely. Tiger Securities’ total revenue in 2025 was USD 612 million, with a net profit attributable to shareholders of USD 171 million, over 1.25 million asset clients, with client assets totaling approximately USD 60.8 billion, and a total trading volume of USD 1.03 trillion (about RMB 7.04 trillion).

Changqiao Securities is characterized by rapid growth, with a nominal trading volume of USD 1.5 trillion (about RMB 10.26 trillion) in 2025, completing 55.7 million orders throughout the year, ranking first among emerging cross-border brokerages in Hong Kong stocks.

This joint crackdown by the eight ministries on illegal cross-border securities activities is an inevitable upgrade of domestic financial regulation to compliance and normalization. It also marks the end of the wild growth era for internet-based cross-border brokerages like Futu, Tiger, and Changqiao.

For ordinary investors, the gray channels for Hong Kong and US stock investments are gradually closing. Abandoning unlicensed cross-border brokers is an inevitable trend. In the future, participating in overseas markets through official, compliant channels such as Stock Connect, QDII, and Cross-border Wealth Management will be the only way to safeguard assets and meet regulatory requirements.

At the industry level, cross-border securities business will officially enter a new stage of strict regulation and compliance, ending the era of disorderly expansion, with normalization and rule of law becoming the core themes for future industry development.