Futu Tiger completely departs from Mainland China; how funds will exit pending regulatory guidelines

Author: Cai Pengcheng; Source: Barrons China

On May 22, the China Securities Regulatory Commission (CSRC) officially issued a major announcement, stating that it has filed an investigation in accordance with the law into the relevant domestic and overseas entities of Tiger Brokers (NZ) Limited (hereinafter “Tiger”), Futu Securities International (Hong Kong) Limited (hereinafter “Futu”), and Changqiao Securities (Hong Kong) Limited (hereinafter “Changqiao”) for conduct such as illegally operating securities business inside China, and that it has issued a pre-notice of administrative penalties.

The CSRC used stern wording: “It is proposed to confiscate all illegal gains of the relevant domestic and overseas entities of Tiger, Futu, and Changqiao, and impose severe penalties in accordance with the law.”

At the same time, the CSRC and eight other departments jointly issued the 《Implementation Plan for the Comprehensive Rectification of Illegal Cross-Border Securities, Futures, and Fund Business Activities》. “The overarching requirement is that, through 2 years of centralized rectification, illegal cross-border operations by overseas securities, futures, and fund business institutions will be comprehensively shut down,” with the goal to “resolutely eliminate illegal activities and carefully clean up existing inventories.”

This is, to date, the most comprehensive and highest-standard regulatory action targeting cross-border internet brokerages.

Market reaction was swift. By 7:00 p.m. Beijing time, both Tiger Securities and Futu Holdings were down more than 34% in pre-market trading.

A person close to the above-mentioned brokerages told Barrons China, “Regulatory authorities will issue related implementation rules later, but in terms of the overall direction, mainland investors’ funds will be required to flow back to the mainland.” He added that “to judge whether an investor is from the mainland, the ID documents used at account opening will be the deciding factor.”

From “curbing incremental growth” to “comprehensive rectification”

To understand the deeper logic behind this filing of an investigation, it is necessary to trace back the five-year campaign by China’s regulators to crack down on cross-border internet brokerages.

2016: The CSRC first made its position clear: apart from Qualified Domestic Institutional Investors (QDII) and the Shanghai-Hong Kong and Shenzhen-Hong Kong Connect mechanisms, no other domestic or overseas institutions have been approved to provide services to allow domestic investors to participate in overseas securities trading.

October 2021: The CSRC explicitly pointed out that marketing activities carried out by overseas securities operating institutions toward domestic investors through related domestic platforms do not comply with laws and regulations such as the Securities Law and the Regulations on the Supervision and Administration of Securities Companies. In the same year’s November, the CSRC held regulatory talks with the senior executives of Futu Holdings and Tiger Securities, requiring them to lawfully standardize their cross-border securities businesses targeting domestic investors.

December 2022: The CSRC issued an announcement, stating it would promote rectification efforts against Futu Holdings and Tiger Securities’ illegal cross-border business activities, and officially characterized their conduct as “illegal securities business operations.”

Compared with the 2022 rectification, this plan introduces several new points:

First, full-process regulation. The plan makes clear that it prohibits overseas institutions from operating websites and trading software within China, publishing marketing information, pushing investment information, conducting rebate-based marketing, and promoting overseas stocks; it prohibits internet platforms from providing them with convenient account-opening channels; and it prohibits accounts of online self-media from publishing relevant traffic-driving information.

Second, a 2-year centralized rectification period, with “no entry and only exit” for existing business. During the centralized rectification period (i.e., the next 2 years), overseas institutions are only allowed to provide one-way sell transactions and fund transfers for existing domestic investors. After the centralized rectification period ends, overseas institutions must fully shut down their domestic websites, trading software, and supporting servers, and are prohibited from illegally providing trading and other services to existing investors within China.

Third, “confiscating all illegal gains.” The CSRC cites Article 120 of the Securities Law (illegal securities business operations), Article 97 of the Securities Investment Fund Law (illegal sale of public funds), and Article 63 of the Futures and Derivatives Law (illegal futures brokerage), covering three business lines: securities, funds, and futures. All illegal gains are included in the confiscation.

Fourth, coordination between the central and local governments, and linkage across departments. The rectification measures cover multiple areas, including securities regulation, foreign exchange management, banking supervision, internet management, and criminal crackdown.

How much impact will this have on Futu’s business?

For Futu, Tiger, and others, another key question is: how much revenue do mainland’s existing clients actually contribute?

Futu’s latest response mentions that, as of the end of the first quarter of 2026, the proportion of asset clients from mainland China within the total number of asset clients of the entire group has fallen to 13%. This is a substantial drop from 55% in the first quarter of 2021.

According to estimates by CMB International in March 2026, the assets of clients in Greater China as a proportion of total AUM still exceed 80%. Taking into account that clients outside Greater China have already surpassed half (55%); but assets in Greater China still account for 80% or more. This means that the per-account asset size in Greater China is several times larger than in other markets.

Although outsiders cannot know how much of Greater China’s 80% AUM comes from mainland China versus the licensed Hong Kong market, given that per-account asset size in Greater China as a whole is relatively large, the AUM of mainland Chinese clients affected by this incident is very likely to be greater than 13%.

For Tiger Securities, its proportion of mainland customers was previously clearly higher than Futu’s. As of 2021, among its existing customers, about 90% of its funding customers’ inflows came from mainland China. Tiger International previously disclosed when releasing its 2023 financial data that customer assets from outside Hong Kong and mainland China had already accounted for more than three-quarters of total existing assets; on the revenue side of the group, about half of revenue came from clients outside those markets. In an evening announcement, Tiger Securities stated that by the end of 2025, retail client assets in mainland China under the company’s consolidated accounts would account for approximately 10% of total client assets.

In addition, for institutions such as Futu, another financial shock will come from “confiscating all illegal gains.”

On the evening of the 22nd, the two companies successively disclosed matters related to administrative fines.

Futu Holdings announced that it has received an investigation notice from the CSRC and a pre-notice letter regarding administrative penalties, and that the total amount of the proposed punishment is approximately RMB 1.85 billion (approximately US$271 million). Futu’s founder and CEO, Li Hua, is also proposed to be fined RMB 1.25 million. Tiger Securities also issued an announcement in the evening stating that the Beijing Securities Regulatory Bureau imposed an aggregate administrative fine of approximately RMB 308.1 million on relevant subsidiaries, and confiscated an aggregate of approximately RMB 103.1 million in illegal gains. Meanwhile, Tiger Securities’ director and CEO, Wu Tianhua, also received a warning and was fined RMB 1.25 million. The total fines and confiscations for both companies add up to RMB 2.3 billion.