Chinese Government Begins Severe Penalties Against Major US Stock Trading Platforms Operating Within China

TLDR

• CSRC penalized Tiger Brokers, Futu and Long Bridge over overseas stock access.
• Regulators said the firms handled mainland trading orders without approval.
• The brokerages face confiscation of illegal gains and further penalties.
• A two-year cleanup plan limits existing accounts to sell-only activity.
• China says Stock Connect and QDII funds remain approved overseas routes.

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China’s securities regulator has penalized Tiger Brokers, Futu Securities International and Long Bridge Securities for offering mainland investors unauthorized access to overseas securities trading, as regulators move to tighten supervision of cross-border brokerage activity.

The China Securities Regulatory Commission said the three brokerages promoted securities trading, handled orders and provided related services on the mainland without regulatory approval. The regulator said the conduct violated China’s Securities Law and disrupted market order.

The Chinese government has announced severe penalties against major US stock trading platforms operating within China, confiscating all illegal gains. This could benefit centralized exchanges (CEXs) and on-chain US stock trading.

China’s Securities and Exchange Commission (CSRC)… pic.twitter.com/ll0QGHbkvX

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According to the CSRC statement, the companies will have illegal gains confiscated and face further penalties. The action forms part of a broader campaign to restrict overseas brokerages from serving mainland Chinese clients without licenses.

China CSRC Targets Unauthorized Overseas Brokerage Services

The regulator said overseas institutions are not permitted to use websites, mobile apps, mainland affiliates or local partners to solicit investors and provide trading services for U.S. and Hong Kong stocks without approval. It said such activity has affected China’s financial market order and investor protections.

Tiger Brokers, Futu Securities and Long Bridge Securities have been linked to platforms that allow investors to trade overseas shares. Chinese retail demand for foreign equities has grown as U.S. technology stocks have performed strongly and market sentiment has improved following easing tensions in the Middle East.

Mainland investors face strict limits on direct overseas stock purchases. Approved routes include the Stock Connect program with Hong Kong, qualified domestic institutional investor funds and the Wealth Management Connect scheme. Regulators have warned that brokerages operating outside those channels may breach domestic rules.

Two-Year Cleanup Plan Covers Existing Accounts

In a separate joint statement, the CSRC and seven other government departments, including the central bank and the cybersecurity regulator, announced a two-year cleanup period for unauthorized overseas brokerage operations tied to securities and futures trading.

During that period, affected overseas brokerages will be allowed only to sell securities on behalf of existing mainland clients. They will be barred from opening new accounts, accepting new funds, processing fresh buy orders or enabling additional fund transfers into trading accounts.

The authorities said existing accounts will not be forcibly closed, and securities or funds already held in those accounts will not be liquidated by force. The framework appears aimed at winding down unauthorized activity while avoiding immediate disruption for current account holders.

The latest measures follow earlier action in December 2022, when the CSRC ordered some overseas brokerages to stop adding new mainland clients and opening new stock accounts. The current enforcement step adds confiscation of gains and further penalties to the regulatory response.

Overseas Stock Demand Meets Capital Control Priorities

The crackdown comes as Chinese investors seek more exposure to overseas markets. Some government-approved funds investing in foreign equities have reportedly exhausted available quotas, while related products have traded at premiums to their net asset values.

China has made capital market stability and foreign exchange control key regulatory priorities in recent years. Authorities have sought to limit unauthorized capital outflows while promoting domestic financial market order.

The enforcement action also comes during a period of broader policy attention on financial technology platforms, cross-border apps and online investment channels. The CSRC said it will continue targeting illegal domestic brokerage services provided by overseas institutions.

The case may also affect discussion around digital platforms offering exposure to foreign stocks, including centralized exchanges and on-chain tokenized stock products. Regulators have stated that account opening, trading, marketing, fund transfers, and order handling for mainland investors require proper authorization under Chinese law.