The People’s Bank of China (PBOC) has targeted online brokerages for illegal financial activity.
Sun Tianqi (孙天琦), head of PBOC’s financial stability department, said that some overseas online brokerages that are licensed for business activity abroad had been engaging in operations within China without first obtaining the relevant licenses that are required domestically.
“[They] are using Internet platforms to mainly and specifically provide offshore securities investment services to domestic investors, including US share and Hong Kong share transaction services,” said Sun on 27 October at the China Finance 40 Forum.
“This is categorised as a ‘cross-border payment…if offshore institutions engage in domestic activity with offshore licenses it will be considered a form of illegal financial activity.”
Sun pointed specifically to a company registered in the Cayman Islands that derives 80% of its client funds from China, and another company registered in Hong Kong for whom the figure is 55%.
Acccording to a report from Reuters these two companies are UP Fintech Holding and Futu Holdings, both of whom have seen their share prices plunge in the wake of Sun’s remarks.
“In terms of their actual operations, cross-border Internet brokerages are categorised as unlicensed driving domestically, and are an illegal form of financial activity,” said Sun.