SHANGHAI, Oct 28 (Reuters) - Online brokerages not licensed
in China are conducting illegal businesses if they serve Chinese
clients via the internet, a Chinese central banker said, in the
first official comment on recent reports flagging regulatory
risks facing firms such as U.S.-listed Futu Holding and UP
"Cross-border online brokerages are driving in China without
driver's license. They're conducting illegal financial
activities," Sun Tianqi, head of the Financial Stability
Department of the People's Bank of China (PBOC) said in a
speech, according to a transcript released on Wednesday.
Futu and UP Fintech face regulatory risks
as China's new personal data privacy law takes effect on Nov. 1,
the official People's Daily said in an analysis on its website
on Oct 14.
Nasdaq-listed shares of Futu and Fintech have since plunged,
amid concern that the sector will be next in Beijing's
regulatory crosshairs. China has launched a flurry of crackdowns
targeting sectors ranging from technology to cryptocurrency to
Speaking at the Bund Summit in Shanghai over the weekend,
PBOC's Sun said that some online brokerages, with only overseas
licenses, serve mainly mainland Chinese investors, allowing them
to trade U.S. and Hong Kong stocks.
Without identifying the firms, Sun said that 80% of accounts
of a brokerage registered in the Cayman Islands were opened by
mainland clients, while the ratio is 55% for another Hong
"Financial licenses have national boundaries," Sun said.
"Overseas institutions with only overseas licenses
conducting business in mainland China is illegal financial
The transcript of Sun's speech was released on the website
of the Finance 40 Forum, which organised the summit.
Futu said in its 2020 annual report that it primarily serves
the emerging affluent Chinese population and a large number of
its clients are mainland Chinese citizens.
Futu said it does not believe it engages in securities
brokerage business in China by redirecting users and clients to
open accounts and make transactions outside China but said there
were regulatory risks.
(Reporting by Samuel Shen and Andrew Galbraith
Editing by Robert Birsel)