Internet Brokers are the Most Complete Sample
From a regulatory perspective, Futu, Tiger, and Changqiao share one common characteristic: they possess complete online pipelines, standardized business models, and highly digitized customer acquisition and trading processes. The advantage of this model is rapid growth; however, its drawback is that it leaves an equally comprehensive compliance footprint.
If we break down an illegal cross-border exhibition link, it is roughly:
- Content and advertising reach to domestic users
- Guiding app download or access to the account opening page
- Completing account registration remotely
- Handling transactions through offshore accounts
- Establishing complementary channels for fund inflows and outflows
- Continuous maintenance of stickiness through customer service, community, and investment education content
Online brokerage firms have almost standardized all six steps into core products. From a regulatory perspective, such subjects are the easiest to categorize, the most straightforward to document evidence against, and thus also the most effective in establishing an industry precedent (or deterrent effect).
Therefore, naming online brokerage firms initially should not be interpreted as meaning that only they are problematic; the more reasonable understanding is that they represent a sample chain that regulators can fully dissect/analyze.
Not Mentioned Does Not Mean Being in the Safe Zone
Regarding this point, the China Securities Regulatory Commission’s (CSRC) Q&A with journalists on February 15, 2023, stated it very clearly: In accordance with the principle of implementing unified supervision for similar types of businesses, the CSRC at that time had “deployed and initiated standardized rectification work for illegal cross-border expansion by offshore subsidiaries of mainland securities companies.”
This statement is crucial. It indicates at least three things.
First, the regulatory logic has never been one where “internet brokers operate under one set of standards, and Chinese domestic brokers operate under another.” Second, what started at the end of 2022 was not merely an isolated case involving Futu or Tiger, but rather a larger unified rectification framework. Third, different levels of public exposure do not equate to different regulatory requirements.
Therefore, I disagree with the view that “only these three companies are going to suffer; the others can get away with it.” But I also don’t agree with the statement “everyone is compromised,” which outright dismisses everything. This judgment is too crude and fails to help differentiate true risk exposure.
A more accurate way to put it is: Different institutions have different ways of being exposed to risks, and the pressure for rectification will also be layered.
More useful than hitting with a single stick by looking at layers
Considering only public definitions and business models, they can generally be divided into three levels/layers.
| Segmentation | Typical Characteristics | Pressure Intensity |
|---|---|---|
| High-Risk Exposure | Clearly targeting Mainland retail investors for online solicitation, account opening, trading, community operation, and content deployment | Highest |
| Medium-Risk Exposure | Mainly serving existing clients; public client acquisition efforts are weaker, but historical business chains remain | Second Highest |
| Low-Risk or Compliant Channels | Serving through licensed, certified, and quota-restricted channels such as Stock Connect (HK), QDII, Cross-border Wealth Management Channels, etc. | Relatively Controllable |
The third layer here is the easiest to confuse. Many people conflate the legitimate channels for investing in Hong Kong and US stocks with overseas institutions that do not hold domestic licenses but directly offer services to Mainland residents. In reality, this boundary is precisely what this current round of rectification aims to demarcate.
The legal cross-border investment channels themselves have not been fundamentally negated. What has been addressed/rectified are the segments of the process that circumvent domestic licensing, bypass market entry approvals, and skirt both capital and operational boundaries.
Next, pay closer attention to the implementation details
If we continue to follow the current trend established by open policies, I am more inclined to see several types of actions emerging successively.
The first type involves brokerage firms implementing self-imposed regional isolation. For example, the account opening page, account opening link, distribution channels, customer service talking points/scripts, community content, and identification of the source of the account opening link will more strictly differentiate between domestic (mainland) and non-domestic users.
Category two involves segmenting trading permissions for existing accounts. The most common approaches include setting up sell-only functionality, or handling permissions separately based on different markets, products, and currencies.
Category Three: Funding channels are continuously tightening. Even if the securities firm’s front-end announcement hasn’t been fully released, banks, payment services, currency exchange, and deposit/withdrawal pipelines may tighten first. Often, what truly hinders user experience is not the trading button itself, but the difficulty in getting funds deposited.
Category Four: The asset transfer arrangements are gradually becoming clearer. This area currently has the least public information available, but it is the most worth monitoring. This is because it determines whether clients can only liquidate their assets, or if they have the opportunity to transfer and absorb them through compliant structures.
Regarding Category V, the penalty document will clarify and standardize the guidelines. Specifically, how exactly “all illegal gains” are calculated, what period they track back to, and which entities are covered. The currently published guidelines for this portion are incomplete; only the release of a formal penalty document later on will serve as the true valuation anchor point.
It won’t stop at just three names
My personal judgment is that this will not stop at simply “publicly naming three companies.”
The reason is simple. The joint plan of eight departments aims to regulate a type of activity, not the brand names of three companies. As long as the business model remains within the same value chain, it is unlikely that it can operate outside the framework for a long time, even if subsequent penalties, levels of public disclosure, or intensity of rectification vary.
The three things that make a difference might be:
- What is the magnitude of the historical stock size?
- To what extent have internationalization and reducing dependency on mainland been achieved over the past two years?
- Did institutions preemptively implement regional isolation and inventory pressure reduction?
Therefore, when looking at this matter going forward, it’s not simply about guessing “who else will be named,” but rather whose business structure is better equipped to withstand this round of boundary redrawing.
Convergence of Series
If you read the three articles together, the connection is actually very clear:
In 2022, the focus was on restricting new additions. The CSI Stock Connect event provided a clear transition period of nearly one year. This time on May 22, 2026, the scope has upgraded to existing holdings only selling and not buying, and it has begun publicly treating internet brokerage firms as typical samples.
If I have to make the shortest assessment, I would say:
This is not a sudden reversal, but rather a regulatory trend that started several years ago and has reached the stage where existing businesses must also be included in the disposal/resolution scope.
Of course, there will also be implementation rules, company responses, formal penalty documents, and asset handover arrangements later on. However, in terms of the general direction, this grey cross-border retail channel will continue to be compressed, leaving virtually no doubt. What truly remains to be waited for is the speed, scope, and cost at which it will be compressed.
References
- [CSRC Promotes Remedial Work on Illegal Cross-Border
Author’s Notes
Original Prompt
Breaking news in Hong Kong and US stock trading today: Institutions like Tiger Securities were severely disciplined for illegal cross-border operations, and Futu and Tiger dropped 40% pre-market. Let's first review the previous CSRC investigation action, which completely locked down account opening for mainland users, but existing clients were unaffected. This time, it is the existing clients who face trading bans. Last year or the year before, there was a ban on HK stockbrokers serving mainland clients regarding transactions through Shanghai Stock Connect (read: "Search related policies to confirm how long the gap is between policy implementation and brokerage enforcement in banning mainland users from buying"). Today's news said there was a two-year period for users to clear their positions, but it didn't specify when the buy ban would take effect. It also did not clarify for how long illegal profits would be retroactively charged. Even if Futu published an announcement, as of the end of Q1 2026, the proportion of mainland Chinese clients with assets to the total group assets has dropped to 13%. Meanwhile, under the group
This rewrite retains the original manuscript's regulatory pathway, institutional stratification, and follow-up observation points. However, it has narrowed the scope of the third section's commitment to focusing on "how the platform growth model is re-evaluated." It avoids expanding further on account operation details to prevent repetition with the second section.