Today, cross-border securities companies are on the cusp again!
On February 8, sun Tianqi, director of the financial stability bureau of the people’s Bank of China, wrote in China finance that some overseas securities operating institutions use the Internet platform to provide overseas securities investment services to domestic investors without obtaining relevant domestic licenses and only holding overseas licenses, which belongs to the category of “cross-border delivery”, Beyond China’s commitment to opening up under the framework of the general agreement on trade in services.
from the perspective of business essence, these cross-border internet securities companies should be identified as “driving without a license” in China and suspected of illegal financial activities, this characterization has nothing to do with whether the capital account is completely convertible.
Affected by this news, futu once fell by more than 5% and tiger securities once fell by more than 3%.
central bank officials issued a document
refers to six illegal financial activities
Sun Tianqi, director of the financial stability bureau of the people’s Bank of China, wrote in China finance that finance, as a franchise industry, must be licensed. At the same time, financial licenses have national boundaries, and the licenses of most small and medium-sized institutions in China also have regional restrictions.
Sun Tianqi said in the article that six cross-border financial services are illegal financial activities,
First, cross-border opening of bank accounts and other banking services. Open an account directly on some domestic bank websites (no personal account opening information is submitted on the Internet). Subsequently, domestic individuals fabricated false names such as “tourism” and remitted domestic funds to overseas individuals’ accounts with the same name (mostly guided by the “remittance” of domestic partners of overseas banks).
second, cross-border securities investment services. some overseas securities operating institutions use the Internet platform to provide overseas securities investment services to domestic investors without obtaining relevant domestic licenses and only holding overseas licenses, which belongs to the category of “cross-border delivery”, which goes beyond China’s opening commitment under the framework of the general agreement on trade in services. From the perspective of business essence, these cross-border Internet brokers should be identified as “driving without a license” in China and suspected of illegal financial activities. This characterization has nothing to do with whether the capital account is completely convertible.
Some overseas brokerage subsidiaries of Chinese securities companies (holding overseas licenses) cooperate with overseas subsidiaries of Chinese banks (holding overseas licenses) to provide bank securities transfer services using app, so that domestic customers can participate in overseas stock investment. In terms of specific operation, domestic investors open accounts in overseas securities companies remotely through app, and overseas securities companies apply for sub accounts with the same name from overseas banks on behalf of customers. After a domestic investor purchases foreign exchange in a domestic bank (generally for false reporting for private tourism, etc.) and remits it to an overseas bank account, the app displays the recorded amount for domestic investors to trade. Such institutions have various disguised solicitation and marketing activities in China. Since the parent company’s Chinese securities companies are domestic licensed institutions, this model is more confusing. However, the relevant cross-border financial services have not been accessed and have also broken through the current opening rules for securities investment under individuals, which should be recognized as illegal financial activities.
Third, cross-border sales of insurance products. some overseas insurance institutions solicit business and sell investment insurance products across the border without China’s access through digital platforms and offline disguised and substantive business presence.
Fourth, cross-border payment services. some overseas collection companies have not obtained the domestic payment license, and have attracted cross-border business registration in the mainland through video, official account and WeChat group. In 2018, overseas real estate companies carried mobile POS machines to provide card swiping payment services for home buyers in China. Bank card clearing institutions cannot monitor the behavior of mobile POS machines by themselves. From the transaction records, the information displayed by card swiping in China is basically the same as that abroad. They can only rely on overseas acquirers for monitoring and management, which is more difficult.
fifth, cross-border bitcoin and ICO trading services. overseas institutions or domestic institutions provide bitcoin and ICO trading services to domestic residents through overseas websites, which is illegal in China. According to the notice on further preventing and dealing with the speculation risk of virtual currency transactions issued by the people’s Bank of China and other ten departments in September 2021, virtual currency related businesses such as virtual currency exchange, buying and selling virtual currency as a central counterparty, providing matching services for virtual currency transactions, token issuance and financing, and virtual currency derivatives transactions are illegal financial activities. It is also an illegal financial activity for overseas virtual currency exchanges to provide services to residents in China through the Internet.
Sixth, cross-border foreign exchange margin trading. some domestic and overseas enterprises hold overseas financial licenses, and then use the digital platform to attract customers and carry out foreign exchange margin business in China through the “cross-border delivery” mode. Foreign exchange margin trading is illegal in China. According to the notice on severely investigating and dealing with illegal foreign exchange futures and foreign exchange deposit trading activities issued by the regulatory authorities in 1994, no unapproved institution shall carry out foreign exchange margin trading without authorization; No unit or individual may participate in foreign exchange margin trading. China’s foreign exchange administration has been cracking down on and dealing with illegal foreign exchange margin transactions.
In addition, sun Tianqi also said that finance, as a franchise industry, must be licensed. Financial products are “monopoly goods”, which can not be sold by any institution. They are not sold to anyone who wants to sell them, nor can they be bought by anyone who wants to buy them (the concept of “qualified investor”). “Big V” must be licensed to sell financial products through social media, otherwise it is an illegal financial activity.
The article concludes that under the condition of digital economy, the realization of the regional boundary and customer group boundary of financial license requires the efforts of the regulatory authorities. Functional supervision should be implemented. It can not be said that “the license sector is not issued by me and is not under my control”. People are in the “position”. To crack down on illegal acts on Internet platforms, we must “fight early” and “fight small”, because the dissemination and expansion speed on the Internet is very fast. If the response is slow in advance and the disposal is passive afterwards, the cost of public funds, the financial cost of individual consumers and individual investors, and the resource consumption of regulatory departments and public security departments will be very large. For illegal and illegal financial activities, heavy penalties must be imposed, and criminal and civil responsibilities must be strictly investigated.
speeches by central bank officials have triggered an “avalanche” of futu and tigers
With the help of futu’s “innovation” in Hong Kong stocks and participation in the U.S. stock market through tiger securities, it was once the standard configuration of China’s middle class.
Public information shows that futu holdings and tiger securities are two Internet brokerage companies engaged in cross-border business, and both have completed listing in the United States.
FTU securities, a subsidiary of FTU holdings, is a licensed institution established in Hong Kong, holding No. 1, 2, 3, 4, 5, 7 and 9 licenses issued by the Hong Kong Securities Regulatory Commission and regulated by the Hong Kong Securities Regulatory Commission. According to the unaudited financial report of the third quarter of 2021, the number of global registered users of FTU reached 16.6 million, a year-on-year increase of 59%; The number of customers opening accounts was 2.58 million, a year-on-year increase of 120%.
The number of users with assets was 1.167 million, a year-on-year increase of 179.2%; The net increase in the number of customers with assets is about 166000. Customer assets at the end of the period were HK $423.9 billion, a year-on-year increase of 111.0%
Tiger securities now holds a total of 46 financial licenses and qualifications in 36 categories in the global mainstream financial markets such as Singapore, Hong Kong, New Zealand, the United States and Australia. According to the third quarterly report of 2021, tiger international has 1.767 million global account opening customers and 612000 global deposit customers.
With the number of accounts opened and trading volume reaching new highs, the share prices of futu and tiger began to turn sharply from October 2021.
In retrospect, first on October 14, due to the risks of user information security, legalization and compliance caused by People.Cn Co.Ltd(603000) , futu and tiger fell more than 15% in front of the market.
Shortly after October 28, futu holdings fell more than 30% and tiger securities fell more than 21%. The market value evaporation of more than $3 billion came from sun Tianqi, director of the financial stability bureau of the central bank, who said at the third Bund financial summit that some overseas securities institutions had not obtained relevant domestic licenses and belonged to the scope of cross-border delivery. He believed that these securities companies were driving without licenses in China and engaged in illegal financial activities.
Sun Tianqi said: “some overseas securities operating institutions use the Internet platform to mainly provide overseas securities investment services for domestic investors without obtaining relevant domestic licenses and only holding overseas licenses. For example, the trading services of US stocks and Hong Kong stocks belong to” cross-border delivery ” “Scope. The customers of cross-border internet securities companies are growing rapidly, mostly from China. According to professional media reports, 80% of the stock deposit accounts of company a registered in the Cayman Islands are from China, and 55% of those of company B registered in Hong Kong. From the perspective of business essence, cross-border Internet securities companies are driving without a license in China, which is an illegal financial activity. Whether this characterization is completely related to the capital account It has nothing to do with exchange. “
The above-mentioned companies a and B are regarded by market participants as two cross-border Internet Securities Companies: futu and tiger.
After the stock price fell sharply before the market, on October 28, in response to the media interview, the parent company futu Holdings said that futu securities was licensed and developed locally in Hong Kong, Singapore and the United States, which met the requirements of local financial supervision. The company has always adhered to compliance and embraced supervision. At present, there is no bankruptcy problem.
However, the share price has been falling all the way in compliance questions. FTU securities fell from around $91.6 in mid October 2021 to $41 on February 7, with its share price down 55%.
Tiger securities also plunged nearly 60%.
