Futu Holdings crashed by nearly 38% on Friday after China’s securities regulator moved to confiscate the profits of three brokers that served mainland investors without a license and laid out a two-year plan to shut illegal cross-border trading entirely. UP Fintech Holding, the parent of Tiger Brokers, was also plunging 36.64% in Friday pre-market trading as the penalty drive hit firms tied to offshore trading channels used by mainland clients.
The China Securities Regulatory Commission said it had opened cases and issued advance notice of administrative penalties against domestic and overseas entities tied to Tiger Brokers (NZ) Limited, Futu Securities International (Hong Kong) and Longbridge Securities (Hong Kong). The regulator said the firms conducted securities marketing, processed trading orders and earned revenue in China without brokerage or margin-trading licenses, and said they breached fund and futures statutes. It said it intends to confiscate all illegal gains and impose severe penalties.
The market reaction landed on the US-listed parents, Futu Holdings and UP Fintech Holding, while the penalty action targeted specific operating subsidiaries. That split matters because the selling was not a verdict on the underlying listed companies’ balance sheets or filings; it was a direct response to Beijing’s effort to close off a channel that has helped funnel mainland retail money into US-listed Chinese shares.
The broader market felt the shock too. EV names and the large-cap technology stocks all fell, but none approached the brokers’ losses. Nio, XPeng and Li Auto are among the most actively traded Chinese names on US exchanges, and a meaningful share of that demand has historically come from mainland investors using offshore brokers such as Futu and Tiger Brokers. Beijing’s two-year plan threatens to wind down that buying source without touching the automakers’ operations, listings or US disclosures.
The regulatory basis for the crackdown is blunt. The CSRC cited Article 120 of the Securities Law and said the firms were operating without the licenses needed to broker trades or provide margin financing to mainland clients. Friday’s move is the latest sign that China is willing to treat offshore access as a licensing issue first and a market issue second. For traders, that means the pain has already hit the brokers; for the stocks they helped support, the question is how much demand disappears as the channel closes over the next two years.
