China Targets Offshore Brokers; Futu, Up Fintech Sink 30%–40% in U.S. Trade

China's securities regulator has stepped up its crackdown on offshore brokerage platforms serving mainland clients without the required licenses, triggering a sharp selloff in U.S.-listed names. Futu Holdings (FUTU) and Up Fintech Holding (TIGR) plunged in U.S. trading on May 22, each dropping roughly 30% to more than 40% in a single session after the China Securities Regulatory Commission (CSRC) announced enforcement actions. Longbridge Securities, another platform cited in the sweep, also saw its shares slide. Regulators proposed penalties of about RMB 1.85 billion (around $271 million) for Futu-related entities. Up Fintech faces RMB 308.1 million in fines, and authorities plan to confiscate RMB 103.1 million they labeled as illegal income. At the center of the case is the allegation that the platforms solicited mainland Chinese customers to trade securities on overseas exchanges without holding domestic brokerage licenses. Mainland clients are now limited to a two-year "liquidation-only" period: they may sell existing holdings but cannot open new accounts or initiate new purchases. Market estimates suggest the tightening could impact roughly HK$200 billion to HK$250 billion in assets held via these offshore platforms. The CSRC has been warning about unauthorized cross-border brokerage activity since late 2022. The latest move underscores Beijing's focus on capital controls, as such platforms have enabled mainland residents to access U.S.-listed stocks, Hong Kong shares, and other foreign assets outside established channels. For investors, the selloff reflects a structural hit rather than a one-quarter setback. Both Futu and Up Fintech have built meaningful portions of their businesses on mainland demand, and the two-year freeze on new client acquisition from that market leaves a material gap in their growth outlook. While both firms operate across multiple jurisdictions—including Hong Kong and Singapore—the extended liquidation window points to a sustained wind-down. That timeline raises the risk that mainland-driven selling and shrinking assets under management could remain a headwind for an extended period.