By Sam Boughedda
Shares of Futu Holdings Limited (NASDAQ:FUTU) and UP Fintech Holding Limited (NASDAQ:TIGR) plunged more than 20% Friday after the Chinese securities regulator said the online brokerages conducted unlawful securities businesses.
As a result, the regulator has told the companies to stop taking on mainland clients.
The China Securities Regulatory Commission (CSRC) said in a statement that Futu and UP Fintech Hong Kong conducted cross-border securities businesses that included domestic investors without regulatory consent, violating Chinese laws. It has asked the companies to take corrective measures.
The news is a year after Chinese media warned that Futu and UP Fintech faced regulatory risks. It also follows a decision by Futu to delay its Hong Kong listing plan.
Tencent-backed Futu said in a statement: "Futu will fully cooperate with the CSRC and take all necessary measures to review its cross-border operations in mainland China and to comply with all applicable rules and regulations."
"The company will proactively seek guidance from and cooperate with the CSRC in connection with its efforts to ensure legal compliance of its business activities in mainland China."
Futu added that it will continue to provide services to its existing clients.
At the time of writing, UP Fintech's stock price is down 24%, while Futu has declined over 22%.