China Securities Regulatory Commission (CSRC) in Beijing Photo:VCG

China's securities regulator on Wednesday said it recently carried out regulation and rectification of illegal cross-border securities brokerage business by the overseas subsidiaries of domestic securities companies.

It came after more than 10 overseas licensed securities brokers, such as Guotai Junan International, Orient Securities and China Industrial Securities, suspended opening accounts for Hong Kong and US stock trading for residents from the Chinese mainland, according to media reports.

The China Securities Regulatory Commission (CSRC) said on Wednesday, in response to the recent market concern, that it had carried out regulation and rectification of illegal cross-border securities brokerage business.

The rectification is in accordance with how the CSRC handled Futu Holdings (FUTU) and UP Fintech Holding Limited (Tiger Brokers). The two brokers conducted cross-border securities brokerage business for domestic investors without the approval of the CSRC in recent years, the commission said in a press release published on December 30, 2022.

The core requirement is to prohibit non-licensed overseas institutions from illegally soliciting domestic investors and opening new accounts for them. At the same time, domestic investors who currently have accounts with overseas brokers are still allowed to conduct transactions, but investors should strictly abide by the relevant regulations on foreign exchange control when transferring incremental funds to overseas accounts.

"It is understood that the vast majority of securities companies involved in this kind of business are actively implementing the relevant rectification requirements and have stopped illegal new account opening. Relevant securities companies and their overseas subsidiaries can fully and accurately understand the regulatory requirements, conduct rectification in an orderly manner in accordance with the laws and regulations, and not restrict the trading of stock customers without reason," said CSRC.

Analysts said that the recent rectification is in line with the new administrative measures published in January by the regulator.

On January 13, 2023, the CSRC officially issued the Measures for the Administration of Securities Brokerage Business, which clearly stated that it would strengthen the daily supervision of illegal cross-border brokerage business and promote the rectification and standardization work in a steady and orderly manner.

The Measures for the Administration of Securities Brokerage Business are set to take effect from February 28. The measures are aimed at standardizing the securities brokerage business, effectively maintaining market trading order, and protecting the legitimate interests of investors.

Industry insiders hailed the CSRC's measures as a milestone in financial regulation.

They also said that after the rectification is completed, the brokerage business will get back on track and investors' interests and legitimate rights will be protected.