China has given mainland investors two years to unwind accounts with three offshore brokers, a deadline that shutters a widely used retail route to US and other overseas shares and tightens capital controls. The China Securities Regulatory Commission on 22 May opened cases against Tiger Brokers (NZ) Limited, Futu Securities International (Hong Kong) Limited and Longbridge Securities (Hong Kong), and barred those firms from taking new mainland clients or new deposits. Regulators said affected customers may only sell holdings and withdraw funds during the two-year wind-down, and promised penalties and confiscation of illegal gains without specifying amounts. The cleanup is set to conclude in May 2028.

The action landed on 22 May when the China Securities Regulatory Commission, coordinating with seven other government bodies including the central bank, accused the three brokers of operating trading, marketing and account services inside mainland China without proper licences. The regulator named specific breaches of the Securities Law, the Securities Investment Fund Law and the Futures and Derivatives Law, and said offshore brokers must immediately stop pitching to mainland clients, opening accounts, processing trades or transferring funds on their behalf.

What regulators ordered

The CSRC set out a clear enforcement plan. Existing mainland customers are permitted only to sell positions and withdraw funds during a two-year wind-down period that begins from the 22 May announcement and therefore runs to May 2028. New buy orders and fresh deposits are blocked. Platforms are required to shut China-facing websites, apps and servers once the cleanup is completed, the regulator said.

Beyond the operational restrictions, regulators promised a follow-up of enforcement measures. The CSRC said it would recover illegal gains from both onshore partners and offshore units and levy "severe penalties according to law," though it didn't quantify potential fines. The regulator framed the move as a full cleanup of unapproved overseas brokerage operations, extending scrutiny first stepped up in late 2022 when overseas institutions were banned from opening accounts directly for mainland investors.

Market reaction and wider context

Markets reacted quickly. U.S.-listed shares of UP Fintech, the parent of Tiger Brokers, and Futu Holdings fell more than 30 percent in U.S. pre-market trading, market reports said. Broader China-related names that benefit from retail investor flows overseas also moved lower, with PDD Holdings and Alibaba among the fallers, and Hang Seng futures sliding around 0.7 percent after the announcement.

Both Tiger and Futu said they would cooperate with regulators and emphasised compliance was a priority. Futu told regulators it had previously stopped adding mainland accounts and said mainland investors made up about 13 percent of its customer base at the end of the first quarter.

Mastheads

Longbridge didn't immediately comment.

Analysts and market participants tied the crackdown to wider policy aims to restrain capital outflows. Bloomberg Intelligence estimated roughly $1.04 trillion in so-called hot money left China in 2025, the largest annual outflow on record by that data. Regulators have been tightening controls on unofficial channels for years, and the CSRC framed the current move as enforcement rather than a new policy direction: an attempt to close unlicensed routes that allowed mainland retail investors to access overseas markets outside approved channels.

The immediate effect is to force mainland investors to exit positions rather than add to them through these brokers. That removes a widely used retail route to U.S.

And other overseas equities, while leaving formal, licensed channels intact. The CSRC and other authorities pointed to legal avenues for outbound investment, including the Qualified Domestic Institutional Investor program and the Hong Kong Stock Connect, which remain available to eligible investors.

The scale of enforcement promises to test how quickly offshore brokers can alter their business models and how many mainland clients will use the two-year window to repatriate assets. Regulators have warned they will pursue confiscation of illegal gains from both the offshore firms and their onshore partners as the cleanup proceeds, signalling further legal and financial risk for firms that served mainland clients without licences.

For Chinese retail investors who used these platforms to buy U.S. stocks, the ruling is a sharp change in access. The wind-down rule doesn't permit new purchases, which will accelerate selling pressure in affected accounts. For the brokerage parents listed overseas, the announcement has already translated into steep market losses and renewed questions about compliance and business exposure to mainland flows.

The CSRC attributed the move to enforcement of existing laws and to coordination across government agencies. The explicit timeline, and the promise of seizure and penalties, make clear the regulator expects a thorough cleanup rather than a partial adjustment.

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The two-year wind-down starts from the 22 May announcement and runs to May 2028, when regulators say they will complete confiscations and impose penalties as they close the unlicensed channels.

This article was created with AI assistance.