Before the US stock market on October 28, Eastern time, the pre-market decline of China’s brokerage stocks continued to expand. Futu Holdings fell more than 25% before the market, and Tiger Securities fell nearly 20% before the market. On the news, Sun Tianqi, director of the Financial Stability Bureau of the People’s Bank of China, delivered a keynote speech at the 3rd Bund Finance Summit on “Realization of the Regional Boundary and Customer Boundary of Financial Licenses in the Digital Environment” recently. Sun Tianqi said that as a franchise industry, finance must operate under a license. Financial products are “specialized products”, and not everyone can sell them, they are not sold to anyone who wants to sell them, nor can they be bought by anyone who wants to buy them (Qualified Investor Concept).
Sun Tianqi said that financial licenses have national boundaries. For financial businesses that are prohibited by domestic and foreign investors, and financial businesses that have not been opened to the outside world, foreign institutions may not operate within the country. For financial services that have been opened to the outside world, overseas institutions must hold relevant domestic licenses to operate in compliance with laws and regulations. It is an illegal financial activity for foreign institutions to engage in prohibited financial services in China that are not open to the outside world, or to conduct business in China with only overseas licenses. The same is true in China. If a financial institution only holds a license for business development in a certain area, it cannot conduct business across the country. National financial licenses can only be issued by the central financial management department.
Sun Tianqi emphasized, “Any institution must be licensed to provide financial services in China through any means. It has a foreign license but is not licensed in China and cannot provide relevant financial services to Chinese investors through digital platforms.”
In fact, according to CBN reporters, Sun Tianqi has repeatedly emphasized the necessity of licensed operation of financial institutions. In May 2019, Sun Tianqi, then the chief accountant of the State Administration of Foreign Exchange, stated at the 2019 Financial Street Forum that individuals tend to provide financial services by establishing a commercial presence in response to foreign investment requirements, that is, the cross-border delivery model will not be opened in the near future. Under the cross-border financial services, there must be a substantial commercial presence in the country. This is mainly because China’s legal system is not yet sound, the market is not yet mature, the current supervision capabilities are relatively weak, and the coordination mechanism is not yet sound.
Cross-border financial services under the “cross-border delivery” model facilitated financial services such as payment and settlement, but also created some chaos-some illegal cross-border financial services are mixed in, such as foreign exchange margin trading is prohibited in China, but It is legal in developed countries. Some institutions have obtained licenses overseas to provide China with cross-border foreign exchange margin trading financial services through websites. In addition, there are cross-border stocks, futures and precious metals trading by domestic residents, payment institutions provide payment services to Chinese enterprises across borders, cross-border Bitcoin and ICO transactions, and domestic related institutions and individuals participate in overseas gambling and gambling through the Internet, APP, etc. Chaos.
It is understood that China Securities Dealers, including Futu Holdings, have been fighting for various financial licenses. In August 2019, Futu Holdings announced that its wholly-owned subsidiary, Futu Securities, has obtained a financial license to provide automated trading services (plate 7) issued by the Hong Kong Securities Regulatory Commission (SFC) and become an automated trading service (ATS) provider. Futu Securities stated that, so far, Futu Securities has held six types of financial licenses from the Hong Kong Securities Regulatory Commission (License No. 1/2/4/5/7/9). On October 26 this year, Tiger Securities issued an announcement stating that the company’s acquisition of a Hong Kong securities firm (Haiyue Securities, Central Code: BMU940) has been approved by the Hong Kong Securities Regulatory Commission (SFC). The brokerage holds Hong Kong Type 1 and Type 2 licenses. After the formal completion of the acquisition, Tiger Securities can enter the Hong Kong market to provide securities brokerage and futures brokerage services for local customers.
An investor who is concerned about the secondary market said that the vocalization of the financial license of securities firms has determined that unlicensed financial activities are illegal financial activities. In the future, financial brokers without domestic financial licenses can continue their business in overseas financial markets with their overseas financial licenses. , But the market size will be much smaller, and overseas brokerages will also compete fiercely. In the future, domestic financial supervision will become more stringent.
Wang Pengbo, a senior analyst in the financial industry, told China Business News that the regulatory authorities have mentioned many times before that the license for financial activities is a bottom line, and Internet finance must also hold a brokerage license or an online agency license to provide financial services. Secondly, the use of personal information on the Internet financial platform also requires the platform to provide corresponding filing.
From the performance of Futu Tiger in the secondary market this time, Wang Pengbo said that in the future online and offline financial activities will be licensed to operate as a mandatory requirement; secondly, cross-type financial platforms that combine online and offline financial institutions will also Be brought into supervision.
As of press time, Tiger Securities responded to CBN reporters that Tiger Group has always regarded legal and compliance operations as the group’s lifeline, actively maintained communication with regulatory agencies, adhered to the bottom line of compliance, and obeyed regulatory requirements at all levels. Tiger Securities, like other US and Hong Kong brokerage business models, strictly abides by regulatory requirements around the world, without any changes and innovations in legal compliance, but only enhances user experience through China’s scientific and technological power. At present, Tiger Securities holds securities licenses in Hong Kong, Singapore, New Zealand, Australia, the United States and other places, and more than 80% of incremental deposit customers come from overseas, and will always strictly abide by relevant regulatory requirements to ensure the safety of customer assets.