Summary of Key Points
Following Futu, Tiger, and Cheung Qiao, Huasheng Securities has also joined the ranks of cross-border securities firms clearing up their existing businesses in the Chinese mainland: Starting from June 15th, mainland customers will not be able to open new stock positions or increase their holdings within China, nor can they transfer funds or securities into their accounts. However, they are still allowed to sell their existing holdings and transfer money out of their accounts. This action is in response to regulatory requirements for a two-year crackdown on illegal cross-border securities activities. The rules vary among different firms: While Huasheng imposes restrictions regardless of the account holder's nationality, Tiger and Cheung Qiao allow overseas-registered accounts to trade normally within China.
1. Huasheng’s Changes: Simply put, “Only out, no in”
The main points in Huasheng’s notification to customers are as follows:
- Trading Restrictions: Mainland customers cannot buy new stocks (open new positions) or add funds to existing stock holdings, but they can sell their stocks or close existing positions (such as futures contracts).
- Funding Restrictions: They cannot transfer funds or securities into their accounts, but they can withdraw money from their accounts.
It is also emphasized that these restrictions apply only to “services provided within China.” If customers move to Hong Kong or another overseas location, all functions (buying, selling, transferring funds) will remain available, and their assets will be safe; they will still be able to check their account details and view their holdings.
2. Why the Changes? Regulatory Authorities Have Set a Two-Year Crackdown Period
This is not a sudden move. Earlier on, eight departments, including the China Securities Regulatory Commission (CSRC), had issued a plan to address the issue:
- A two-year crackdown period was established to target “illegal cross-border securities activities” (e.g., overseas firms providing services to mainland customers without authorization).
- During this period, overseas institutions are not allowed to offer mainland customers services such as buying stocks or transferring funds into their accounts; they can only allow customers to sell stocks or transfer funds out of their accounts.
- After the crackdown period ends, overseas institutions must shut down their domestic websites and apps and cease providing any services to mainland customers.
Huasheng’s adjustments are in line with these regulatory requirements.
3. Differences in Rules Among Securities Firms: Huasheng is More Strict, While Tiger and Cheung Qiao Are Less So
Although all firms are making changes, the rules for overseas-registered accounts trading within China differ:
- Huasheng: Regardless of whether the account is registered in China or abroad, any trading or funding transfer instructions issued from within China will be restricted (no buying or fund transfers allowed).
- Tiger and Cheung Qiao: If an account is registered overseas (e.g., in Singapore), customers can trade and transfer funds normally even while in China (for business trips or tourism). Customer service has explicitly stated that these activities are not affected.
For example, a Singaporean customer using a Tiger account while visiting China can buy stocks just as usual, but a Huasheng account would only allow selling, not buying.
4. Practical Implications for Investors:
- Asset Security: All firms have assured that existing assets will not be affected, and customers can still check their account details and view their holdings.
- Mainland Customers’ Restrictions: They can only sell stocks and transfer funds out of China; they cannot buy new stocks or transfer funds into their accounts. However, these restrictions are lifted when they go overseas (e.g., to Hong Kong).
- Overseas-Registered Accounts: Customers with overseas accounts should be aware of the differences in regulations between firms. Before opening an account, it is important to understand the specific rules.
5. There Were Signs Ahead: Previous Steps Toward These Changes
These adjustments are part of a larger regulatory effort:
- In May 2023, Futu and Tiger removed their apps (Futu Niuniu and Tiger International) from Chinese app stores.
- In March 2024, Huasheng removed its “Huasheng Tong” app, stating that it would not affect existing customers’ usage.
The current service adjustments are further steps in implementing these regulatory requirements.
In summary, these changes are part of the regulatory effort to standardize cross-border securities activities. Investors need not panic; as long as they follow the rules, their assets will be protected, and overseas transactions will not be affected. If you have an overseas-registered account, it is important to be aware of the differences in regulations between different securities firms.