How to read the crackdown on illegal cross-border securities transactions in China | Sorting out the impact on FUTU, TIGR, and moomoo Japanese users

[Summary]

On May 22, 2026, the China Securities Regulatory Commission (CSRC) issued advance notice of administrative sanctions against entities related to Tiger Brokers, Futu Securities International, and Longbridge Securities for conducting unauthorized cross-border securities, funds, and futures-related business in mainland China.

What is confusing about this news is that it is easy to mix up what is confirmed fact, what is market estimate, and what is the risk for Japanese investors.

First, as a confirmed fact, Futu Holdings (FUTU) received a proposed disposition of approximately 1.85 billion yuan from the CSRC Shenzhen Bureau, and the impact was reflected in the financial results for the first quarter of 2026. UP Fintech (TIGR) also disclosed that it received a punishment of approximately 410 million yuan, including fines and forfeiture, from the CSRC Beijing Bureau.

On the other hand, the numbers ``approximately HK$250 billion impact on the Hong Kong market'' and ``150 billion to HK$180 billion for Futu alone'' are not official figures determined by CSRC. These numbers should be treated as external estimates by CITIC Securities and other companies.

We also need to separate the discussion regarding Japanese moomoo securities users. moomoo Securities Co., Ltd. is a domestic corporation registered as a financial instruments business operator in Japan, and as of now, we have not confirmed that it has received any punishment from the Japanese Financial Services Agency in this case. The issue is not that the Japanese corporation's customer assets are in immediate danger, but rather whether the parent company Futu's regulatory, profit, and business restructuring risks could spill over into service operations and administrative processing in the future.

To conclude, this case is not simply a matter of "don't use moomoo." Now is the time to separate the convenience of it as a tool and the business continuity risk of having it as a place to store long-term core assets.

First, separate facts and estimates

In this news story, the reliability of the article changes greatly depending on how the numbers are used.

The first three things you should separate are:

What is particularly dangerous is to simply write down the estimated value as ``determined selling pressure.''

Since there is a two-year liquidation period, there is no guarantee that the assets in question will be sold off on the market all at once. Actual movements will be dispersed, such as sales, withdrawals, transfers to legal channels, and reclassification to family accounts or corporate schemes on the Hong Kong side.

Still, if buy orders and new deposits stop, it will weigh on medium-term supply and demand for Hong Kong stocks and Chinese ADRs. This way of writing is probably the most accurate at this point.

What happened on May 22, 2026?

On May 22, 2026, the CSRC announced that Tiger Brokers, Futu Securities International, and Longbridge Securities, both domestic and foreign affiliates, engaged in securities marketing, order processing, and securities-related services in mainland China without the necessary licenses.

At the same time, the company explains that fund sales and futures-related operations are also illegal.

What is important here is that this announcement is not just a warning, but an advance notice of administrative penalties.

Regarding Futu, the company itself explained that the impact of approximately 1.85 billion yuan was reflected in the first quarter of 2026 financial results.

However, this is at the stage of advance notice, and the company has the right to make statements, pleas, and hearings. This is not a final figure determined. It is better not to omit this sentence.

Meaning of “2-year consolidation period”

Some suggested that ``all accounts would be immediately frozen'' and ``all assets would be forcibly sold.''

Based on current reports and official explanations, this is an exaggeration.

China's policy is to liquidate illegal cross-border securities, term currency, and fund operations over a two-year period. In principle, existing mainland Chinese investors will be treated as follows.

In other words, the problem is not a "forced bulk sale."

Rather, it will take two years for mainland investors' purchasing power and new capital inflows to stop.

This difference is huge. Rather than looking at short-term crash factors, the theme is to see how liquidity will shrink over the medium term.

How far has Futu's dependence on mainland China fallen?

Futu explained that as of the end of the first quarter of 2026, deposit accounts in mainland China accounted for approximately 13% of the total.

Looking at this part alone, it is tempting to say that Japan's dependence on mainland China is already small.

However, it's not that simple.

Futu's financial results for the first quarter of 2026 show customer assets of HK$1.22 trillion, total transaction value of HK$4.15 trillion, and margin trading and securities lending balance of HK$72.9 billion. Even though 13% of customers are from mainland China in terms of number of accounts, if the frequency of transactions and use of margin trading is high, the impact on profits will be greater than the account ratio.

Based on the transcription of financial results briefings, mainland Chinese customers account for approximately 17% of assets and contribute approximately 20% to sales. This is not a number that can be confirmed solely from the text of Futu's financial results release, so I would like to note in the article that it is based on the financial results briefing.

What investors should look at is the return sensitivity, not the number of accounts.

Even if the number of customers in mainland China decreases, if new deposit accounts and customer assets increase in Hong Kong, Singapore, Japan, the United States, Malaysia, etc., Futu will be able to change its evaluation from a ``mainland-dependent online brokerage'' to a ``global securities app.''

On the other hand, unless overseas growth can compensate for the decline in domestic demand, the regulatory shock will not be a temporary phenomenon.

How should we view the figure of 5.1 trillion yen?

According to estimates by CITIC Securities and others, the assets related to mainland investors in the Hong Kong market that will be subject to liquidation this time are estimated to be around HK$250 billion at most. It is easy to come up with a figure of around 5 trillion yen in Japanese yen terms.

Furthermore, there are estimates of HK$150 billion to HK$180 billion for Futu-related costs and HK$45 billion to HK$50 billion for Tiger-related costs.

However, this is not an officially confirmed value.

If you're writing an article, it's safe to do something like this:

According to external estimates such as CITIC Securities, the amount of Hong Kong-related assets that will be affected is estimated at a maximum of HK$200 billion to HK$250 billion. However, this is not the planned sale price, but an estimate of the size of the assets that could be the target.

Your impression will change considerably depending on whether or not this sentence exists.

It would be misleading to read that HK$250 billion would be "sold all at once." The correct explanation is that buying may stop and sales, withdrawals, and transfers may proceed over time.

Impact on Hong Kong stocks and China ADR

Stocks that are likely to be affected are those that retail investors in mainland China tend to like.

Specifically, these include Hong Kong tech stocks, emerging stocks related to AI and semiconductors, and Chinese ADRs listed in the US.

On the other hand, when looking at the Hong Kong market as a whole, some believe that HK$250 billion is not a scale that would destroy the entire market.

Therefore, it is best to look at this in two stages.

First, from a macro perspective, it is not a systemic risk for the Hong Kong market as a whole. However, on a micro level, supply and demand could weigh on stocks where mainland retail funds via Futu/Tiger were concentrated.

The market dislikes this "localized selling pressure."

What should Japanese moomoo users worry about?

It's quite easy to misunderstand here.

moomoo Securities Co., Ltd. is a financial instruments business operator registered in Japan. The company profile shows that the company is registered as a financial instruments business operator under Kanto Local Finance Bureau (Kinsho) No. 3335 and is a member of the Japan Securities Dealers Association.

At this time, we have not confirmed that Japan's Moomoo Securities has been disciplined by the Japanese Financial Services Agency due to this incident with the Chinese authorities.

In other words, the points of contention for Japanese users should be divided as follows.

This does not mean that assets will be immediately confiscated.

However, if you look at it as an account for storing long-term core assets, you should not ignore the regulatory risk of the parent company. In the unlikely event that the group's strategy changes or the Japanese business is reorganized, practical inconveniences may arise, such as the transfer of shares to other companies, withdrawals, and trading suspension periods.

The important thing here is to distinguish between legal security and operational liquidity.

Illustration: Where should this risk be divided?

Investor defense measures

The practical lesson to be learned from this case is to separate securities accounts by function.

Apps like moomoo have strengths such as the amount of information, charts, US stock data, screening, and community features. Being an excellent tool is one thing, but whether it's the best place to store long-term assets is another.

In reality, it is easy to use them in the following ways.

This is not a story that criticizes any particular securities company.

Rather, when using foreign tech securities, you should not only look at the convenience of the app, but also the parent company, regulatory jurisdiction, customer asset protection, and transfer procedures.

Indicators to watch in the future

If you look at Futu or TIGR, it's not enough to just follow the rebound in stock prices.

I would like to confirm the following numbers.

Once stock prices fall significantly, they tend to rebound in the short term.

However, the real battle after the regulatory event begins with the next financial results. Will customer assets increase in overseas markets, absorb regulatory costs, and return profits? The market is still skeptical.

Summary

The latest crackdown on illegal cross-border securities transactions by Chinese authorities is not just an isolated issue involving Futu, Tiger, and Longbridge.

The event was held to systematically organize the route through which mainland Chinese personal funds flow to Hong Kong and US stocks through overseas online securities.

However, I would like to make a calm distinction here.

The CSRC disposition plan and two-year restructuring policy are true. The estimate by CITIC Securities and others is HK$250 billion. At this point, we cannot confirm that moomoo's Japanese subsidiary's customer assets are in immediate danger.

For individual investors in Japan, it is important not to put too many accounts into one.

Long-term assets emphasize stability. Highly functional apps are used for information gathering and short-term trading. If the parent company's regulatory risk arises, check its practices regarding withdrawals, transfers, and trading restrictions.

This sense of distance is just right for this news.

Source/Reference materials

• c100028/ / c7634330/
• Futu Holdings “Futu Receives Investigation Notice and Administrative Penalty Pre-Notification Letter from the China Securities Regulatory Commission
• Futu Holdings “Futu Announces First Quarter 2026 Unaudited Financial Results”
• The Motley Fool "Futu Q1 2026 Earnings Call Transcript"
• UP Fintech Holding Limited “SEC Filings”
• China State Council News Office / Xinhua “China to penalize 3 brokerages as crackdown on illegal cross-border trading intensifies”
• Tonghua Shun Finance and Economics "[Chinese Trust Certificate: Cross-border expansion, industry adjustment, land adjustment, reflection of the port in the port, 2000~2500 yen port left and right] (https://stock.10jqka.com.cn/20260525/c676942009.shtml)";
• moomoo Securities “Company Information”