Futu Holdings (FUTU) stock dropped more than 35% in premarket trading on Friday after China’s securities regulator moved to formally penalize the company for running unlicensed brokerage operations inside mainland China.
The China Securities Regulatory Commission (CSRC) filed investigations and issued advance penalty notices against three offshore brokers: Futu Securities International (Hong Kong), Tiger Brokers (NZ), and Longbridge Securities (Hong Kong). All three were found to have conducted securities trading, order processing, and fund sales on the Chinese mainland without CSRC approval or the required licenses.
Futu’s stock was last seen trading around $84 in premarket, down roughly 32% from Thursday’s close. Its 52-week high was $202.53.
The regulator cited violations of three Chinese laws: the Securities Law, the Securities Investment Fund Law, and the Futures and Derivatives Law.
Under those laws, the CSRC intends to confiscate all illegal gains from both the Chinese and overseas entities of Futu, Tiger, and Longbridge. The regulator also said it plans to impose severe financial penalties on top of that.
The CSRC called the cross-border business activities a disruption to market order, stating they “must be resolutely cracked down upon.”
The three companies do have the right to respond. They can submit statements, present defenses, and request hearings before final penalty decisions are made.
The penalties go beyond just fines. During a two-year transition period, Futu and the other brokers are banned from offering buy-side services or accepting new money from mainland clients. Existing mainland clients will only be allowed to sell holdings and withdraw funds.
Once that transition window closes, the firms must fully shut down all domestic websites, trading apps, and supporting servers in China.
This is a direct hit to the business model that Futu built its growth on — serving mainland Chinese investors through its offshore platform.
The regulatory pressure is not new. The CSRC first declared this type of cross-border brokerage business illegal back in late 2022, which sent Futu and Tiger Brokers stock sharply lower at the time and forced them to stop accepting new mainland clients. Friday’s action is a formal escalation, moving from warnings to case filings and asset confiscation.
UP Fintech Holding (TIGR), which operates Tiger Brokers, fell about 37% in premarket trading to around $3.67.
The broader U.S. market was steady on Friday, with the S&P 500 and Nasdaq posting fractional gains, confirming the selloff is tied entirely to this regulatory action and not any macro move.
Futu’s Q1 2026 earnings have not yet been reported.
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