BEIJING, October 28 (TMTPOST)— The U.S.-listed shares of Futu Holdings Ltd. and Up Fintech Holding Ltd., also known as Tiger Brokers, tumbled as much as more than 20% before settling about 13% and 17% lower respectively on Thursday, after these popular Chinese online brokerages were slapped by an official of the country’s central bank.

“Essentially speaking, cross-border online brokers’ operating in China is just like driving without any license, and such nature of their business, effectively conducting illegal financial activities, has nothing to do with exchangeability of their capitalization”, claimed Sun Tianqi, the Director-General of the Financial Stability Bureau of the People's Bank of China (PBOC), in his keynote at a summit featuring digital economy and fintech that day earlier.

In Sun’s opinion, financial license has its own national boundary, so overseas investors shall not carry out any financial business banned under China’s laws and regulations or any financial business that hasn’t been given the access to the domestic market. And foreign firms have to first obtain relevant licenses in accordance with the law and regulation, if they want to tap in those businesses that China has allowed them to operate. In order to expand their business in the whole country, they shall gain the license granted by China’s central government, as the local authority can only authorize their operation in certain areas.  

Sun also noted the state media’s recent comment on two online brokerages when the effective date of the Personal Information Protection Law looms. Earlier this month, a report of stae-owned People’s Daily pointed out that these securities brokers would face new compliance challenges in handling the personal information they collect from residents in mainland China, since the law has specified the rules for handling cross-border communication of personal data.

In response to Sun’s remark, Futu said it hasn’t had any unfavorable record since it held the license issued by Hong Kong financial regulator and has capital sufficient enough that there is no risks of bankruptcy. Tiger stressed it has always treated legal compliance as its lifeline and been actively communicating with regulators to follow regulatory requirements from different levels, either the central government or the certain local market.