SHANGHAI -U.S.-listed Chinese online brokerages Futu Holding and UP Fintech Holding face regulatory risks as China’s new personal data privacy law takes effect on Nov. 1, the official People’s Daily said in an analysis on its website.
Such brokerages, which help mainland Chinese individuals invest in overseas stock markets such as in the United States and Hong Kong, could violate data privacy rules and also run compliance risks, the article said.
China has launched a flurry of crackdowns targeting sectors ranging from technology to cryptocurrency to property. The People’s Daily’s article could put Chinese online brokers next in the regulatory crosshairs.
“Since our founding Futu has insisted that the protection of personal information and data is of top priority,” Futu said in a statement in response to the article.
“Futu has been strictly complying with relevant laws and regulations. Going forward, we will continue to actively cooperate with regulatory authorities to better safeguard personal information,” said Futu, whose Nasdaq-listed shares fell more than 10%.
U.S.-traded shares of UP Fintech, which could not be immediately reached for comment, slumped more than 20%.
China will implement the Personal Information Protection Law from Nov. 1, complementing the Data Security Law in regulating cyberspace and safeguarding national security.
The new rules will regulate export of personal data, posing a challenge to online brokers that provide cross-border trading services to mainland Chinese citizens, the People’s Daily said.
Brokerages such as Futu and UP Fintech don’t have brokerage licences on the mainland, but Chinese citizens can open accounts online after submitting personal information related to ID cards, bank cards and tax records, the article said, adding: “after personal information is collected, where does it go?”
Online brokers, which also include Snowball Securities, face business compliance risks as well, the article said.
Currently, Chinese investors can invest in overseas securities markets through the cross-border Connect schemes, and through Qualified Domestic Institutional Investors (QDII).
Apart from these two channels, China’s securities regulator has not allowed any institutions to provide cross-border trading services to domestic investors, People’s Daily said.