The China Securities Regulatory Commission (CSRC) and the Hong Kong Securities and Futures Commission (SFC) recently signed a Memorandum of understanding (MoU), which will take effect on March 31, 2023, to strengthen the supervision of cross-border securities issuance and listing by domestic companies.

The mou clarifies the arrangements and procedures between the CSRC and the SFC in the areas of stock offerings and listings, cross-border enforcement, intermediary supervision, and information exchange. The mou will help the SFC and SFC perform their regulatory functions, jointly crack down on cross-border violations of laws and regulations, safeguard the legitimate rights and interests of investors, and ensure the stable and healthy development of the two markets."

At the same time, the agreement was signed days after Hong Kong-based brokerage firms began suspending client accounts from mainland China to comply with the country's ban on international brokerage firms offering services without a local license. Hong Kong-listed Bright Smart Securities and the Hong Kong arm of broker Guotai Junan Securities both issued accounts suspension notices, although the latter later withdrew the notices from public channels.

This comes after the China Securities Regulatory Commission issued a warning to Futu Holding and UP Fintech Holding (operating under the name Tiger Brokers), two popular online brokers registered in Hong Kong that provide investors from mainland China with access to global stocks, to stop accepting new clients from mainland China.

In addition, in 2021, Sun Tianqi, director of the Financial Stability Department of the People's Bank of China, noted that "cross-border online brokers operate in China without licenses, [and] conduct illegal financial activities." A year later, the CSRC announced that Futu and UP Fintech were operating illegal securities businesses and would be required to take corrective action.