The China Securities Regulatory Commission (CSRC) and the Hong Kong Securities and Futures Commission (SFC) have entered into a Memorandum of Understanding (MoU ) that seeks to strengthen their cross-border regulatory efforts in securities offering and listing by domestic companies in both countries.

The SFC announced the cooperation on Friday in a joint statement published on its website. According to the Hong Kong securities regulator, the MoU outlines the methods and procedures for the issuing and listing of shares in both countries. Additionally, the memorandum provides clarifications on how both regulators will go about a joint cross-border enforcement and information exchange. In addition, the agreement explains how financial intermediaries in both countries are to be supervised.

“The MoU will facilitate the CSRC and the SFC in discharging their supervisory functions, jointly combating cross-boundary offences and misconduct, safeguarding the legitimate interests of investors and ensuring the steady and healthy development of both markets,” the regulator explained in the joint statement.

China Crackdowns on Cross-Border Online Brokers

Meanwhile, the signing of the agreement comes days after Hong Kong-based brokerages started suspending clients' accounts from mainland China in order to comply with China’s ban on international brokers that are offering services without a local license. Both Hong Kong-listed Bright Smart Securities and the Hong Kong unit of the Chinese broker Guotai Junan Securities, issued notices on the account suspension although the latter later withdrew the notice from the public domain.

The move follows a warning issued by CSRC against Futu Holding and UP Fintech Holding (operating as Tiger Brokers), two popular Hong Kong-registered online brokers that provide investors from mainland China access to global stocks, to stop accepting new clients from mainland China. This came as the Chinese regulator does not offer licenses to online brokerages specializing in cross-border trades.

Furthermore, China started mulling over banning online brokers from engaging Chinese citizens in late 2021. In that year, Sun Tianqi, the Head of the Financial Stability Department of the People’s Bank of China, noted that “cross-border online brokerages are driving in China without a driver’s license [and are] conducting illegal financial activities.” A year later, CSRC declared that Futu and UP Fintech were operating an unlawful securities business and will be asked to take corrective measures.