China's securities regulator announced a sweeping campaign against overseas brokers accused of illegally soliciting mainland clients, sending shares of Futu, Tiger, and other firms tumbling, reported Reuters.

The China Securities Regulatory Commission (CSRC), working with seven other agencies including the central bank, stated that Tiger, Futu, and Longbridge would be penalized for operating without approval. Futu and Tiger's parent company, UP Fintech Holding, saw shares plunge more than 30 percent in US pre-market trade. The CSRC indicated that illegal gains would be confiscated.

Futu disclosed that it faced a proposed penalty of CNY1.85 billion ($271 million). UP Fintech reported that its Beijing bureau imposed fines of CNY308.1 million and ordered the confiscation of CNY103.1 million in illegal income. Tiger stated it would cooperate fully, while Longbridge pledged to implement rectification measures and stressed that client funds remained safe.

Regulators announced that the firms would have a two-year grace period to wind down illegal activities. During that time, customers may only sell existing holdings and withdraw funds, with no new investments allowed. The crackdown also impacted US-listed Chinese companies, with PDD, Alibaba, and JD.com falling between 3.5 and 6 percent.

Hong Kong's Securities and Futures Commission reported finding 'significant deficiencies' at 12 brokers and ordered stricter checks on account openings and funding sources. The city's capital markets raised HK$209.9 billion ($26.8 billion) in the first quarter, topping global rankings, according to KPMG.

Analysts noted that the penalties appeared lenient but warned that harsher fines or criminal prosecution could follow. 'The government wants to ensure that any outbound capital flows are under its scrutiny,' said Gary Ng, senior economist at Natixis. Lawyer Zhan Kai of Dacheng added that tougher measures could not be ruled out.