The Securities and Futures Commission (SFC) released a statement on Monday warning brokers against doing business in mainland China.
According to the Hong Kong regulator, the Chinese State Administration of Foreign Exchange recently stopped a Mainland China entity from trying to get traders to deposit funds with a broker based outside of the world’s most populous country.
“SAFE…advised [the SFC] that according to Mainland requirements, it is illegal for any unapproved institution to conduct forex margin trading or for any client, whether an organisation or individual, to entrust an unapproved institution to do so,” said the Hong Kong regulator in a statement.
The SFC brought this up as it is also concerned that brokers based in Hong Kong are advertising their services to traders in Mainland China.
According to the financial watchdog, firms are marketing their services in simplified Chinese, as opposed to the local dialect used in Hong Kong. These companies are also providing toll-free phone calls to people in Mainland China.
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SFC logo, mainland clients
On top of that, Hong Kong brokers are also allowing affiliates in Mainland China to market their services. In some instances that has lead to these affiliates sticking an SFC logo on to their websites and sales materials.
“[Companies] which provide or market forex margin trading or similar services to Mainland investors, or assist other persons to provide or market them to Mainland investors, should immediately review the legality of their activities under Mainland law and regulations,” the SFC said in a statement.
“Any non-compliant activities should be discontinued immediately and be notified to the SFC.”
The SFC’s statement bears a strong resemblance to warnings issued by the Australian Securities and Investments Commission over the past couple of months.
A number of executives speaking at the iFX Expo in Cyprus last month said that Chinese authorities had asked ASIC to stop Australian brokers from trying to do business in China.