Hong Kong and China signed a MoU about cross-border shares listing

China and Hong Kong have made a crucial move in strengthening their cross-border regulatory efforts when it comes to securities offerings and listings by the local companies in two countries. The two countries have just signed a Memorandum of Understanding (MoU).

Hong Kong’s Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) revealed their cooperation this Friday, February 17th. The two regulators posted a joint statement in which they explained that the MoU outlined what methods and procedures will be necessary for issuing and listing shares in both countries.

In addition, the Memorandum provides certain clarifications, involving what the regulators intend to do to make a joint cross-border enforcement and information exchange possible. The agreement even explained how to supervise financial intermediaries in both, Hong Kong and China.

The document is very detailed and seemingly well-developed, with the regulators saying that it will facilitate the SFC and the CSRC in discharging their supervisory functions in order to put a stop to any cross boundary misconduct and offences together. The partnership will also lead to safeguarding the interests of investors, and it will ensure that both markets are developing in a steady and healthy way.

China was forced to take steps against a number of Hong Kong brokers

Interestingly, the agreement was signed only a few days after brokerages in Hong Kong started suspending the accounts of clients based in China. This was necessary in order for the brokerages to become compliant with the country’s ban on international brokers which have been offering services to China’s citizens without having a license to do so.

Hong Kong-based Bright Smart Securities issued a notice on the account suspension, and so did the Hong Kong branch of China-based broker, Gutai Junan Securities. However, after initially making the notice public, Gutai Junan Securities later withdrew it from the public domain for unknown reasons.

The move came quickly after China’s CSRC issued warnings to several Hong Kong-registered brokers, including UP Fintech Holding and Futu Holding, telling them to stop accepting clients from mainland China. Previously, the brokers were providing China’s investors with access to global stocks, which is against the local regulations.

The brokers could not even obtain licenses to offer such services to China’s people, as the regulator does not offer them.

However, so many brokerages are doing it that China started banning online brokers from being able to reach its citizens, which originally started back in 2021. Back then, the PBoC’s Head of the Financial Stability Department, Sun Tianqi, said that online brokers that operate internationally are “driving without a driver’s license” when they operate in China. As such, their financial activities are considered illegal by the country’s authorities.