(Yicai) Sept. 23 -- Chinese online brokerages Futu Securities and Tiger Brokers are making it harder for residents on the mainland to open new accounts and now require them to provide proof of permanent residency overseas, as Beijing gets tough on cross-border investments.

Futu Securities’ account opening rules have changed under the latest regulatory requirements, Yicai learned. Mainland Chinese customers must now show proof of permanent residency in another country to open an account.

Tiger Brokers’ customer service center echoed this message, saying that since last week the Beijing-based securities firm no longer accepts applications to open an account from mainland residents who provide documents proving that they work or live overseas. Only clients with non-mainland identification documents are eligible.

For years, Futu Securities and Tiger Brokers were popular channels for mainland investors to access Hong Kong and US stocks. But since 2022, both companies have come under pressure from regulators to close their account opening channels for mainland Chinese residents.

When asked if the previous, looser requirements for mainland customers might be restored later, a Futu Securities customer service representative said the Hong Kong-based firm has not received any notifications on the matter and advised customers to stay tuned for future updates.

The US’ Interactive Brokers, the world’s largest online brokerage, also started to make it more difficult for mainland Chinese to open accounts in August, and its app has been pulled from Chinese app stores, Yicai previously reported.

And another overseas broker, Singapore’s Longbridge Securities, said in June that it had stopped allowing users in mainland China to open accounts using proof of existing holdings, and its app is no longer searchable or downloadable.

The changes come against the backdrop of stricter tax enforcement in China on individuals’ overseas income. Since the second quarter, many Chinese people with investments in Hong Kong and US stocks have received notices from local tax departments to pay back taxes. As a result, discussions about offshore trading channels have intensified.

Tiger Brokers reports user information to the tax authorities in New Zealand, while Futu Securities reports to Hong Kong and Longbridge Securities operates in Hong Kong and mainland China. All these countries and regions are part of the global Common Reporting Standard system for sharing tax data. Interactive Brokers, though, is based in the US and is not part of this framework. Some investors thought they could avoid having China’s tax authorities monitor their overseas income this way.

Mainland investors can still invest in Hong Kong stocks through the Shenzhen-Hong Kong and Shanghai-Hong Kong stock connect programs, as well as through Hong Kong equity exchange-traded funds that are listed in the mainland, market experts said. The tax treatment for buying Hong Kong stocks through these channels is also more favorable, a tax specialist said.

Editor: Kim Taylor