(Yicai) May 29 -- Chinese mainland investors accounted for about 17 percent of client assets at Futu Holdings at quarter-end, Chief Executive Li Hua said after regulators in China proposed to fine the fintech company for offering unlicensed cross-border stock trading services for mainlanders and order it to rectify or cease such activities.

Mainland investors made up 13 percent of Futu’s client base at the end of the March quarter and accounted for about 20 percent of its revenue, Li, who is also the Hong Kong-based company’s founder and chairman, also said on its first-quarter earnings conference call yesterday.

On May 22, the China Securities Regulatory Commission said that Futu, Longbridge Securities, and Tiger Brokers operated unlicensed cross-border securities, fund, and futures businesses in the mainland and it would confiscate all of their illegal gains and impose heavy fines on them.

The CSRC proposed to fine Futu about CNY1.85 billion (USD273 million), the firm said in a statement on the same day, adding that the regulator also proposed to hand a CNY1.25 million (USD185,000) penalty to Li.

The authorities have set a two-year grace period, during which time existing mainland clients of Futu, Longbridge, and Tiger Brokers can only execute sell orders and withdraw their funds.

“The two-year concentrated rectification period for mainland customers does not require account closures,” Li said on the call. “Rather, it restricts deposit and buying activities within the mainland.”

As a result of the proposed fine, Futu has set aside HKD2.1 billion (USD268 million), resulting in a 61 percent plunge in net profit for the three months ended March 31 from a year earlier, its unaudited financial report showed yesterday. Revenue climbed 25 percent to HKD5.9 billion.

Futu has more than a 50 percent share of the Hong Kong market, Li noted. The overseas independent brand Moomoo saw income across all markets abroad surge in the quarter from a year ago, with that in five countries more than doubling, he said.

Moomoo has over two million clients with assets overseas, with average assets per client of around USD18,000, which is higher than other local online investment platforms, Li pointed out, adding that the firm also plans to leverage its 140 overseas licenses to explore more markets.

Chinese authorities also jointly announced on May 22 that foreign brokerages have been banned from promoting their securities, futures, and fund services in the country and are also barred from providing services such as account opening, processing of trading orders, and fund transfers.

"Futu's business operations in Hong Kong and overseas markets are running smoothly, and various new initiatives are progressing in an orderly manner," Li said. “We anticipate that the implementation of new regulatory updates will not have a significant impact on our guidance of 800,000 customer growth for the year.”

Editor: Martin Kadiev