(Yicai) May 28 -- Fresh from being penalized for illegally giving Chinese mainland investors access to overseas stock trading, Futu Securities and Longbridge Securities have begun closing investment accounts opened using forged documents as well as inactive accounts with no assets or holdings.

Futu’s NiuNiu app has added an “Update Identity Information” shortcut under the “Account” section, alongside an explanatory document on updating the info. The notice states that clients who provide compliant overseas identification can continue trading and accessing all account functions, including deposits and withdrawals, without disruption after updating their information.

Updated guidance issued by the China Securities Regulatory Common and Hong Kong’s Securities and Futures Commission on May 22 only affects investors who hold solely mainland Chinese ID cards or passports, a source at Futu said. Clients with overseas identity documents are unaffected, regardless of whether those documents were obtained before or after opening the account.

That same day, the CSRC announced that Futu, Longbridge, and Tiger Brokers operated unlicensed cross-border securities, fund, and futures businesses in the Chinese mainland, and said it would confiscate all illegal gains and impose severe fines.

Hong Kong-based Futu had already conducted system-wide checks and clean-up work in the second half of last year, the source said.

In a notice to clients, Longbridge said the regulatory clean-up mainly targets two types of accounts: those opened using suspicious or forged documents and those that are inactive with zero balances. Accounts opened in compliance with regulations and holding genuine assets and holdings do not fall within the scope of this action, it said.

The authorities also unveiled a two-year grace period on May 22, during which time existing mainland clients of these brokers will be restricted to selling their holdings and withdrawing funds.

Regulators have not yet issued detailed guidance on this, the Futu insider said, adding that at present, all client accounts, trading activity, and fund services remain fully operational. The broker will continue monitoring policy developments and will notify customers of any updates through its app, website, and other channels, the person said.

Editor: Kim Taylor