Key Takeaways:
Tiger Brokers said mainland Chinese clients account for as much as a quarter of its net revenue, a disclosure that came weeks after Chinese regulators fined the brokerage $59.7 million for operating without a license on the mainland.
"The penalties stemmed from certain subsidiaries' unlicensed cross-border securities business and illegal activities relating to the fund and futures business in mainland China," Wu Tianhua, chairman and chief executive officer of UP Fintech Holding Ltd., said in the company's earnings release.
The Beijing bureau of the China Securities Regulatory Commission on May 22 ordered the confiscation of illegal gains and levied administrative fines totaling about 411 million yuan, or $59.7 million. The penalty pushed UP Fintech, which operates the Tiger Brokers brand on the Nasdaq, to a first-quarter net loss of $26.9 million, compared with net income of $30.4 million a year earlier. Revenue rose 26 percent to $154.9 million.
The fine and the disclosure show a widening regulatory crackdown on Chinese brokerages that route mainland clients into overseas markets. Larger rival Futu Holdings last week disclosed that mainland Chinese investors held about $26 billion, or 17 percent, of its client assets and generated 20 percent of its first-quarter revenue. Both companies have operated in a regulatory gray area for years, registered in Hong Kong but serving mainland clients without a formal cross-border license from Beijing.
Wu said on the earnings call Tuesday that mainland Chinese retail investors represented about 10 percent of total client assets as of the end of March, or roughly $5.9 billion. Those clients contributed between 20 percent and 25 percent of first-quarter net revenue, he said. The company added 28,900 new funded accounts in the quarter, bringing the total to 1.28 million, with the majority coming from Singapore and Hong Kong.
Net asset inflows reached a record $2.9 billion in the quarter, though mark-to-market losses of $4.9 billion from a broad market pullback pushed total client assets down 3.2 percent from the prior quarter to $58.9 billion. Wu said the Nasdaq's second-quarter rebound has since recovered those paper losses.
The CSRC action against Tiger Brokers followed a similar enforcement wave that also targeted a New Zealand unit of the brokerage and a Hong Kong arm of LongBridge Securities. Beijing has never issued licenses for cross-border online brokerage, leaving platforms like Tiger and Futu exposed to periodic regulatory escalation. The last major round of enforcement against these firms came in 2023, when regulators ordered them to stop accepting new mainland clients, though existing accounts were allowed to continue trading.
Alongside the results, UP Fintech's board approved a share repurchase program of as much as $50 million over 12 months starting June 1, funded from cash on hand. Cash and term deposits ended the quarter at $598.1 million, down from $793.1 million three months earlier. Shares of UP Fintech were down about 4 percent in pre-market trading Tuesday following the results, extending a year-to-date decline of more than 45 percent.
This article is for informational purposes only and does not constitute investment advice.
