On May 22, 2026, the China Securities Regulatory Commission (CSRC) and seven other ministries jointly published the Implementation Plan for the Comprehensive Crackdown on Illegal Cross‑Border Securities, Futures and Fund Business Activities (CSRC Document [2026] No. 28, the “Implementation Plan”). This launches a two-year dedicated rectification campaign targeting illegal cross-border securities, futures and fund business activity and marks a new stage in China’s efforts to crack down on illegal cross-border financial activity.
Echoing the Implementation Plan, the Securities and Futures Commission of Hong Kong (SFC) and the Hong Kong Monetary Authority (HKMA) each issued a regulatory circular (collectively the “Circulars”) on the same day to licensed corporations (including Hong Kong licensed securities brokers and fund managers) and registered institutions (including Hong Kong commercial banks). The Circulars set out general requirements regarding client account opening, due diligence and ongoing monitoring while specifically mentioning these for clients from Chinese Mainland.
In our view, while the regulatory focus of this rectification campaign is on offshore institutions’ provision of online securities, futures and fund services without approval to retail clients in Chinese Mainland, the regulatory principles and compliance boundaries set out in the Implementation Plan go far beyond the concepts of “online” and “retail clients”. They will inevitably affect the compliance assessment of all types of cross-border financial services.
On June 7, 2026, a Hong Kong-based private wealth management industry association invited JunHe team to share with its members our observations of these regulatory developments, key points of which are:
- Firstly, this reflects the “baring of teeth” for the financial regulation in Chinese Mainland, which we believe would happen throughout the rectification campaign, and we would not be surprised if the CSRC imposes heavy fines on some firms for their illegal cross-border financial activities.
- Secondly, illegal cross-border securities activities that have operated in a “dark grey” area in Chinese Mainland will no longer be tolerated by the Chinese government, and some firms may even face retrospective penalties. Given the campaign-style of this rectification, even overseas financial institutions who have been operating cautiously and have not directly breached any Chinese regulation, should pay attention to so called “counterparty risk” and “collateral damage risk”, which, if not appropriately managed, could result in reputational damage.
- Thirdly, the simultaneous release of the Implementation Plan and the Circulars indicates significant progress in cross-border financial regulatory cooperation between Chinese Mainland and Hong Kong. This is likely to serve as a reference for cross-border regulatory collaboration in other financial sectors (such as capital markets) between these two jurisdictions and may also serve as a reference for cross-border financial regulatory cooperation between Chinese Mainland and other overseas jurisdictions outside Hong Kong.
- Finally, overseas financial institutions serving Chinese Mainland clients, regardless of the jurisdiction in which they are located, should continue to monitor the extraterritorial application of PRC financial law and ensure that they do not engage in or facilitate any illegal activity prohibited in Chinese Mainland.
Between May 29 and June 17, 2026, in response to market concerns, government and regulatory officials in both Chinese Mainland and Hong Kong made statements to clarify the compliance boundaries for cross-border business activity, account opening and the provision of investment services to Chinese Mainland investors.
The Implementation Plan and the Circulars have been in place now for over a month. This briefing summarizes the key requirements under the Circulars and the recent public statements made by the regulators in Chinese Mainland and Hong Kong respectively, to help clients better understand the evolving regulatory landscape and assess the implications relevant to them from time to time.
I.The Beginning of the Rectification Campaign: Issuance of the Implementation Plan
The regulatory logic of the Implementation Plan remains grounded in the principle of territorial jurisdiction, namely that overseas institutions may not conduct securities, futures or fund business activity within Chinese Mainland without approval. Under the territorial jurisdiction principle, the Implementation Plan further extends the scope of “conducting business in Chinese Mainland” to include any ancillary activity such as online marketing, account opening, customer service and technical support.
Beyond illegal securities, futures and fund business activity, any violation of foreign exchange control, anti‑money laundering, cybersecurity or personal information protection arising from the activity, shall also be rectified.
II.Hong Kong Regulatory Coordination: Release of the Circulars
The SFC and the HKMA each issued the Circulars on the same day as the CSRC issued the Implementation Plan. The Circulars require Hong Kong licensed corporations and registered institutions to comply with all the relevant laws and regulatory requirements of Hong Kong and the relevant jurisdictions when opening accounts for clients outside Hong Kong. The Circulars remind these licensed institutions to take note of the Implementation Plan and not to engage in or facilitate any illegal activity when providing services to investors outside Hong Kong.
The Circulars further require Hong Kong licensed corporations and registered institutions to implement the following additional measures when opening and managing investment accounts of Chinese Mainland investors1.
Measure 1: Closure of investment accounts that were opened using questionable or forged documents.
Identify the client investment accounts that have opened since January 2023 (or another designated timeframe) that have used questionable or forged documents. Give advance written notice to the clients of the accounts identified for the suspension of any new client-initiated transactions and the intended closure of the relevant accounts, while allowing reasonable time for clients to manage the assets in their accounts, such as unwinding their positions and transferring funds to their bank accounts. In principle, such account closures should be completed within six months after the completion of the review.
Measure 2: Closure of zero-balance dormant investment accounts
Identify zero-balance dormant investment accounts which have zero asset balance as of May 22, 2026 (or another designated timeframe) and have had no client-initiated activity during the previous 12 months. The review should be completed within three months.
Give advance written notice to clients of the identified accounts and suspend the accounts from any new transactions until the licensed institution is able to satisfactorily complete the reactivation procedures (including confirmation that the KYC and the client due diligence information remain valid), and the client declaration and the bank account requirements under Measure 3 below are satisfied. In principle, such account closures should be completed within six months after the completion of the review.
Measure 3: Opening new investment accounts
(1) Obtain a series of written declarations from the Chinese Mainland investor, including but not limited to: (a) confirmation that the investment funds come from legitimate channels outside Chinese Mainland; (b) confirming that there is no record of account closure or suspension due to questionable or forged documents; (c) agreeing to notify the Hong Kong licensed corporations or registered institutions within seven business days of any change in the information provided in the written declaration; and (d) agreeing to the access to personal data by the regulators or the enforcement authorities.
(2) Require investors to link a bank settlement account in their own name with a bank in Hong Kong or another compliant offshore jurisdiction, and all fund transfers must be conducted through that account only.
(3) Close the client investment account if the client’s funding sources are subsequently found to be unlawful or in violation of any of the capital control regulations of Chinese Mainland.
(4) Maintain proper records for each client’s account opening process in a manner that is readily accessible for compliance checks and audit purposes.
(5) Provide information to the SFC/HKMA upon request (as applicable), including but not limited to the number and details of the new investment accounts opened during a specified period and the clients’ written declarations as above.
III.Regulatory Clarifications by Both Chinese Mainland and Hong Kong: Navigating the Compliance Boundaries
Following the release of the Implementation Plan and the Circulars, market participants have expressed concerns as to whether Hong Kong licensed institutions would be stopped from opening or maintaining investment accounts for investors from Chinese Mainland. Accordingly, the Hong Kong regulators provided further clarity through appendices to the Circulars2, Q&As and public statements, that the measures do not impose a prohibition on Chinese Mainland investors opening accounts or investing in Hong Kong. Instead, Hong Kong licensed institutions are required to implement more stringent KYC, client due diligence and account management measures, provided that they comply with the laws and regulations of Hong Kong and the other applicable jurisdictions.
In other words, Hong Kong licensed institutions may still open and maintain investment accounts for eligible Chinese Mainland investors, provided that the regulatory requirements are satisfied. The provision of such services shall remain subject to Chinese Mainland regulatory requirements, should not constitute illegal securities, futures or fund business activity within Chinese Mainland without approval, and should not engage in or facilitate any clients or counterparties in illegal activity intended to circumvent foreign exchange control, anti-money laundering, cybersecurity, personal information protection or any other applicable laws and regulations.
This position is consistent with the subsequent public statements made by CSRC officials. On June 17, 2026 at the Lujiazui Forum 2026, Wu Qing, the Chairman of the CSRC, stated that financial operations subject to license is a globally recognized principle and a basic requirement for protecting investors’ lawful rights and interests. The CSRC is cracking down on illegal and non-compliant cross-border financial business activity, while supporting the lawful and compliant cross-border investment activity of investors from Chinese Mainland. Going forward, the CSRC will further promote the improvement of cross-border regulatory coordination mechanism, strengthen routine information sharing and market communication, “open the front door while blocking the side door”, i.e., the CSRC will support lawful and compliant cross-border investment and financing activity while cracking down on all types of illegal and non-compliant cross-border activity in accordance with the law, so as to maintain normal market order and protect investors’ lawful rights and interests.
IV.Our Observation
The Implementation Plan primarily targets financial business activity conducted without approval in Chinese Mainland. The Circulars are from the perspective of Hong Kong licensed institutions’ compliance obligations in opening and managing investment accounts, and require licensed institutions to strengthen their KYC, their client due diligence and their anti-money laundering procedures. As Chinese Mainland-Hong Kong cross-border financial regulatory cooperation continues to deepen, the implementation of major changes in the regulatory policy will rely on effective communication between the regulators and the markets, securing accurate interpretation and implementation by market participants. Following the release of the Implementation Plan and the Circulars, officials in Chinese Mainland and Hong Kong have communicated with the markets of both sides in a timely manner, clarifying the regulatory bottom line and dispelling market concerns, reflecting the continued deepening of cross-border regulatory cooperation between the two jurisdictions.
Although this rectification campaign mainly targets illegal online cross-border securities business activity aimed at retail clients, other financial businesses (including private banking businesses serving high-net-worth clients, as well as fund or insurance businesses primarily serving institutional investors), are also subject to the legal and compliance boundaries set by the Implementation Plan. We recommend that offshore financial institutions monitor developments in regulatory cooperation between Chinese Mainland and Hong Kong and the progress of certain administrative penalty cases, reassess compliance risks in light of the changes in the regulatory policy, enhance their internal compliance policies and procedures, and manage their compliance risks relating to cross-border business.
[1] Pursuant to the Circulars, a Chinese Mainland investor refers to an individual investor who uses either or both a resident identity card and a passport issued by the People’s Republic of China as an identification document according to a licensed corporation/recognized institution’s records or when opening an investment account.
[2] Taking the SFC Circular as an example, Appendix C provides that when Chinese Mainland investors come to Hong Kong in person and approach licensed corporations to open investment accounts or for other investment services, licensed corporations should implement Measure 3 in Appendix B in relation to declarations and the designation of bank accounts, in addition to fulfilling know‑your‑customer and customer due diligence requirements. Licensed corporations may continue to serve existing Chinese Mainland investors provided that, among other things:
1) No questionable or forged documents were used in their account opening;
2) The relevant measures in Appendix B are adequately implemented; and
3) The service is conducted in a manner compliant with the applicable requirements under the notice.
Where a licensed corporation has questions regarding the interpretation or application of the notice, including whether certain activities carried out by the licensed corporation in Chinese Mainland may be unlawful, it should seek legal advice from a qualified legal adviser.
