Chinese state media the People’s Daily on Thursday questioned the ability of Futu and Tiger Brokers to meet requirements of the country’s strict new data protection law. As a result, the two brokers’ shares decreased by about 16% and 13% before markets opened in the U.S., respectively.
The People’s Daily, a Chinese Communist Party mouthpiece, said on Thursday that risks existed for online brokers such as Tencent Holdings-backed Futu and Xiaomi-backed Tiger Brokers in the protection of user data. Such technology firms face challenges in meeting the requirements of new legislation that was passed in August and will take effect on November 1, the newspaper said, citing a lawyer.
A People’s Daily’s reporter pointed out two big worries regarding the business model of Tiger and Futu: one is the security of information collection, the other is the whereabouts of that information.
In response to the media’s queries, Futu and Tiger both responded that they had completed all rectification in August 2019 in accordance with regulatory requirements put forward by the app’s special governance working group in July 2019.
Futu pointed out that the company has been maintaining regular self-examination and self-inspection, and hired an external professional security team to regularly provide safety testing reports for system optimization.
Tiger said that in the past few years, the group has obtained a number of domestic and international authority certifications in personal information protection and data security, and stressed that the group will earnestly implement the relevant national laws and regulations to protect the security of users’ personal information.
In recent years, internet brokerages engaged in cross-border business have been questioned about their business model. As early as July 2016, the China Securities Regulatory Commission (CSRC) issued a warning on the risks of overseas investment, naming domestic websites and mobile apps like Tiger Broker and Jimu Group to provide trading services for overseas securities.
Apart from qualified domestic institutional investors and investors on the list of “Shanghai-Hong Kong Stock Connect,” no domestic or foreign institutions have been approved to provide services for domestic investors to participate in overseas securities trading, the CSRC said.