There are blind spots in the supervision of cross-border Internet brokers The cross-border transfer methods of funds are "varied" but the scale is limited

Financial Associated Press (Beijing, reporter Zhang Xiaochong) news, recently sun Tianqi, director of the Financial Stability Bureau of the central bank, on the cross-border Internet brokers operating without a license in China, which has aroused widespread concern in the market. The Financial Associated Press reporter learned from a number of investors and financial institutions today that under the current mechanism, there are indeed blind spots in domestic supervision, but because the scale of such cross-border funds is relatively limited, even if the regulatory authorities tighten the "floodgates", it is not expected to have a big impact on the market.

Sun Tianqi recently said at the Third Bund Financial Summit: "Some overseas securities operators use Internet platforms to provide overseas securities investment services mainly for domestic investors without obtaining relevant domestic licenses and only holding overseas licenses. From the perspective of business essence, cross-border Internet brokers are driving without a license in China and are illegal financial activities, and this characterization has nothing to do with whether the capital account is fully convertible. “

Industry insiders pointed out that on the one hand, overseas securities companies themselves violate the regulations by expanding their business in China without obtaining a domestic license; on the other hand, according to the current domestic laws and regulations, individual funds cannot directly go abroad to participate in capital projects such as securities investment. So, from any point of view, the compliance of the business is really questionable.

Individual investors send out their funds in a variety of ways

Since overseas stock investment has not been completely liberalized to individuals at present, in recent years, for various reasons, many domestic investors will directly invest in overseas stocks through various channels. Among them, cross-border Internet brokers have become the main channels.

According to the reporter's understanding, although cross-border Internet brokers can provide convenience for opening accounts and trading, if you want to open an account overseas to do stocks, the transfer of funds is the first problem to be faced.

A number of interviewees told the Financial Associated Press that because the foreign investment of domestic individuals under the capital account has not yet been fully liberalized, they basically remit funds out of the country by playing the "edge ball".

According to the above-mentioned person, there are many ways to send funds out of the country.

For example, if the import and export or production enterprises have production and sales platforms at home and abroad, and the profits after sales are retained overseas and entered into personal accounts through dividends and other forms, domestic funds can be transferred overseas in disguise. In addition, some exporters will stay abroad to watch the trend of the RMB exchange rate, during which they may also purchase wealth management products on the cross-border Internet brokerage platform, which will also cause domestic funds to remain on the above platform, but if there are large and frequent transactions, it may attract the attention of the Hong Kong regulatory authorities.

For individual investors, the channels for transferring funds are mostly through banks. An interviewee revealed that although the supervision of this type of business is much stricter than in previous years, at present, some domestic banks can still handle overseas account opening witness services, and individual investors can apply for offshore regional bank accounts through overseas study, work, business, tourism and other reasons. There are also some individual investors who adopt the method of "ant moving", gradually transferring funds to offshore bank accounts, and then transferring them to the capital account of the Internet securities platform.

With the gradual upgrading of the supervision of domestic banks, some individual investors have also begun to choose to transfer funds by directly opening accounts in foreign banks.

In addition, there are some illegal ways of transferring funds in the market. For example, individual investors transfer funds through underground banks, which are relatively hidden, do not involve actual cross-border remittances, but use the way of capital exchange, but the underground banks are very expensive and violate Hong Kong's anti-money laundering laws.

Most banks are more cautious The overall size of funds is limited

Banks play an important role as "intermediaries" in the process of repatriating funds. Therefore, whether the bank strictly complies with the relevant regulations will have a great impact on such business.

The person in charge of the overseas business of a medium-sized securities company in South China told the Financial Associated Press, "Domestic remittance travel, large banks are generally more cautious, have been fined many times, remittances must be recorded in detail." Overseas beneficiary banks, many large banks in Hong Kong are also very strict in opening accounts for domestic residents. ”

The person said that the operation of Chinese-funded financial institutions in Hong Kong is relatively standardized, the requirements for customers to transfer funds are relatively strict, and the success rate of domestic personal bank cards directly into overseas securities accounts is very small, which is generally rejected, but there will indeed be individual financial institutions playing "edge ball".

The Financial Associated Press reporter learned that although domestic investors through some domestic and foreign banks as a capital transfer platform, the phenomenon of detouring to buy and sell negotiable securities on the cross-border Internet brokerage platform does exist, but due to the greater policy risks, cumbersome procedures, and relatively high costs, the actual scale of funds is limited as a whole.

Industry insiders pointed out that although the total amount of funds directly invested by domestic individual investors in overseas securities markets is limited, it should not become a regulatory vacuum. Sun Tianqi's recent statement was interpreted by the market as "the current regulatory department may intentionally make up for the regulatory vacuum caused by the above loopholes".

In fact, domestic regulators are not unaware of the problem of cross-border Internet brokers. As early as 2016, the CSRC made a reminder in the "Illegal Securities and Futures Risk Warning" column of its official website: "Domestic investors participate in overseas securities market transactions through the platform websites or mobile clients of domestic Internet companies, and because there is no corresponding legal protection, and the securities investment accounts and funds are overseas, once a dispute occurs, the rights and interests of investors will not be effectively protected." Do not participate in such investments to avoid losses. ”

However, due to the flexible and convenient account opening procedures of the cross-border Internet brokerage platform and the low handling fee, many customers still choose to transfer their accounts from Chinese securities companies in Hong Kong to cross-border Internet brokerage platforms in recent years. A person from a branch of a domestic financial institution in Hong Kong told the Financial Associated Press that since the domestic regulatory authorities cannot carry out penetrating supervision of the business of all securities companies in Hong Kong, they are indeed worried about the potential risks.

The broadening of outbound investment channels will release some of the demand for outbound investment

A number of industry insiders and investors told the Financial Associated Press that the allocation of domestic funds to overseas financial assets has always existed, and from the perspective of investors themselves, they are more inclined to invest through formal channels.

In recent years, with the gradual broadening of domestic outbound investment channels and the increasing experience of domestic investors in overseas investment, domestic investors can indirectly participate in overseas market investment through qualified domestic institutional investors (QDII), land stock connect and other means.

A Hong Kong stock investor told the Financial Associated Press that it is now very convenient to buy and sell Hong Kong stocks and offshore wealth management investment products through the land-Hong Kong stock connect and wealth management, although the transaction policy is still somewhat restricted, but the capital channels are formal, so the demand for ways to send funds overseas to buy stocks and make investments has been greatly reduced.

Industry insiders also agree that cross-border capital flows for speculative purposes are highly correlated with the performance of domestic and foreign capital markets, the current trend of domestic stock market stability and improvement in the medium and long term has not changed, the RMB exchange rate outlook is stable, and the offshore market risk is larger, so the trend of funds flowing out through various informal channels has narrowed.