ONLINE brokerages not licensed in China are conducting illegal businesses if they serve Chinese clients via the internet, a Chinese central banker said, in the first official comment on recent reports flagging regulatory risks facing firms such as U.S.-listed Futu Holding and UP Fintech Holding.

“Cross-border online brokerages are driving in China without driver’s license. They’re conducting illegal financial activities,” Sun Tianqi, head of the Financial Stability Department of the People’s Bank of China (PBOC) said in a speech, according to a transcript released Wednesday.

Futu and UP Fintech face regulatory risks as China’s new personal data privacy law takes effect Nov. 1, the People’s Daily said in an analysis on its website Oct. 14.

Nasdaq-listed shares of Futu and Fintech have since plunged, amid concern that the sector will be next in China’s regulatory crosshairs. China has launched a flurry of regulatory actions targeting sectors ranging from technology to cryptocurrency to property.

Speaking at the Bund Summit in Shanghai over the weekend, Sun said that some online brokerages, with only overseas licenses, serve mainly Chinese mainland investors, allowing them to trade U.S. and Hong Kong stocks.

Without identifying the firms, Sun said that 80 percent of accounts of a brokerage registered in the Cayman Islands were opened by mainland clients, while the ratio is 55 percent for another Hong Kong-registered brokerage.

“Financial licenses have national boundaries,” Sun said.

“Overseas institutions with only overseas licenses conducting business on the Chinese mainland is illegal financial activity.”

The transcript of Sun’s speech was released on the website of the Finance 40 Forum, which organized the summit. (SD-Agencies)