State media questions Futu, Tiger Brokers’ ability to meet requirements of China’s strict new data protection law
- Futu said it is checking the way it handles Chinese investors’ personal information after state media questioned the practices of online brokers
- People’s Daily said risks exist in the use of Chinese citizens’ personal data by online brokers in conducting cross-border trading
Futu Holdings said it is checking its use of client information after state media questioned the ability of online brokers to handle Chinese investors’ personal data for cross-border trading of stocks.
Nasdaq-listed Futu told the South China Morning Post on Thursday that it was studying the new Personal Information Protection Law (PIPL) in China, and had arranged a team to check and optimise its own operations.
“Futu has also maintained regular self-examination and self-inspection to further ensure compliance. We have always been actively communicating with regulators, strengthening training on personal information protection, and enhancing the awareness and capacity of personal information protection,” the Shenzhen-based company said in a written reply, adding that it is enhancing its ability to protect personal data.
The People’s Daily, a Chinese Communist Party mouthpiece, said earlier 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 the new legislation that was passed in August and will take effect on November 1, the newspaper said, citing a lawyer.
Tiger did not reply to an emailed request for comment, while Futu declined to provide details of specific measures it will take to satisfy the new law.
The online brokers are the latest group to be slammed by Beijing’s crackdown on the tech industry, after the sector lost about US$1 trillion of market value in a sell-off in Hong Kong before rebounding last week.
The People’s Daily article sent the shares of both Futu and Tiger’s parent UP Fintech plunging by more than 11 per cent before the market opened in the US.
The new law, one of the toughest in the world on personal information security, states that companies need to get individual consent to obtain sensitive personal information such as biometrics, medical health, financial accounts and location. For platforms that illegally collect personal information, regulators can suspend or terminate the provision of their services.
It also requires companies holding the data of more than 1 million users to ask for review and approval from Beijing before going public overseas, the People’s Daily said.
In its report, the newspaper said the online brokers will be tested when it comes to offering personal data to upstream providers such as Interactive Brokers as well as foreign regulators such as the US Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA).
It said some brokers – including Tiger and Alibaba-backed Snowball X – had transferred their client data to Interactive Brokers, an American financial service firm that helps them with conducting orders, risk controls and asset clearing.
The People’s Daily also reported that a working group clamping down on apps collecting personal information illegally had told some brokers including Tiger and Futu to address problems such as failure to disclose valid contact information.
“[We] contacted the task force immediately and had completed all the rectification work in accordance with relevant opinions and regulatory requirements by August 2, 2019,” Futu said on Thursday.
Author: Iris Ouyang, South China Morning Post