Interactive Brokers Limits Accounts for Chinese Mainlanders

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The largest online brokerage firm globally has strengthened its requirements for residents of mainland China attempting to open securities accounts to comply with regulatory standards.

Since last month, the company has gradually restricted access for users from mainland China, and its application has been removed from app stores within China. New applicants are now required to submit a Chinese identification document and proof of overseas residence or employment within the last three months to open an account, as detailed on the company’s website.

This development follows increased regulation by Chinese tax authorities concerning the reporting of overseas income, prompting many mainland investors to turn to U.S. brokers to avoid reporting their capital market income under the international Common Reporting Standard (CRS).

As of April 2023, the CRS, a worldwide agreement aimed at combating tax evasion, covers 119 jurisdictions, with China fully participating in exchange of financial data with 106 of these countries.

While the USA is not a member of the CRS, it enforces its own Foreign Account Tax Compliance Act (FATCA), which some interpret as a loophole allowing mainland individuals to evade Chinese offshore investment regulations.

Headquartered in Greenwich, Connecticut, the firm offers clients from more than 200 nations the ability to trade stocks, options, futures, and various other assets across 150 global markets.

This broker is not the first to tighten policies in response to Chinese regulatory pressure. For instance, a Singapore-based securities company announced that in June, it would halt new account openings for Chinese residents who cannot verify overseas residency.

Previously, in 2022, firms based in Hong Kong and Beijing, including a well-known Asian broker, ceased providing account services to mainland Chinese clients. The following year, these firms removed their apps from Chinese app stores after regulators accused them of offering cross-border securities services without the necessary licenses.