The regulatory crackdown centers on the brokerage's handling of the Nippon Individual Savings Account (NISA) program. Between early 2025 and 2026, the firm incorrectly labeled 78 U.S.-based investment products as tax-exempt on its mobile app. Regulators found that the company failed to notify affected clients or rectify the status of these assets after the error was discovered, leaving retail investors with unexpected tax liabilities.
Beyond these misrepresentations, the Securities and Exchange Surveillance Commission identified critical gaps in the firm's operational integrity. Moomoo Securities, a subsidiary of Hong Kong-based Futu Holdings, reportedly blocked customers from transferring domestic stocks to other brokerages since early 2024. Investigators also found that over 1,500 flagged account applications bypassed mandatory anti-money laundering screenings, as the firm erroneously restricted its oversight only to approved accounts.
The Financial Services Agency has demanded a complete management overhaul and a formal business improvement plan by July 21. Beyond the immediate account freeze, the brokerage must address severe deficiencies in its cybersecurity infrastructure and internal governance. This enforcement action highlights a broader shift in Japan toward stricter oversight of digital-first financial institutions as the country reforms its framework for asset management and digital finance.
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