Wall Street didn't enjoy 2022 very much, and it was a particularly bad year for the Nasdaq Composite (^IXIC 0.63%). The index was down another 1% on Friday morning, bringing its losses for the year to 34% and marking a steep reversal from the massive gains the Nasdaq has enjoyed in each of the three previous years.

There are plenty of culprits for the poor performance of the Nasdaq in the past year, but one fact about the index that differs from its fellow stock market benchmarks is that the Nasdaq Composite includes the performance of foreign companies that list their shares on the exchange.

Indeed, you'll find several foreign companies among the elite ranks of the Nasdaq-100 Index, and sometimes, what happens with those companies can have an effect on the broader market.

Today, shares of Futu Holdings (FUTU -0.33%) and Up Fintech Holding (TIGR -1.74%) are moving sharply lower, and that's just the latest among several instances during 2022 in which companies with exposure to the Greater China region have weighed down the Nasdaq.

Chinese regulators aren't happy

Shares of Up Fintech and Futu were both down about 25% in midmorning trading on Friday. The online brokerage companies got the attention of securities regulators in China, and both face allegations that they have broken the law in ways that could prove problematic for their business models.

The China Securities Regulatory Commission (CSRC) issued a statement on Friday in which it called into question how Futu and Up Fintech have allowed individual investors within mainland China to invest in stocks and other investments outside the country. China has stringent controls on capital outflows, and as the CSRC sees it, Futu and Up Fintech have been operating illegally in violation of those controls.

The CSRC called on Futu and Up Fintech to stop letting new mainland China customers sign up for their respective fintech platforms. Those who are already customers will be allowed to keep trading securities with Futu and Up Fintech, but they won't be able to make further deposits since they would potentially violate the capital-movement restrictions.

The two companies acknowledged the CSRC's comments while trying to reassure investors that their businesses aren't in danger. Futu expects to work in cooperation with regulators to make sure that it can continue to operate in compliance with all laws and regulations within mainland China.

Up Fintech asserted that it will keep offering services to its current customers but take corrective measures to stop bringing on new customers as specified by the CSRC.

Is China a safe place to invest?

The news is particularly ill-timed for Futu, which had hoped to open its stock for trading under a dual listing in Hong Kong. Futu delayed the move, likely in light of recent events.

Futu and Up Fintech have both sought to capitalize on rising interest among Chinese citizens to invest online. Exposure to multiple markets has been part of the draw for customers, as the platforms offer services that traditional brokers in China don't.

More broadly, the episode marks the latest conflict between internet-based businesses and the Chinese government. Companies much larger than Futu and Up Fintech have been caught up in political wrangling, causing considerable uncertainty for foreign investors.

Some people have simply given up on Chinese stocks entirely, worrying that at any moment, the government could essentially change the rules and take away moneymaking opportunities from businesses.

Regardless, China will continue to play a key role in the global economy, and its citizens could have steadily rising influence on the investment world. A lot of that depends on what the Chinese government does, though, and tight restrictions could cap not only Futu's and Up Fintech's prospects but also those of the nation's entire economy.