EditorialHKEX should heed recommendations from Hong Kong’s securities watchdog
As the city’s stock exchange moves forward on listing reforms, it would do well to also improve vetting and maintain compliance standards
The city’s reputation as a premier regional hub for raising capital can only be maintained when both institutions work together.
After vetting listed companies’ internal control reviews, cases of late auditor resignations and HKEX’s own listing procedures, the SFC recommends that the exchange strengthen its oversight of firms’ internal controls to ensure the timely release of financial information. It also recommends revising its market guidance so companies can better meet auditors’ standards and avoid late resignations.
The industry watchdog expressed concern that 40 companies with long suspensions resumed trading in 2024, while 32 were delisted. Reasons for suspension included failure to publish financial information and adverse opinions on financial statements, usually from an auditor. To rectify the problems, the SFC recommends that the stock exchange formalise its practice to consistently identify internal control deficiencies with listing candidates and impose a trade resumption condition requiring an independent internal control review. The exchange failed to do so in at least eight cases.
The recommendations are sound and should be formalised as part of HKEX’s coming listing overhaul. Proposed changes by HKEX include lowering the minimum valuation for companies to list, allowing listing aspirants to apply confidentially and relaxing the dual-class share structure to give company founders greater control.