The SFC released a report on 18 Mar 2026 reviewing SEHK's 2024 listing regulation performance, recommending enhancements on internal controls and auditor resignation handling.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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SFC Report on SEHK Listing Regulation Performance
On March 18, 2026, the Securities and Futures Commission ("SFC") issued a report assessing the Stock Exchange of Hong Kong Limited ("SEHK")'s regulatory performance regarding listing matters throughout 2024. This review encompassed the Listing Division's operational procedures and specifically scrutinized SEHK's vetting of listed issuers' internal control reviews and their management of late auditor resignations.
Enhanced Recommendations on Internal Controls and Audit Oversight
While SEHK has acted upon prior recommendations from late 2024, the SFC has issued new directives for improvement. Specifically, where financial statements are delayed due to irregularities, SEHK must ensure material internal control deficiencies are rectified and assets safeguarded. To strengthen vetting, the SFC advises SEHK to mandate independent consultant opinions on internal control effectiveness rather than relying solely on director confirmations. Furthermore, SEHK should rigorously examine audit committees' discharge of duties regarding financial reporting management, audit timeliness, and disclosure accuracy.
Auditor Resignation Protocols and Regulatory Definitions
To reduce the frequency of late auditor resignations which impede timely financial disclosures, the SFC recommends updated market guidance. This includes requiring shareholder approval prior to auditor resignation requests and encouraging early discussions on audit fees to prevent fee-related disputes. Contextually, late auditor resignation is defined as occurring one month before or after the reporting period end, raising concerns about the incoming auditor's ability to conduct quality audits within the four-month pre-deadline window. Although Listing Rules mandate shareholder approval for auditor removal, recent instances show issuers circumventing this by soliciting resignations without such approval.
Statutory Supervisory Framework
Under the Securities and Futures Ordinance, the SFC holds a statutory obligation to supervise and regulate SEHK's activities, necessitating these periodic reviews. The regulatory focus remains on ensuring compliance with Listing Rules and maintaining market integrity regarding audit appointments and financial reporting disclosures.
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