The Securities and Futures Commission of Hong Kong recommends that the Stock Exchange strengthen its review of internal controls and monitoring of issuers.

On March 18, the Securities and Futures Commission of Hong Kong issued a review report on the performance of the Hong Kong Exchanges and Clearing Limited (HKEX) in regulating listing matters by 2024. During the review, the Securities and Futures Commission of Hong Kong conducted a thorough assessment of HKEX's internal control review and handling of sudden resignations of auditors when reviewing listing issuers. Additionally, the Securities and Futures Commission of Hong Kong also reviewed the general operations, processes, and procedures of the HKEX listing division. The latest report mentioned that HKEX has taken follow-up measures in response to the recommendations made in the previous review report issued by the end of 2024. At the same time, the Securities and Futures Commission of Hong Kong identified several areas that need improvement and made further suggestions for this year. The Securities and Futures Commission of Hong Kong believes that when an issuer fails to issue financial statements due to improper business or accounting practices, HKEX must ensure that the issuer has fully corrected its significant internal control deficiencies and implemented effective measures to comply with the Listing Rules, and to safeguard its assets and interests. The Securities and Futures Commission of Hong Kong suggested that HKEX strengthen its review of internal control reviews of issuers and consider requiring independent advisors of issuers to provide opinions on the adequacy and effectiveness of their internal control measures, rather than relying on directors who have not been able to maintain proper internal controls. The sudden resignation of auditors can hinder issuers from timely publishing high-quality financial information. Therefore, the Securities and Futures Commission of Hong Kong recommended HKEX to update its guidelines to reduce cases of auditors' sudden resignations. The recommendations include requiring issuers to obtain shareholders' approval when requesting auditors' resignation and encouraging issuers to discuss and clarify audit fees with auditors early on to prevent auditors from resigning hastily due to fee disputes. The Securities and Futures Commission of Hong Kong also recommended HKEX to enhance its review of how issuers' audit committees fulfill their responsibilities in actively managing financial reporting and audit processes, resolving audit issues, overseeing the timeliness and quality of audits, and making accurate disclosures.