Exchange Seeks Views on Proposed Rule Changes Relating to Disclaimer or Adverse Opinion on Issuer’s Financial Statements

28 Sep 2018

  • Exchange proposes to require trading suspension if listed issuers publish financial statements with disclaimer or adverse audit opinion
  • Proposed Rule changes aim to enhance the quality and reliability of financial statements published by issuers
  • Deadline for responses is 30 November 2018


The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published a consultation paper seeking feedback on a proposed suspension requirement for listed issuers with disclaimer or adverse audit opinion on their financial statements.

Under the proposal, the Exchange would normally require suspension of trading in an issuer’s securities if the issuer publishes a preliminary results announcement1 for a financial year and the auditor has issued, or has indicated that it will issue, a disclaimer of opinion or an adverse opinion on the issuer’s financial statements.   Trading in the securities may resume once the issuer has addressed the issues giving rise to the disclaimer or adverse opinion, provided comfort that a disclaimer or adverse opinion in respect of such issues would no longer be required, and disclosed sufficient information for investors to assess its updated financial positions. 

This consultation forms part of the Exchange’s holistic review of the continuing listing obligations of issuers to address market concerns and maintain the quality and reputation of the Hong Kong market.

 “A disclaimer or adverse opinion on the financial statements indicates that the risk of misstatements could be both material and pervasive,” said David Graham, HKEX’s Head of Listing.  “We are seeking to afford better investor protection by safeguarding the quality and reliability of financial information published by listed issuers.  We also want to encourage issuers to resolve audit issues promptly with their auditors.”

Under the proposal, the suspended issuer must take action to resolve the issues that resulted in the disclaimer or adverse opinion to bring itself into re-compliance with the Listing Rules (Rules) and resume trading.  Under the Rules, the Exchange may delist a Main Board issuer after a trading suspension of a continuous 18 months (GEM issuer: 12 months).

The proposal is intended to apply to preliminary results announcements of listed issuers for the financial years commencing on or after 1 January 2019.   For the avoidance of doubt, in respect of issuers currently with disclaimer or adverse opinion on their financial statements, unless the issuers continue to receive such opinion on their financial statements for the financial years commencing on or after 1 January 2019, they will not be required to suspend trading under the proposed Rules. 

The deadline for responding to the consultation paper is 30 November 2018.

The consultation paper and the questionnaire can be downloaded from the HKEX website.  Interested parties are encouraged to respond to the consultation paper by completing and submitting the questionnaire. 



1 Per the requirements under the Rules.




Updated 06 May 2020