© 2017 Lyra Financial Corporation

Review of HKSE proposed listing rule 13.50a

September 29, 2018


In this article, we summarize and advise on, in a few bullet points, HKSE’s consultation paper on new 13.50A rule – which would suspend trading on companies with weak internal control/fraudsters leading to auditor disclaimer or adverse of opinion.


Deadline to comment on proposal: November 30 2018 – link here


Full paper here (25 pages)




“The Exchange will normally require suspension of trading in an issuer’s securities if it publishes a preliminary results announcement for a financial year as required under rules 13.49(1) and (2) 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. The suspension will normally remain in force until 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 to enable investors to make an informed assessment of its financial positions.”



  • Demystifying scope of new rule against modified audit opinion

    1. Out of scope: Qualified Opinion – estimated impact: material but not pervasive

    2. Within scope: Disclaimer (or adverse) Opinion – estimated impact: material and pervasive (i.e. undetectable since no audit evidence available)

  • Benefits sought from new rule:

    1. Enhanced investor protection since improve quality and reliability of financial information

    2. Encourage companies and its advisors to act promptly to resolve issues. (12 – 18 months delisting deadline – for GM and mainboard, respectively)

  • Resumption conditions:

    • Trading may resume provided an updated interim audit or for next period

    • Does not detract following period closing balance

  • Exceptions:

    • There are exceptions to suspension if matters are addressed during same financial year

    • FYI – No exceptions for going concern issues

  • Current Standing (data)

    • 43 companies for the 2017 financial year end published results with disclaimer of opinion

    • 24 of 43 issuers received disclaimer of opinion for 2 – 5+ financial years, of which 17 involved going concern issues (amongst others)

    • 13 of 43 received disclaimer due to going concern issues (2017 results)


In our next article, we provide cautionary advice to the application of the proposed regulation.



Questions or comments? Please contact us: info@lyrainsight.com









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