Introduction

The Stock Exchange of Hong Kong Limited (the "Stock Exchange") published its July 2026 Listing Regulation and Enforcement Newsletter (the "Newsletter"), setting out a range of regulatory developments and initiatives that have taken effect or are to be implemented in the second half of 2026.

Market infrastructure reforms: New board lot framework,
USM and the Stock Exchange IAP

The Newsletter highlights three key initiatives designed to modernise Hong Kong's securities market, all of which are rolling out in the second half of 2026.

·           New board lot framework: Following a positive market response to its December 2025 consultation, the Stock Exchange introduced enhancements to the board lot framework effective from 2 July 2026. The enhancements include reducing the board lot value floor guidance from HK$2,000 to HK$1,000, introducing a new board lot value ceiling guidance at HK$50,000, and standardising board lot units to one of eight prescribed options, namely 1, 50, 100, 500, 1,000, 2,000, 5,000 and 10,000 shares. The changes are being implemented in two phases. In the first phase, which commenced on 2 July 2026, all issuers are required to comply with the revised floor and the new ceiling guidance. During the second phase, commencing on 16 November 2026 when the USM regime is expected to take effect, issuers will be required to adopt one of the standardised board lot units within six months after completing their transition to the USM regime.

·           USM regime: The Uncertificated Securities Market (“USM”) regime is targeted to take effect from 16 November 2026, marking a key milestone in the digitalisation of Hong Kong's securities market. Most importantly, all issuers must ensure that they have an Approved Securities Registrar appointed by the USM Implementation Date, failing which trading in their securities will be suspended. Issuers incorporated in Bermuda, the Cayman Islands, Hong Kong or the Chinese Mainland, which are the “Specified Jurisdictions” under the USM regime, are required to make necessary amendments to their constitutional documents or terms of issue within one year of the USM Implementation Date or by their next annual general meeting, whichever is later.

·           The Stock Exchange IAP: The Stock Exchange Issuer Access Platform (“IAP”), an online platform built for regulatory communications, is moving into the registration and onboarding phase. A trial version, training videos, a webinar and a user manual have been made available to help users prepare. The onboarding will be rolled out in phases, with adviser registration already commenced and issuer registration expected to commence in October 2026. For listing applicants with hearing dates on or after 1 October 2026, onboarding must be completed two business days before the date of listing.

Enhanced financial reporting and audit oversight

Financial reporting remains central to market transparency and investor confidence, and the Newsletter reflects the Stock Exchange's continued focus on enhancing reporting quality and governance practices.

One area of concern is the increase in audit disclaimers solely due to going concern issues. While the vast majority of issuers (95%) have published financial statements with an unmodified audit opinion, a considerable number (3%) remained subject to going concern disclaimers, with one case persisting for 14 years. The Stock Exchange observed that issuers' disclosures on going concern assessments are often overly generic and lack sufficient details, and is looking into this issue in collaboration with other regulators with a view to issuing further guidance later this year.

Another area of focus is auditor changes and fees. The Stock Exchange has observed a growing number of issuers changing auditors close to, or even after, the financial year-end, often purportedly due to disagreements over audit fees. Such late-stage changes place incoming auditors under significant time pressure and may increase the risk of compromised audit quality. In April 2026, the Stock Exchange updated FAQ16-No.5 to clarify expectations on disclosure relating to auditor fees in shareholders' circulars for the appointment or re-appointment of auditors. With the updated guidance in FAQ16-No.5, issuers are expected to agree audit fees with the auditor at the time of appointment or re-appointment and disclose the agreed fee, together with the basis of determination and key assumptions. While many issuers have responded promptly, the Stock Exchange noted that some disclosures remain inadequate, with circulars merely reciting broad factors without explaining in the issuer's own circumstances how the fee was arrived at, or disclosing overly broad fee ranges. The Stock Exchange also highlighted the issue of "removal in disguise", where an issuer pressures an auditor to resign by citing a substantially lower fee quote from another auditor, thereby circumventing the requirement for shareholders' approval of auditor removal. Issuers are reminded to provide meaningful and issuer-specific disclosure to enable shareholders to make informed decisions.

In the area of management discussion and analysis (“MD&A”) in annual reports, the Stock Exchange continues to emphasise the importance of providing informative and meaningful analysis. The Newsletter refers to the Guide on Preparation of Annual Report, which distils disclosure quality of MD&A guidance into four practical principles: breadth and depth, balance, connectivity and consistency. Issuers are encouraged to apply these principles and to use the AI-enabled Annual Report Explorer platform, launched in December 2025, to assist in preparing annual reports.

Governance and safeguards for
Chapter 21 investment companies

The Newsletter highlights specific governance expectations for investment companies under Chapter 21 of the Listing Rules (the “Chapter 21 Companies”). The Stock Exchange's recent review of annual reports found that a majority of Chapter 21 Companies did not clearly disclose their investment policies and objectives, or their custodian or trustee arrangements. To address this, the Stock Exchange expects Chapter 21 Companies to clearly disclose their investment policies and objectives with details including the scope of permitted investments, selection criteria and other key parameters, as well as details of any custodian or trustee appointed, including the role and scope of the arrangement. Where no custodian or trustee has been appointed, the issuer should explain the reasons and describe alternative measures to protect shareholders' assets. The Stock Exchange will continue to monitor the activities of Chapter 21 Companies and the conduct of their management, and may take regulatory or disciplinary action against issuers and/or their management where material deficiencies or misconduct are identified.

Risk management and internal control systems

Effective risk management and internal control (“RMIC”) systems are fundamental to sound corporate governance and investor confidence. The Newsletter notes that failures to establish effective RMIC systems or to adequately monitor their ongoing effectiveness often contribute to governance failures and Rule non-compliance. The Corporate Governance Code enhancements on RMIC, effective July 2025, require mandatory annual board reviews of RMIC systems and enhanced disclosures on the review and RMIC effectiveness. In April 2026, the Stock Exchange published "Practical Tips to Effective Risk Management & Internal Control Systems" (the “Practical Tips”) to assist issuers in designing, implementing and reviewing RMIC systems, highlighting common risks and deficiencies identified in money lending activities, fund transfers, delegation and record-keeping practices. Issuers are encouraged to use the Practical Tips and refer to the video recordings of the ESG Academy seminar on risk management and internal controls to enhance awareness of common risk areas.

New Shareholder Value in Focus webpage
 and re-domiciliation trends

The Newsletter also highlights two other developments of interest to listed issuers. In June 2026, the Stock Exchange launched a new Shareholder Value in Focus webpage, which brings together eight key valuation and return metrics for all issuers, supported by interactive charts and filtering tools that enable users to analyse historical market trends and benchmark performance across sectors and market segments. Issuers are encouraged to leverage this resource to assess their market positioning and identify opportunities to strengthen long-term shareholder value.

In addition, the Newsletter notes growing issuer interest in re-domiciliation to Hong Kong following the introduction of the Government's company re-domiciliation regime in May 2025. The regime provides overseas companies with a practical route to re-domicile to Hong Kong while preserving legal identity and business continuity. From a Listing Rules perspective, re-domiciliation is generally not expected to raise complex issues, but the key is to ensure timely and clear disclosure and to explain to shareholders the relevant arrangements and any consequential changes. Issuers interested in re-domiciliation are encouraged to review the dedicated section on the Companies Registry's website, which brings together the regime overview, guide, forms and frequently asked questions.

Takeaways

The July 2026 Newsletter reflects the Stock Exchange's ongoing commitment to enhancing market transparency, governance standards and competitiveness. The Newsletter is a worth-noting piece of document which issuers and market practitioners to should pay careful attention to.