The SFC and the Stock Exchange have issued a joint statement giving guidance to listed issuers who, because of travel restrictions in force resulting from the coronavirus outbreak, may be facing difficulty with complying in full with the Listing Rules requirements relating to disclosure of financial information. In this regard, the primary objective of the SFC and the Stock Exchange is to minimise disruption to trading, while ensuring that investors receive sufficient information to make informed investment decisions.
With this primary objective in mind, the SFC and the Stock Exchange have instructed listed issuers which believe that there is a real possibility that, as a result of the travel restrictions, it may be unable to publish preliminary results announcements and/or issue audited financial statements in compliance with the Listing Rules, to consult the Stock Exchange to discuss the situation as early as possible.
When a listed issuer contacts the Stock Exchange for a discussion, the listed issuer will be requested to provide to the Stock Exchange, to the extent possible, a description of the travel and other restrictions which have affected the auditing or reporting process, details of why those restrictions hinder the listed issuer’s ability to comply with the relevant reporting requirements in the Listing Rules, the financial information that it is nevertheless still able to report on, and an explanation whether the disruptions faced by the issuer and/or its auditor has adversely affected accuracy, completeness and presentation of such available financial information and, if so, to what extent.
If an issuer is otherwise in all respects able to publish its preliminary results in full compliance with the other reporting requirements but is not able to obtain the agreement of its auditor to the financial statements as required by Main Board Listing Rule 13.49(2) and GEM Rule 18.49, it should publish such preliminary results (without the agreement of its auditors) on or before the deadline. A subsequent disagreement by the auditor will not attract disciplinary action from the SFC or the Stock Exchange unless there is evident fraud or other serious misconduct.
In all other cases, the Stock Exchange will then consult the SFC and assess whether publication of this information will be sufficient to maintain an orderly, informed and fair market so that trading in the securities of the listed issuer can continue. The SFC and the Stock Exchange do not want a flood of cautionary statements to be made, which would render disclosure not useful. Instead, listed issuers and their directors should focus on understanding the financial information available and the key audit matters that would involve judgment, making careful deliberations and informing investors of their reasoning A good faith effort to go through the deliberation process will not attract disciplinary action from the SFC or the Stock Exchange unless there is evident fraud or other serious misconduct.
Listed issuers should note that the special arrangements in place are not a relaxation of the financial reporting requirements under the Listing Rules but merely a recognition that the travel restrictions may hinder reporting and/or audit processes and an effort to minimise the disruption to trading caused by such hindrances. Listed issuers should pro-actively engage its auditor to discuss audit plans and timetables and monitor new developments. The entire board of a listed issuer remains ultimately responsible for the financial disclosures of the issuer, notwithstanding that the audit committee may have more familiarity than other members of the board with such matters. The entire board should still put in good faith efforts to go through the deliberation efforts, including checking and questioning information, assumptions and assurances given by management.
The joint statement also reminds listed issuers that if their business operations, reporting controls, systems, processes or procedures are materially disrupted by the coronavirus outbreak and/or the related travel restrictions, management should assess whether any inside information has arisen and, if so, make a separate announcement as soon as reasonably practicable, independent of any applicable Listing Rule requirement.
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