Hong Kong’s securities regulator will be able to see audit working papers when investigating mainland China-based companies, after it signed an agreement with Chinese authorities on Wednesday, Reuters reports.
Under the deal, the Securities and Futures Commission (SFC) will be able to access to papers relating to Hong Kong accounting firms’ audits of mainland-based firms that are listed, or are trying to list, in Hong Kong as well as their related persons or entities, the Hong Kong regulator was quoted as saying in a statement.
Roughly half of the 2,315 companies on Hong Kong’s stock exchange are based in mainland China, according to exchange figures.
The Memorandum of Understanding was signed by China’s Ministry of Finance (MOF), the China Securities Regulatory Commission (CSRC) and Hong Kong’s SFC.
The MOF and the CSRC “will provide the fullest assistance in response to SFC’s requests for investigative assistance regarding the provision of audit working papers,” the statement said.
MOF vice minister Cheng Lihua said in the statement that the deal would “further deepen the regulatory cooperation between the two sides, helping to improve the quality of annual reports of listed entities in Hong Kong, and fully protect the legitimate interests of investors in both sides.”
The agreement may go some way to solving a long running point of contention between Chinese and Hong Kong regulators, Reuters noted.
China has long been reluctant to allow overseas regulators, including those in Hong Kong, to inspect audit documents relating to mainland firms, citing national security concerns.
The issue also came to the fore in the United States last month after a bipartisan group of US lawmakers introduced a bill to force Chinese companies listed on US stock exchanges to provide access to audits or face delisting.
In spite of a 2013 agreement with the United States to end a stalemate and allow US regulators to see audit working papers held in China, there have been difficulties in actually gaining access, for both US and Hong Kong officials.
– Contact us at [email protected]