Hong Kong’s financial watchdogs warned they may reverse a rule that allows listed companies to keep trading even when auditors cast doubt on their ability to survive.

The Accounting and Financial Reporting Council, the Securities and Futures Commission and Hong Kong Exchanges & Clearing Ltd issued joint statement Thursday threatening to reinstate trading suspensions for firms that receive a “disclaimer of opinion solely relating to going concern.”

Since the stock exchange relaxed the rule in 2019, the number of listed firms operating under such going-concern disclaimers surged to 95 in 2025 from 12 in 2017, according to the statement. Among those, 65 firms have maintained the designation for more than a year and in the most extreme case, 14 consecutive years.

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The 2019 exemption was intended to protect investors from prolonged suspensions, enabling distressed issuers to raise capital or meet debt covenants. However, regulators said an audit disclaimer, even one limited to going-concern issues, means the auditor is unable to express an opinion on the overall accounts, undermining the basic reliability of financial statements.

“If no significant improvement is observed, the exchange will consider amending the listing rules as necessary, including requiring listed issuers with a disclaimer of opinion solely relating to going concern to be suspended,” the watchdogs said.

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The potential crackdown highlights a balancing act for Hong Kong officials. While the city’s capital markets have seen a revival in initial public offerings alongside broader efforts to ease listing friction, regulators have grown increasingly wary of deal quality.

The SFC and HKEX previously restricted the number of transactions individual dealmakers can handle, while the audit regulator raised concerns over stretched audit firms handling an expanding list of corporate books.