ComplianceOne Newsletter – October 2026

The topics discussed in this monthly newsletter are as follows: 

Enforcement News

1. SFC commences MMT proceedings against GEM-listed Taste Gourmet’s top executives and associates over alleged manipulation scheme for Main Board transfer

2. SFC takes action against suspected IPO-rigging syndicates and suspends dealings in Baicha shares

   
   

Market News

3. Hong Kong’s securities brokers post strong earnings growth in first half of 2026

4. SFC approves first-ever secondary trading of tokenised public funds

5. SFC welcomes HKEX’s proposal to implement T+1 settlement in Hong Kong’s stock market

6. The US House of Representatives argues that Webull has structural links to China that threaten national security

Regulatory Updates

7. SFC hosts meeting of IOSCO’s Committee on Issuer Accounting, Audit and Disclosure

8. SFC proceeds to strengthen targeted tools to tackle IPO-related and other corporate misconduct

9. SFC recognises progress in sponsors’ work and urges sustained vigilance

10. SFC, AFRC and the Exchange join forces to address disclaimers of opinion solely relating to going concern

11. SFC issues guidance to support enhancements to Hong Kong’s retail fund regime

Enforcement News

1. SFC commences MMT proceedings against GEM-listed Taste Gourmet’s top executives and associates over alleged manipulation scheme for Main Board transfer

On 22 October 2026, the SFC commenced Market Misconduct Tribunal (MMT) proceedings against three top executives of GEM-listed Taste•Gourmet Group Limited (Taste•Gourmet) and five of their associates. The regulatory action centers on an alleged scheme to manipulate Taste•Gourmet’s share price in support of its proposed transfer of listing from GEM to the Main Board of the Stock Exchange of Hong Kong Limited (HKEX).

The SFC alleges that between 01 June and 18 September 2020, the three executives of Taste•Gourmet coordinated trading to artificially inflate the share price to HKD 1.32. This target price was specifically required to meet the HKD 500 million minimum market capitalisation threshold for the Main Board transfer, with the alleged manipulation facilitated by substantial fund transfers and coordinated order placements.

SIGNIFICANCE:

This enforcement action underscores the SFC’s zero-tolerance stance towards market manipulation designed to artificially fulfil listing requirements. Licensed Corporations (LC) should enhance their transaction monitoring systems to detect suspicious, coordinated trading patterns among associates, particularly when advising on corporate actions and listing transfers.

2. SFC takes action against suspected IPO-rigging syndicates and suspends dealings in Baicha shares

On 13 October 2026, the SFC directed the Stock Exchange of Hong Kong Limited (SEHK) to suspend trading in the shares of Sichuan Baicha Baidao Industrial Co., Ltd. (Baicha) (02555.HK) over serious concerns of IPO rigging. Concurrently, the SFC took decisive action against two suspected syndicates and issued restriction notices to dozens of brokers.

The regulatory action froze over HKD 4.38 billion in assets, this is the largest amount in SFC history linked to these syndicates. The groups allegedly transferred IPO proceeds out of listed companies, including Baicha, Cloudbreak Pharma Inc. (02592.HK), and Tianju Dihe Suzhou Technology Co., Ltd. (02479.HK), to secretly channel funds back to major places under undisclosed agreements.

SIGNIFICANCE:

The immediate trading suspension and record-breaking asset freeze demonstrate the SFC’s aggressive regulatory approach to tackling deceptive IPO-rigging syndicates. Intermediaries and sponsors must exercise heightened due diligence on investor independence and strictly scrutinise the source of client funding to avoid facilitating IPO-rigging schemes.

Market News

3. Hong Kong’s securities brokers post strong earnings growth in first half of 2026

On 6 October 2026, the SFC published its latest financial review showing that Hong Kong’s securities industry recorded strong earnings growth in the first half of 2026, supported by robust trading activity and growing client participation

SIGNIFICANCE:

The results indicate improved profitability and activity levels across the broking sector, underpinned by higher trading volumes and client engagement. LCs should note the divergent performance across income streams and broker categories, and continue to strengthen risk management, operational resilience and conduct standards to support sustainable growth and investor confidence.

4. SFC approves first-ever secondary trading of tokenised public funds

On 26 October 2026, the SFC approved the world’s first secondary trading of tokenised public funds on a licensed virtual asset trading platform (VATP). This milestone development enables around-the-clock trading of two existing SFC-authorised tokenised money market funds.

·         ChinaAMC HKD Digital Money Market Fund

·         ChinaAMC USD Digital Money Market Fund

Building upon the regulatory framework introduced in April 2026, this approval aims to leverage tokenised deposit capabilities developed under Project Ensemble. The interaction between tokenised funds and tokenised money on digital rails is expected to support more efficient trade settlement and enhance overall asset mobility.

As Ms Elisa NG, SFC’s Executive Director of Investment Product, said: “Secondary trading of tokenised money market funds marks an important milestone in the SFC’s ongoing effort in advancing Hong Kong’s digital asset development. It puts the SFC’s regulatory framework through its paces and adds an important building block – 24/7 trading capability – to Hong Kong’s evolving tokenisation ecosystem. We will continue to strengthen Hong Kong’s position as a pioneer in tokenisation by facilitating responsible innovation while safeguarding investors.”

SIGNIFICANCE:

This approval marks a critical advancement in Hong Kong’s digital asset ecosystem and its integration with traditional finance. Licensed VATPs and asset managers should explore opportunities to build compliant infrastructure for tokenised investment products while ensuring strict adherence to the SFC’s operational, pricing, and liquidity safeguards.

5. SFC welcomes HKEX’s proposal to implement T+1 settlement in Hong Kong’s stock market

On 16 October 2026, the SFC welcomed the Consultation Conclusions Paper issued by HKEX regarding the proposed transition of Hong Kong’s stock market from a T+2 to a T+1 settlement cycle. The SFC highlighted this as an important step in maintaining the city’s competitiveness as an international financial centre.

Acknowledging that the successful implementation of T+1 requires coordinated preparations across the market ecosystem, the timeline has been adjusted based on market feedback. The transition will now adopt a readiness-based approach, with September 2028 identified as the target implementation date.

As Mr Rico LEUNG, SFC’s Executive Director of Supervision of Markets, said: “The transition to T+1 represents an important step in maintaining Hong Kong’s competitiveness as an international financial centre and ensuring alignment with developments in global markets. We welcome HKEX’s consultation conclusions and its readiness-based approach to implementation. Industry participants are urged to begin their preparations early, assess the implications for their systems, processes and operating arrangements, and work closely with their counterparties and service providers to ensure a smooth and orderly transition.”

SIGNIFICANCE:

While transitioning to a T+1 cycle will significantly enhance capital efficiency, it places substantial operational demands on market participants. Licensed brokerages must heed the SFC’s call to immediately begin assessing their back-office systems, operational workflows, and counterparty arrangements to ensure readiness by the 2028 target.

6. The US House of Representatives argues that Webull has structural links to China that threaten national security

On 08 October 2026, a recent bipartisan report by the US House Select Committee on Strategic Competition between the United States and China has identified online brokerage Webull as a national security threat. This report has affected Webull’s stock price plunging significantly to 24.3% on that day.

Despite claiming to be an American firm, the report alleges Webull maintains deep “structural ties” to China through its technical infrastructure, data pipelines, and compliance framework. The committee highlighted that a Hunan-based subsidiary employs 863 people, representing 62% of Webull’s global workforce, potentially exposing US investor data to foreign risks.

SIGNIFICANCE:

Escalating geopolitical tensions are driving intense regulatory scrutiny over cross-border data flows, technological infrastructure, and corporate ownership. Licensed brokerages operating internationally must proactively review their data governance, IT dependencies, and compliance frameworks to mitigate geopolitical risks and demonstrate clear operational independence.

Regulatory Updates

7. SFC hosts meeting of IOSCO’s Committee on Issuer Accounting, Audit and Disclosure

On 05 October 2026 to 08 October 2026, the SFC hosted the four-day plenary meeting of the International Organization of Securities Commissions’ Committee on Issuer Accounting, Audit and Disclosure in Hong Kong. The event brought together more than 35 senior executives from 21 securities regulators worldwide.

The global regulators exchanged views on modernising corporate disclosure requirements to reduce reporting burdens for listed companies. Discussions also covered new developments in financial reporting and auditing, alongside emerging public equity market issues such as the adoption of Artificial Intelligence and private equity investments in audit firms.

As Ms Christina CHOI, SFC’s Executive Director of Corporate Finance, said: “High-quality corporate disclosure, financial reporting and assurance are essential to fostering investor confidence and effective capital formation,” Ms Choi said. “As global capital markets continue to evolve and become increasingly interconnected, cross-border regulatory cooperation is becoming ever more important in promoting market transparency, fairness and efficiency, as well as addressing common regulatory challenges."

SIGNIFICANCE:

The meeting highlights the global regulatory shift towards balancing comprehensive corporate disclosure with streamlined reporting burdens, alongside managing the risks of emerging technologies. Licensed corporate finance advisers should stay abreast of these international trends to provide forward-looking guidance to listed issuers, especially regarding AI governance.

8. SFC proceeds to strengthen targeted tools to tackle IPO-related and other corporate misconduct

On 12 October 2026, the SFC published consultation conclusions confirming it will proceed with amendments to the Securities and Futures (Stock Market Listing) Rules (SMLR). These enhancements are designed to tackle IPO-related and other corporate misconduct, with implementation expected in the first quarter of 2027.

The amended rules will empower the SFC to impose post-listing conditions on applicants and issuers as an alternative to immediate trading suspensions. Furthermore, a new independent merits review mechanism will be introduced through the Securities and Futures Appeals Tribunal to strengthen procedural fairness regarding the SFC’s decisions.

As Ms Christina CHOI, SFC’s Executive Director of Corporate Finance, said “The broad market support of the proposed enhancements demonstrates a shared commitment to maintaining a high-quality and resilient listing market in Hong Kong – essential to fortifying the city’s position as a leading international finance centre. In line with our balanced and front-loaded regulatory approach, the enhanced toolkit would equip the SFC with more targeted and proportionate tools to address emerging risks before they cause harm to our markets, uphold market integrity and support quality growth”.

SIGNIFICANCE:

These amendments provide the SFC with more proportionate and ongoing intervention tools beyond blunt trading suspensions. Licensed sponsors and financial advisers must ensure clients understand that regulatory scrutiny extends well beyond listing, necessitating continuous compliance and robust corporate governance post-IPO.

9. SFC recognises progress in sponsors’ work and urges sustained vigilance

On 13 October 2026, the SFC issued a circular recognising recent improvements in IPO sponsors’ resource allocation and principal capacity. The regulator noted that sponsor work has become more broadly distributed, with the market share of active listing applications handled by the five most active sponsors dropping from 77% to 65% as of September 2026.

Despite these improvements, the SFC identified persistent deficiencies, resulting in the suspension of 65 listing applications during the vetting process. The SFC urged gatekeepers to remain highly vigilant against dubious IPO arrangements, such as undisclosed subscription funds or guaranteed returns that artificially inflate demand and distort price discovery.

As Ms Julia LEUNG, Chief Executive Officer of the SFC, said “The market progress made since January is welcome – improved sponsor capacity and management oversight would strengthen the foundation for rigorous gatekeeping and quality listings. At the same time, a robust IPO market must be built on market integrity and investor protection. While most market participants play by the rules, intermediaries must remain alert to the warning signs associated with questionable arrangements, and challenge anything that does not add up. The SFC will not hesitate to act against the few bad actors who seek to undermine a fair, orderly and quality market.”

SIGNIFICANCE:

While the SFC recognises that market concentration is easing and resources are better managed, regulatory scrutiny on core gatekeeping standards remains intense. Licensed sponsors must apply rigorous professional scepticism and robust due diligence, specifically scrutinising suspicious fund flows and order placements that could indicate market manipulation.

10. SFC, AFRC and the Exchange join forces to address disclaimers of opinion solely relating to going concern

On 8 October 2026, the SFC, the Accounting and Financial Reporting Council (AFRC), and the SEHK issued a joint statement addressing growing regulatory concerns over the increasing number of listed issuers publishing financial statements with a disclaimer of opinion solely relating to going concern.

The regulators emphasized that resolving these issues is a shared responsibility across the financial reporting ecosystem. Management is required to prepare robust assessments and feasible action plans, audit committees must actively oversee their implementation, and auditors are expected to critically evaluate these measures, with the SEHK warning of potential trading suspensions for continued inaction.

As Ms Christina CHOI, SFC’s Executive Director of Corporate Finance, said: “Reliable financial reporting is the bedrock of investor confidence and a quality market. All relevant parties must take collective ownership of going concern issues—acting early, challenging assumptions rigorously and providing transparent, meaningful disclosures. This joint statement makes clear that inaction and inadequate scrutiny are unacceptable.”

As Ms YAP Kim Bong, AFRC’s Head of Policy, Registration, said: “This joint statement underscores the important roles that listed issuers’ management, audit committees and auditors play in maintaining confidence in our capital markets. No single party can achieve this alone. Auditors must play their part by delivering a high-quality audit that supports the audit opinion issued and communicating in the auditor’s report any matters, beyond going concern, that could lead to a modified opinion.”

As Ms Katherine NG, HKEX’s Head of Listing, said: “A disclaimer of opinion, even when it relates solely to going concern, can have significant implications for market quality and investor confidence. Upholding the integrity of our markets requires listed issuers to take ownership of the underlying issues, pursue credible actions to address them, and keep investors informed through timely and transparent disclosures. Audit committees also have a vital role to play in providing independent and rigorous oversight of management’s responsibilities.”

SIGNIFICANCE:

Regulatory tolerance for prolonged “ongoing concern” issues, inaction, and inadequate financial scrutiny is strictly diminishing. LCs acting as financial advisers to distressed issuers must proactively guide management to establish transparent, viable action plans, as regulators now demand immediate collective accountability for resolving financial reporting deficiencies.

11. SFC issues guidance to support enhancements to Hong Kong’s retail fund regime

On 28 October 2026, the SFC published a set of guidance for the revised Code on Unit Trusts and Mutual Funds (UT Code), which took effect on 01 November 2026. The guidance includes circulars, FAQs, and updated application guides covering:

·         New Value-at-Risk (VaR) methodology for measuring derivatives exposure, alongside the existing net derivative exposure (NDE) approach.

·         Strengthened liquidity risk management requirements for authorised funds.

·         Enhanced Investment and disclosure standards for money market funds (MMFs).

·         Revised Key Facts Statement (KFS) templates with clearer product classification and liquidity-risk disclosure.

·         Transitional arrangements for existing and new funds, plus guidance on Undertakings for Collective Investment in Transferable Securities funds and streamlined management-company requirements.

These changes, will have 12-month transitional period, aligning Hong Kong’s retail fund regime with international standards and aim to improve investor protection while maintaining the city’s asset/wealth management competitiveness.

SIGNIFICANCE:

The guidance resets regulatory expectations for any licensed entity involved in SFC-authorised retail funds (especially Type 9 managers, management companies, and distributors).

[End of ComplianceOne Newsletter – October 2026]

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