The Hong Kong Securities and Futures Commission has introduced a new "market surveillance model" to use AI to identify companies at risk of exacerbating risks.

The Securities and Futures Commission of Hong Kong recently reissued the "Enforcement Newsletter," explaining the main enforcement work of the authorities in combating improper conduct by companies. The authorities have introduced a new "market surveillance model" and applied AI-driven analytical methods to assess financial disclosures, market trends, and various governance indicators to identify companies with worsening risk situations. The authorities stated that using AI to assist in data analysis can focus resources on formal investigations and other higher-risk areas; it can also identify warning signs of risk in a timely manner, communicate with boards of directors and audit committees, strengthen corporate governance and internal control measures before risk issues develop into serious misconduct. The Securities and Futures Commission of Hong Kong stated that early detection and communication aim to intervene early and change the behavior patterns of the relevant corporate management, which can enhance transparency and accountability and boost market confidence. The authorities emphasize that they will not turn a blind eye and will carefully examine any measures proposed by companies and may consider taking further regulatory actions if necessary. The Securities and Futures Commission of Hong Kong stated that, in a pilot scheme, they have analyzed listed companies engaged in lending activities and identified common warning signs of governance risks, including making large loans to third parties with little or no due diligence, making significant impairment provisions shortly after granting loans, attracting internal monitoring and surveillance attention, and listing impairment assessment disclosures as key audit matters in financial statements.