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SGX RegCo announces enhanced rules for auditors, valuers

It now requires primary-listed issuers to appoint an auditor registered with Acra

Mr Tan, CEO of SGX RegCo, says the new rules should improve market quality and investor protection, and adds that a maturing marketplace would mean greater scrutiny from investors and higher expectations.


SINGAPORE Exchange Regulation (SGX RegCo) on Tuesday announced enhancements to rules governing the dealings of auditors and valuers with listed companies.

The new rules, which follow a public consultation in 2020, require primary-listed issuers to appoint an auditor registered with the Accounting and Corporate Regulatory Authority (Acra) to conduct statutory audits. This rule change effectively puts all audits performed for primary-listed issuers under Acra's oversight.

"It serves the interest of our market to ensure that there is sufficient regulatory attention and oversight in Singapore on the audits of issuers' financial statements," SGX RegCo said, adding that the number of issuers impacted by this proposal is limited. Fewer than 20 primary-listed issuers do not have a Singapore auditor.

Secondary-listed issuers from some developed markets may continue to use auditors from their own jurisdictions. SGX RegCo will assess others on a case-by-case basis.

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Acra chief executive Ong Khiaw Hong said the rule is "another step towards greater market assurance and investor confidence in the broader financial ecosystem".

Another change is the expansion of SGX RegCo's administrative powers, allowing it to direct the appointment of a second auditor. The regulator would, however, exercise such powers "only in exceptional circumstances". This may be when it believes that possible misstatements in the financial statements are pervasive, and yet not evidenced by the incumbent auditor's opinion. A second opinion may hence be needed in the interest of the market.

SGX RegCo also announced changes to rules on qualifications of property valuers and standards for property valuation reporting.

Property valuers must now have at least five years of relevant practical experience in valuing properties in a similar industry and area as the property to be valued. For Singapore properties, the valuer must be a member of the Singapore Institute of Surveyors and Valuers (SISV). Valuers of overseas properties must be members of, or authorised by, the relevant professional body or authority.

Beyond professional qualifications, the valuer should also be independent of issuers and cannot be a sole practitioner or have an adverse compliance track record.

In terms of valuation reports, SGX RegCo said valuation for Singapore properties should be prepared in accordance with SISV standards. For overseas properties, valuations must be prepared in accordance with domestic standards or the International Valuation Standards.

Summary property valuation reports will be required for significant transactions - such as at initial public offerings for property investment or development companies, business trusts or real estate investment trusts (Reits), or in an interested-person transaction involving the purchase or sale of property.

Teo Li Kim, director of SISV, said the new rules will improve the quality of valuation reports and the professional conduct of valuers.

"This will further strengthen the interest and confidence in our property, Reit and business trust sectors," he said.

The listing rule changes take effect from Feb 12, 2021.

Tan Boon Gin, CEO of SGX RegCo, said the rules should improve market quality and investor protection.

In a press briefing on Monday, Mr Tan said a maturing marketplace would mean greater scrutiny from investors and higher expectations.

"Behaviour will be assessed against the spirit, rather than the letter of the rules," he said, adding that SGX RegCo will therefore be shifting its focus to shaping culture.

SGX RegCo had launched a consultation on enhancements to its enforcement framework last August. Response to the feedback can be expected within this quarter.

It is also finalising a survey of institutional investors on their views of companies' ESG reporting, and will then complete a second review of listed companies' sustainability reports. This will likely be completed in the current quarter too.

The findings will shape moves by SGX RegCo to make disclosures more meaningful, useful and impactful, Mr Tan said, especially in relation to climate-related disclosures. It is targeting to consult the market on proposed changes by the end of its current financial year.

SGX RegCo is also planning to look at how listing rules can be aligned with the intentions of the Insolvency, Restructuring and Dissolution Act, which is aimed at making restructuring easier and positioning Singapore as a restructuring hub. These proposals are expected by end-June.

Other upcoming initiatives for SGX RegCo include consulting on proposed changes to rules governing retail bonds and a possible consultation on special-purpose acquisition companies.

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