SGX RegCo announces enhanced rules on auditors, valuers

SINGAPORE Exchange Regulation (SGX RegCo) on Tuesday announced enhancements to rules on auditors and valuers in their dealings with listed companies, following a public consultation in 2020.

Under the new rules, all primary-listed issuers must appoint an auditor registered with the Accounting and Corporate Regulatory Authority (ACRA) to conduct their statutory audits. Following this new requirement, audits performed for all primary-listed issuers will effectively be subject to ACRA's regulatory 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 said. It noted that the number of issuers which will be impacted by this proposal is small, with currently fewer than 20 primary-listed issuers that do not have a Singapore auditor.

Secondary-listed issuers from certain developed markets may continue to use auditors from their own jurisdictions. For all other secondary-listed issuers, SGX will assess on a case-by-case basis if an appointment of a joint auditor that is registered with ACRA is required.

ACRA chief executive Ong Khiaw Hong said: "SGX's new requirement for listed issuers to appoint an auditor registered with ACRA would ensure that the audit comes within ACRA's audit oversight regime, which is yet 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 to allow it to direct the appointment of a second auditor. However, it would 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 said.

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Apart from rules relating to auditors, SGX RegCo also announced changes to rules on qualifications of property valuers and standards for property valuation reporting.

Property valuers will be required to 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), while the valuer of overseas properties must be a member of, or authorised by, a 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 institute sees the enhancements to the rules as helping to progress 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."

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

Tan Boon Gin, chief executive officer of SGX RegCo, said: "These latest rule changes heighten the standards required of auditors and property valuers in their dealings with listed companies.

"We expect the quality of the market and investor protection to improve as a result," he said, adding: "Our collaboration with the relevant authorities and bodies towards greater trust and confidence in our markets will continue."

In a press briefing on Monday, Mr Tan also noted that a credible deterrence is needed for a more mature market overall. SGX RegCo had launched a consultation on enhancements to its enforcement framework last August. He said the response to the feedback can be expected within this quarter.

Mr Tan added that as the marketplace matures, there will be 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 move to a different phase, which is to focus on shaping culture.

In the coming half-year, SGX RegCo said its focus will be on the framework around sustainability reporting. Mr Tan noted that environmental, social and governance (ESG) reporting goes beyond just "pushing out data", with increasing calls for standardisation and ways to improve comparability.

SGX RegCo is finalising a survey of institutional investors on their views of companies' ESG reporting, and it will then complete a second review of listed companies' sustainability reports, likely in the current quarter.

Mr Tan said the findings will shape what SGX RegCo needs to do to make disclosures more meaningful, useful and impactful, 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 listing rules to see how they can be aligned with the intentions of the Insolvency, Restructuring and Dissolution Act, which is aimed at helping to make company restructuring easier and to position Singapore as an international restructuring hub. The proposals are also expected by end-June.

Other upcoming initiatives for SGX RegCo include consulting on proposed changes to rules governing retail bonds in the next few months. It is also considering to launch a consultation on special-purpose acquisition companies, possibly as early as this quarter, given the current popularity of such a listing structure.