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SGX scraps mandatory quarterly reporting
THE Singapore Exchange Regulation (SGX RegCo) announced on Thursday that quarterly reporting (QR) is no longer required for listed companies unless they are associated with higher risks.
With effect from Feb 7, a new risk-based approach to QR will replace the current reporting requirement based on companies meeting a certain minimum market capitalisation.
QR was implemented in 2003 for listed companies with market capitalisation of above S$20 million, and subsequently raised to S$75 million amid cost concerns for smaller companies. This resulted in around 70 per cent of SGX-listed companies to be required to report their results on a quarterly basis.
Under the new approach, a firm has to undertake QR if it does not have clean audit opinions or face financial and regulatory compliance issues. Otherwise, companies are only required to do semi-annual reporting.
SGX will be releasing a list of around 100 companies that are not freed from QR once the revised rule comes into effect, and this list will be reviewed quarterly.
In January 2018, SGX sought public feedback on changes to the QR framework, including whether to remove it entirely or recalibrate the QR requirement. This was in part due to the current approach being "too arbitrary and not meaningful in targeting companies that should be doing more frequent reporting", according to SGX's press statement.
SGX RegCo is also taking the cue from global markets such as Hong Kong, Australia and the UK. For instance, Australia reserves QR for higher-risk industries and companies.
"The international trend is moving away from QR," Tan Boon Gin, chief executive officer of SGX RegCo, told the media.
"The business landscape is evolving rapidly. In order to meet these changes, companies in general must be allowed to consider and implement longer-term strategies," he added.
When asked about the key drivers that led to the eventual removal of mandatory QR, Mr Tan told the media: "If we just use a size-based approach, it will not necessarily capture all the companies we want to do QR."
Another factor that triggered the initial consultation to the QR framework was concerns surrounding compliance cost.
"The main compliance cost cited by companies in their responses is mainly in manpower and effort cost in preparing quarterly statements," said Michael Tang, SGX RegCo’s head of listing policy and product admission.This includes time spent by finance department staff as well as the management and board to look through these reports.
Having said that, companies are encouraged to consider providing voluntary business updates to shareholders.
"These may include market trends that could materially affect the performance and progress of its strategic and long-term goals", according to the Corporate Governance Advisory Committee (CGAC) in the press statement.
Mr Tan also pointed out that disclosures should be immediate rather than wait for a milestone like QR.
"That is why we have continuous disclosure rules and we are tightening this by taking a targeted approach. This means focusing on disclosures of greatest concern," he said.
Therefore, continuous disclosure requirements will be strengthened in areas such as interested person transactions (IPTs), significant financial assistance, significant transactions and dilutive secondary fundraising.
For instance, express powers will be set out to deem a person or party an "interested person" in appropriate cases even if the technical definition is not met.
Furthermore, SGX RegCo is making explicit that disclosure obligations apply not just to materially price-sensitive information but also trade sensitive information. This is contrary to the common misconception in some parts of the market that only information that has an impact on share price needs to be disclosed, according to Mr Tan.
SGX RegCo also set out its expectations on companies’ handling of material information, including making immediate announcements where there is a change in the issuer’s near-term earnings prospects or where there are ongoing developments.
When it comes to efforts to increase regulatory presence, a whistle-blowing office has been set up to address tip-offs, feedback, complaints and short-seller reports on companies.