SGX: Looser reporting regulations but tighter disclosure rules

With the announcement of major regulation changes by the Singapore Exchange (SGX), hundreds of listed companies can afford to focus more on their long-term goals as well as save money and time.

On 9 Jan (Thursday), SGX announced that the requirement that companies with a market capitalisation exceeding S$75 million must report their earnings every quarter will be abolished. However, this does not mean that no information is to be disclosed. Rather, SGX stressed that significant developments and information must be disclosed without delay.

Beginning from 7 Feb, only riskier firms will have to provide the quarterly reports as well as firms whose auditors deem as risky. As of now, close to 600 of the 850 listed firms are obligated to file quarterly financial reports, a task these companies consider as costly, onerous and time-inefficient. With the new rule in place, SGX Regulation (SGX Regco) will identify these 100 or so firms who will need to submit their quarter financial reports. As for the remaining companies, they will only need to submit their financial reports every six months.

“Regulation needs to be more targeted, even surgical, so as to ensure compliant companies aren’t overburdened while non-compliant companies receive more attention… Internationally, there is a shift away from quarterly reporting, and this is to allow companies to focus on the long term.” SGX RegCo chief executive Tan Boon Gin stated.

This change in rule is similar to what Britain and the European Union have done by abolishing quarterly reporting due to the high cost and time commitments to prepare.

However, there are still measures particularly for companies that are considered to be risky. Mr Tan added that, “Some companies face immediate challenges and need to focus on the short term to solve their problems. These are the companies that should be made to do quarterly reporting. Size-based quarterly reporting does not achieve this outcome.”

At this, Ho Meng Kit, the chief executive of Singapore Business Federation shared the same sentiment that “SBF has always held the view that rules and regulations should not overburden businesses and, as result, divert their attention from their main focus of value creation.”

Neelamani Muthukumar, chief financial officer of Olam group also agreed that “It is not just about saving cost, but time. We are operating in so many countries, and quarterly reporting takes up a lot of senior management time.”

In addition to this, company actions that affect stakeholders must be disclosed without delay. These actions include providing significant financial assistance or interested-person transactions.

With stricter disclosure regulations, companies will need to announce immediately and obtain shareholder approval with regards to a broader range of significant acquisitions. These significant transactions will also have to undergo independent valuation. Added to this, trade-sensitive information that can sway investors’ selling, holding and buying of securities must be disclosed. Not only that, companies need to also disclose changes that are likely to influence short-term earning prospects.

In light of this, Mr Tan stressed that “There is currently a misconception in some parts of the market that companies only need to disclose information that has an impact on share price. We are making it clear that this is not the case.” Matters related to rights issues will require disclosure of more information.

Echoing what Mr Tan said, David Gerald, the president of Securities Investors Association (Singapore) further added that “Companies embracing transparency and accountability to their stakeholders should not find the amendments of the rules to be onerous…Companies should embrace the spirit of the law, and not just the letter of the law. This would ultimately create more trust with their investors and shareholders.”

The central bank, Monetary Authority of Singapore also chimed in that “Ultimately, what is important is that companies and their boards must seek to conduct meaningful and regular engagement with their stakeholders, keeping them well-informed through timely, pertinent and high-quality disclosures.”