SINGAPORE - Compliance costs for hundreds of firms will be significantly reduced after the Singapore Exchange said it will scrap quarterly reporting for most companies.
The rule will now be applied only to firms considered at risk.
These will include companies whose auditors have raised alarms or those that the regulatory arm of the Singapore Exchange (SGX) have concerns about.
The dramatic move announced alongside other measures on Thursday (Jan 9) is a major change from existing regulation, which demands that companies must file quarterly financial reports if their market capitalisation exceeds $75 million. This covers about 70 per cent - or almost 600 - of the 850 or so listed companies here.
It is estimated that only about 100 firms will have to file for the next quarter once the new regime takes effect on Feb 7. SGX Regulation (SGX RegCo) will name the affected firms then.
SGX RegCo chief executive Tan Boon Gin said on Thursday: "Regulation needs to be more targeted, even surgical, so as to ensure compliant companies aren't overburdened while non-compliant companies receive more attention and are stopped as early as possible in their malfeasance."
He noted that the European Union and Britain among others have moved away from quarterly reporting for all issuers, which reduces the manpower costs needed to prepare such statements.
"Some companies face immediate challenges, and need to focus on the short term to solve their problems," Mr Tan added.
"These are the companies that should be made to do quarterly reporting. Size-based quarterly reporting does not achieve this outcome."
The Monetary Authority of Singapore (MAS) said it backs the move: "Companies with good disclosure practices would perform semi-annual reporting instead of quarterly reporting, and this will enable them to better focus on long-term strategies to build resilient and sustainable businesses."
Mr Tan noted that even with the change, disclosures should be immediate, which is why rules are being tightened to focus on company actions that might be of concern to stakeholders.
He said: "We are strengthening continuous disclosures requirements in areas such as interested person transactions, significant financial assistance, significant transactions and dilutive secondary fund-raising."
The new regime will give SGX RegCo express powers to deem a party "an interested person" and to treat some separate interested person transactions as a single one. This is to circumvent companies that try to break transactions into smaller amounts so they do not hit the threshold of disclosure at $100,000, Mr Tan said.
A broader range of significant acquisitions will be subject to the rules, such as requiring companies to make an immediate announcement and get shareholder approval. This will occur if the move will reduce net profits by 20 per cent or more, or if the acquired asset is in a loss-making position.
Significant transactions will also require valuation and companies must explain if no valuation is conducted for a major acquisition or disposal of assets.
Companies must also disclose changes to their near-term earnings prospects caused by specific events such as the loss of a major customer. Previously, a profit warning was only required if there were changes that would significantly deviate from previous financial statements.
Businesses are also given express guidance to disclose trade-sensitive information that can influence investors' decisions to buy, hold or sell securities.
Mr Tan said: "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."
Certain loans and guarantees to third parties may also require immediate announcement and shareholder approval.
More information will also have to be disclosed for rights issues.
The MAS said: "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."
