SGX set to relook quarterly reporting

The SGX is seeking feedback on whether to retain quarterly reporting.
The SGX is seeking feedback on whether to retain quarterly reporting. PHOTO: ST FILE

Regulator seeks feedback as more markets do away with practice

The Singapore Exchange (SGX) may relax rules on mandatory quarterly reporting - a move that could cut compliance costs for 240 or so listed firms.

The regulator is seeking feedback on whether to retain quarterly reporting, which it implemented in 2003 for listed companies with a market capitalisation of above $20 million. That was subsequently raised to $75 million.

"There have been changes in the international landscape. The United Kingdom and European Union have done away with quarterly reporting," said Mr Tan Boon Gin, chief executive of SGX Regulation. "Stakeholders, including investors, have also expressed concerns about compliance cost," he added.

Companies with a market value of at least $75 million must report results on a quarterly basis. That is 70 per cent of the 750 companies listed on the SGX.

The exchange is suggesting raising the threshold to $150 million. That would affect about 38 per cent of listed companies.

Firms below the threshold need only report their interim and full-year results.

  • The possibilities

  • If quarterly reporting is retained, SGX proposes it applies to:

    •Companies with market value of $150 million or more. Current threshold is $75 million; or

    •Companies with market value of $150 million and which have a shareholder who owns at least a 15 per cent stake.

    SGX is also asking if other options, not based on market capitalisation, should be considered. It also proposes that:

    •Minority shareholders be allowed to vote to opt out once every three years.

    •The content of any reports for the first and third quarters be simplified to the balance sheet, income statement, cash-flow statement, review of performance commentary of significant trends, and board confirmation.

    •New issuers may be exempted from quarterly reporting until the third annual general meeting after the listing date.

Another proposed option would be to require companies with market value of $150 million and a shareholder with at least 15 per cent stake to report results quarterly. Minority shareholders of a listed company can also vote to opt out of quarterly reporting every three years.

The SGX has also proposed to simplify the format of the first-and third-quarter reports by cutting back the content. That could mean only having to record balance sheet, income and cash-flow statements, review of performance, notes on significant trends and board confirmations.

Items deemed unlikely to fluctuate on a quarterly basis, like share capital, accounting policy and financial indicators, would be omitted.

The new reporting rules could be adopted in the second half of this year.

Mr Ernest Kan, deputy managing partner of markets at Deloitte in Singapore, said the question remains on whether quarterly reporting is relevant for the remaining 280-odd companies.

This is particularly so since the key directors and shareholders may already have access to monthly management reports, he said.

Mr Robson Lee, a partner at Gibson Dunn & Crutcher, said there is still a need for periodic updates by firms facing severe financial problems or a protracted downturn like those in the energy space.

Ms Stefanie Yuen Thio, joint managing partner at TSMP Law Corporation, said: "Arguably, it is even more critical for shareholders to receive frequent financial updates if the company (previously valued above $150 million) has fallen below the threshold due to worsening performance.

"It would be important to fine-tune the regulation in these situations accordingly."

Mr David Gerald of the Securities Investors Association in Singapore agreed: "In today's advanced accounting systems, management can get real-time updates to track the performance of the business.

"Thus, we do not expect much difficulty from companies to engage shareholders on an ongoing basis."

A version of this article appeared in the print edition of The Straits Times on January 12, 2018, with the headline 'SGX set to relook quarterly reporting'. Print Edition | Subscribe