SGX consults on enhancements to regulatory regime for auditors and property valuation

27 February 2020

Between 16 January 2020 and 14 February 2020, Singapore Exchange (“SGX”) conducted  a public consultation to seek feedback on proposed changes to the SGX Listing Rules (Mainboard) and SGX Listing Rules (Catalist) (collectively, “Listing Rules”) requirements on audit practices and property valuation for issuers listed on Singapore Exchange Securities Trading Limited. To strengthen oversight of audits, SGX is proposing for all issuers (except for issuers of exchange-traded funds) to appoint an auditor registered with the Accounting and Corporate Regulatory Authority (“ACRA”). In exceptional circumstances, SGX may direct the appointment of an additional auditor.

SGX also sought feedback on proposals to raise the reporting standards of property valuation by issuers.

Summary of SGX’s proposals

Set out below is a summary of SGX’s proposals:

  • Appointment of auditor registered with ACRA: SGX is proposing to require all issuers (except for issuers of exchange-traded funds) to appoint an auditor registered with ACRA. Both the auditing firm and the audit partner must be registered with ACRA. Foreign issuers that wish to appoint foreign auditors must also appoint an auditor registered with ACRA to act as a joint auditor. This means that if the foreign issuer wishes to appoint only one auditor, that auditor must be registered with ACRA.

For secondary listings, SGX will take a risk-calibrated approach, taking into consideration the safeguards available in the jurisdiction of the issuer’s home exchange, in assessing whether appointing a joint auditor registered with ACRA is required.

  • Appointment of additional auditor in certain circumstances: Currently, SGX has the power under the Listing Rules to require issuers to appoint independent professionals, as well as special auditors, for specified purposes. SGX proposes to exercise this power, in exceptional circumstances, to direct an issuer to appoint an additional auditor to audit the issuer’s financial statements. One possible instance may be for the additional auditor to conduct a second audit of the company’s financial statements, if SGX has concerns with the issuer’s overall audited financial statements.

Another possible instance could be to require the additional auditor to act as joint auditor for the issuer’s financial statements, potentially in exceptional cases where the issuer wishes to continue the appointment of the incumbent auditor and SGX has concerns on upcoming audits, notwithstanding that the incumbent auditor is registered with ACRA.

  • Minimum five years’ relevant experience for property valuers: SGX proposes that property valuers must have a minimum of five years’ relevant experience in conducting valuations for the type of property under valuation, and should be a member of the Singapore Institute of Surveyors and Valuers (“SISV”) or a similar professional body in his home jurisdiction of practice, which has the powers to discipline and revoke the membership of the valuer. SGX also proposes that the property valuer should not be a sole practitioner, should not have an adverse compliance track record and must be independent of the issuer.
  • Property valuation reporting to comply with SISV Standards: For the valuation of properties in Singapore, SGX proposes to require issuers and listing applicants to comply with the SISV Valuation Standards and Practice Guidelines (“SISV Standards”) which include the SISV Practice Guide for Valuation Reporting for REITs, IPOs and Listed Companies (“SISV Practice Guide”). For overseas properties, SGX proposes that the valuation may be carried out in accordance with the SISV Standards or International Valuation Standards.

Property investment or development issuers seeking to list on SGX must prepare property valuation reports in accordance with the prescribed standards. It is also proposed that all issuers have to comply with the prescribed standards in meeting their continuous disclosure obligations for material transactions.

  • Summary property valuation report to comply with SISV Practice Guide: SGX proposes that where the Listing Rules require issuers to disclose summary property valuation reports, including those produced for overseas properties, such reports must contain the information required for prospectus and circulars under the SISV Practice Guide.

 Reference materials

The following materials are available on the SGX website www.sgx.com:

 

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