SGX's regulatory unit enhances rules on auditors after market criticism

SINGAPORE: Singapore Exchange's regulatory unit will improve requirements on auditors and valuers in their dealings with listed companies, and standards on valuation reports, such as introducing a regulatory regime for conduct of auditors.

In a statement released on Tuesday (Jan 12), Singapore Exchange Regulation (SGX RegCo) CEO Tan Boon Gin said the latest rule changes enhance the standards required of auditors and property valuers in their dealings with listed companies.

"We expect the quality of the market and investor protection to improve as a result," Mr Tan said.

The moves follow market criticism faced by SGX RegCo, the city-state's frontline capital markets regulator, over its handling of accounting irregularities at some listed firms.

SGX RegCo has already stepped up disciplinary action on companies and toughened listing requirements, while also making it mandatory for firms to have a whistleblowing policy. SGX has been working to strengthen regulation and shore up liquidity after a penny stocks crash in 2013 battered investor confidence.

SGX is one of the world's biggest global listing hubs for real estate investment trusts and business trusts - a key segment for retail investors.

The main changes to the listing rules are: Regulatory regime for conduct of auditors, circumstances to direct appointment of an additional auditor, qualifications of property valuers, and standards for property valuation reporting.

The changes take effect on Feb 12.

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All primary-listed issuers must now appoint an auditor registered with the Accounting and Corporate Regulatory Authority (ACRA) to conduct their statutory audits, said SGX in a press release.

Following this new requirement, audits performed for all primary-listed issuers will effectively be subject to ACRA’s regulatory oversight.

SGX RegCo currently may exercise administrative powers to require issuers to appoint independent professionals as well as special auditors for specified purposes. Under the enhanced rules, SGX RegCo’s administrative powers will be expanded to include requiring the appointment of a second auditor.

"SGX RegCo will exercise such powers only in exceptional circumstances, for example where SGX RegCo believes that possible misstatements in the financial statements are pervasive and yet not evidenced by the incumbent auditor’s opinion, and such concerns cannot be addressed by a special auditor," said SGX.

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SGX RegCo will also require property valuers to have at least five years’ of relevant practical experience in valuing properties in a similar industry and area as the property to be valued.

The valuer of Singapore properties must be a member of the Singapore Institute of Surveyors and Valuers while the valuer of overseas properties must be a member of, or authorised by, a relevant professional body or authority.

Valuations for Singapore properties should be prepared in accordance with Singapore Institute of Surveyors and Valuers standards, while overseas properties must have valuations prepared in accordance with domestic standards or the International Valuation Standards.

Summary property valuation reports will be required for significant transactions such as at IPO for property investment firms or developers, business trusts or REITS, or in an interested person transaction involving the purchase or sale of property.