SGX tightens rules in the wake of scandals

Singapore Exchange Ltd is tightening its regulation of auditors and property valuers who work with listed companies, in the wake of a series of accounting scandals in the city-state in recent years.

All companies whose main listing is in Singapore will be required to appoint an auditor registered with the country’s Accounting and Corporate Regulatory Authority for their financial year beginning on or after Jan 1, 2022, according to a statement from the exchange yesterday.

That means audits of all primarylisted companies will fall under the Singapore regulatory body’s oversight.

The exchange said it could also ask listed firms to appoint a second auditor if it finds evidence of “pervasive” potential misstatements in their financial statements.

Companies from developed markets that choose Singapore as their secondary listing venue can continue to use auditors from their own jurisdictions.

A spate of accounting-related scandals has rocked Singapore’s corporate sector in recent years.

Among the most high-profile include Singapore water treatment company Hyflux Ltd, which went bankrupt in 2018 owing hundreds of millions of dollars to retail investors, while commodities trader Noble Group Ltd is still under investigation for its accounting practices.

The country’s top central banker has said the city-state needs to raise its accounting standards to boost its credibility on environmental, social and governance grounds.

However, it’s uncertain whether these rules could avoid the recent scandals since many of these companies were audited by the Big Four accounting firms who are registered locally.

“The new rules catch outliers — where the auditors with less expertise or standing are appointed and who may not be well versed in the standards expected of listed companies,” said Stefanie Yuen Thio, joint managing partner at Singapore-based legal firm TSMP Law Corp. “But the big scandals have caught the Big Four off guard.”

Property valuers of Singapore-listed firms are also coming in for increased scrutiny. Valuers must have at least five years of experience in valuing properties in a similar industry, and be independent of the issuer.

Valuers of Singapore real estate need to be a member of the Singapore Institute of Surveyors and Valuers — a professional body.

“Those looking to see how much overseas properties are worth have to be members of or authorized by a relevant professional authority,’’ the exchange said, and prepare valuations in accordance with standards in their location or the International Valuation Standards.

“These latest rule changes heighten the standards required of auditors and property valuers in their dealings with listed companies,” Tan Boon Gin, chief executive of Singapore Exchange Regulation, said in the statement. “We expect the quality of the market and investor protection to improve.”

The listing rule changes, which follow a public consultation, are effective Feb 12.