CCP 2: Disclosure Requirements

Disclosure Requirements

• Key obligation is to ensure the disclosure of material information as and when it arises
• Listing Rule 703 requires immediate announcement of:
  • Information on issuer, subsidiaries, and associated companies
  • Information necessary to avoid creating a false market
  • Information likely to materially affect the price or value of its securities
• Example: A tech company discovers a critical security flaw in its flagship product. Immediately announcing this prevents a false market, allowing investors to make informed decisions.
• Madhavan Peter v PP [2012] SGHC 153: The test in Listing Rule 703 must refer to information "likely to effect a significant change in the price or value of an issuer's securities."
• Examples of material information to be disclosed, found in paragraph 4 of the Corporate Disclosure Policy in Appendix 7.1 of the Listing Rules:
  • Property, assets, business, financial condition, and prospects
  • Mergers and acquisitions
  • Dealings with employees, suppliers, and customers
  • Material contracts or development projects
  • Significant changes in ownership of shares owned by insiders
  • Any developments that affect materially the present or potential rights/interests of shareholders
• Example: A mining company uncovers a new mineral deposit that could significantly increase reserves. This is a material event affecting the company's prospects.
• Specific events to be disclosed immediately under Rule 704:
  • Appointments/resignations of directors, general managers, or equivalent executive officers
    • Example: A sudden resignation of the CFO must be disclosed promptly.
  • Qualifications by auditors
    • Example: An auditor becoming aware of a conflict of interest must be disclosed.
  • Further information available in Rule 704
• Events likely to require immediate disclosure under Rule 703
  • Joint venture, merger, or acquisition
    • Example: Negotiations for a merger with another large firm.
  • Firm evidence of significant change in near-term earnings prospects
    • Example: Discovering a large unexpected loss that will occur in the upcoming quarter.
  • Acquisition or loss of a significant contract
    • Example: Losing a contract when 50% of revenue has a high impact.
  • Purchase or sale of significant assets
    • Example: Selling off a major division.
  • Significant litigation or disputes
    • Example: Being sued for a material amount.
• 3 Conditions for withholding disclosure under Listing Rule 703(3):
  • A reasonable person would not expect disclosure
  • The information is confidential
  • The information concerns an incomplete proposal/negotiation
    • Example: Early-stage discussions for a partnership which have yet to progress.
  • The information comprises matters of supposition or is insufficiently definite to warrant disclosure
    • Example: Vague rumors of a new product launch with no confirmed details.
  • The information is generated for internal management purposes
    • Example: Draft budget that hasn't been approved.
  • The information happens to be a trade secret
    • Example: Secret formula for a cosmetic product.
• If any of these conditions ceases to satisfied that piece of information must be disclosed immediately
• Announcements must be made through SGXNET first or simultaneously with other media disclosures
• There's no waiver for requirements for disclosure of Material Information under Listing Rule 703
• It is NOT an excuse to fail to disclose based on the fact that information is generally available
  • According to Listing Rules 702 & 703, Appendix 7.1 Paragraph 5
• Clarify, confirm, or explain rumors or reports, especially if resulting in unusual trading activity
  • Example: Unusual trading volumes after an unconfirmed media report of a takeover bid.
• If information is materially price-sensitive, halt/suspend trading so that information can be properly disseminated before trading resumes
  • Example: Breaking announcement of a major product recall.

Periodic Reports

• Financial statements must be announced quarterly or half-yearly
• Q1-Q3 reporting deadline: 45 days
• Q4 & FY reporting deadline: 60 days
• Annual reports must be issued at least 14 days before the AGM
• Reports are issued to shareholders and SGX
• Date of AGM cannot exceed 4 months from the end of financial year
• Sustainability reports must be issued no later than 4 months after FY
• Issuers who have conducted external assurance have up to 5 months after FY

Other Disclosure Requirements

• If an issuer is unlikely to meet previously disclosed performance targets, profit guidance is required
  • Example: A retailer revising its revenue forecast downwards due to weaker consumer spending.
• E.g. No selective disclosure of information to certain media entities, analysts and shareholders
• Paragraph 7 of Appendix 7.1 of the Listing Rules disallowed the divulging of Information to any person outside the issuer to place him/her in a privileged dealing position
  • Example: A CEO giving an analyst advanced notice of earnings, before disclosing it to all shareholders.
• In 2020, SGX announced that quarterly reporting was no longer required for listed companies unless associated with higher risks as per Listing Rule 705(2).
• Under the risk-based approach, a company reports financials quarterly if its auditors issued an adverse/qualified opinion or a disclaimer on the latest statements, or if the auditors stated a material uncertainty about the going concern.
• SGX publishes the list of companies that have to do quarterly reporting on its website
• Others only require semi-annual/half-yearly reporting & voluntary business updates to shareholders in between
• Issuers should focus on considerations of investor expectations, competition, and long-term strategy to decide whether to provide these voluntary updates
  • Example: A consumer goods company choosing to provide more frequent updates in a rapidly evolving market.

Board Diversity Policy

• A diverse board with broad perspectives better equips companies to anticipate and navigate financial and governance challenges
  • Example: A board with members from various ethnic backgrounds and professional experiences being able to better understand customers from said demographics.
• In 2022, SGX mandated a policy with specific disclosures around board diversity for all issuers
• Listing Rule 710A requires issuers to maintain a board diversity policy addressing gender, skills, experience, and other diversity aspects
  • Example: A company needs to state what skills and experiences the board is lacking and how it wishes to address this by finding people who fit those categories.
• An issuer must describe its board diversity policy in its annual report, including:
  • Targets to achieve diversity
    • Example: Setting a goal to have at least 30% female directors by a certain date.
  • Accompanying plans and timelines
    • Example: Outlining a recruitment strategy to attract female candidates and meet the goal.
  • Progress towards targets
    • Example: Reporting on current board composition and the % change.
  • Description of how director skills, talents, experience, and diversity serve its needs and plans
    • Example: Describing how having an industry veteran, a tech entrepreneur, and a sustainability expert on the board improves decision-making.

Sustainability Reporting Requirements

• Code of Corporate Governance: Companies that embrace accountability, transparency, and sustainability are more likely to engender investor confidence & achieve long-term business performance
• The Board is collectively responsible for the long-term success of the issuer and needs focus on sustainability.
  • Example: A board setting strategic objectives that include reducing carbon emissions and investing in renewable energy.
• The Boards bears the ultimate responsibility for it's sustainability reporting, as the environmental, social and governance factors must be monitored/managed
• All directors must undergo one-time sustainability training.
  • Example: Directors attending a workshop on environmental impact assessment.
• If the nominating committee doesn't requires training it must make a basis assessment of the members expertise
  • Example: A committee justifying not sending a director for training who has 20 years of ESG experience.
• Listing Rule 711A requires every issuer to prep an annual sustainability report, referencing the components in Listing Rule 711B on a 'comply or explain' basis (besides Listing Rule 711B(2))
• The sustainability reporting process must be internally reviewed, but may be further assessed via and external independent reviewer
• According to 711B(1), the sustainability report must describe the following:
  • (a) material environmental, social and governance factors;
    • Example: Discussing water usage, employee wellbeing, and board independence.
  • (aa) climate-related disclosures consistent with the recommendations of the Task Force on Climate-related Financial Disclosures;
    • Example: Identifying climate-related risks and opportunities and their potential impact on financial performance.
  • (b) policies, practices and performance;
    • Example: Describing a diversity and inclusion program and tracking the diversity stats.
  • (c) targets;
    • Example: Goal to reduce carbon emissions by 50% come the year 2025.
  • (d) sustainability reporting framework;
    • Example: Using GRI Standards.
  • (e) Board statement and associated governance structure for sustainability practices.
    • Example: Details outlining the Boards oversight on sustainability.
• If the issuer excludes any item, it must disclose such exclusion/ describe their decision making process
  • Example: A gold mining company decided not to report on water usage because all water is recycled.
• An issuer in the following industries MUST include primary component in Rule 711B(1)(aa)
  • Commencing 1 January 2023
    • Financial
    • Agriculture, Food and Forest
    • Products
    • Energy
  • Commencing 1 January 2024
    • Materials and Buildings
    • Transportation