'New Bursa rules are good but enforcement is key'

Bursa Malaysia has introduced a Corporate Disclosure guide that will see companies having to raise their standards of disclosure.


Kuala Lumpur: Analysts and fund managers like the fact that listed companies will have to make more timely and detailed disclosures from next year under changes to the listing rules, but stress that enforcement is key.

Bursa Malaysia this week announced changes to its listing rules and introduced a Corporate Disclosure guide that will see companies having to raise their standards of disclosure.

"It's one thing to have rules, but whether companies are complying with them is another. The regulator must be able to ensure compliance without fear or favour ... we don't want to see selective enforcement," said the head of research at a local brokerage outfit.

From next year, for example, a company will be required to give a detailed analysis - as opposed to a review - of the performance of all its operating segments in the notes to its quarterly reports.

It must comment on the prospects of each segment, including details such as contracts in hand, competitive challenges, significant changes in raw material prices, financial impact from recently completed deals, and new regulations that might affect its activities.

Bursa will no longer accept general statements - such as "the board is optimistic of achieving better performance for the financial year" or "the board expects the group's results for the remaining period to be profitable" - if they are not followed by a discussion.

The company also must announce when any director or external auditor has resigned and provide the reason for it.

Interestingly, a company will also have to ensure that each of its directors, chief executive or chief financial officer "has the character, experience, integrity, competence and time" to discharge his or her roles.

The new rules will help investors make better informed decisions, said Kaladher Govindan, head of research at TA Securities Bhd.

Any move to improve disclosure and transparency will always be welcomed by investors, said Choo Swee Kee, executive director at TA Investment Management Bhd.

"But how you set the standard and how you enforce it ... those will be issues that need to be looked at as well," he added.

Most companies in Malaysia are scarce on details in their corporate announcements and tend to disclose the minimum possible in quarterly reports, analysts and fund managers often complain.

"Based on actual rules, we're probably comparable to regional markets, but it's just the mentality that we're probably behind on. Companies here don't seem to have the desire to disclose more than necessary. Boards need to have a mindset change," Choo said.