The JSE has already undertaken several initiatives recently to reduce complexity and compliance costs for listed companies. These include introducing market segmentation, a project to simplify listings requirements and the removal of the auditor accreditation model, which broadened the pool of firms available to audit listed companies.
Image: Nicola Mawson | IOL
The JSE has proposed a number of amendments to the listings requirements following consultations with a broad range of stakeholders.
In November, the bourse published a consultation paper on financial reporting costs following feedback from a survey, which had identified financial reporting and audit-related costs as among the most significant costs associated with maintaining a listing on the JSE.
The consultation paper formed part of the JSE's broader reforms aimed to ensure South Africa's capital markets remain competitive, attractive, and appropriately regulated.
The JSE has already recently undertaken several initiatives to reduce complexity and compliance costs for listed companies. These include introducing market segmentation, a project to simplify listings requirements, and the removal of the auditor accreditation model, which broadened the pool of firms available to audit listed companies.
On Friday, the bourse said it had received a “significant number of submissions” from a broad range of stakeholders, including institutional investors, analysts, sponsors, issuers, audit firms, and regulatory bodies on the consultation paper.
“A consistent theme emerging was the need to balance efforts aimed at reducing regulatory costs and complexity with the continued provision of decision-useful information to investors and the preservation of market confidence,” the bourse said.
Stakeholders generally supported measures to reduce the administrative burden, provided these did not compromise transparency, governance, or investor protection.
There was overwhelming support for the continued use of trading statements. Investors emphasised their importance as a transparent and structured mechanism for providing earnings-related information to the market.
Consequently, the JSE would not proceed with previously contemplated changes to trading statement thresholds, wording requirements, or net asset value-based triggers.
Stakeholders raised concerns that the current drafting may inadvertently discourage issuers from providing updated guidance to the market. Accordingly, the JSE proposes an amendment to encourage issuers to provide more timely market updates after guidance has been given, thereby supporting transparency without altering the underlying trading statement framework.
Feedback supported deferring changes to the regulation of non-IFRS (International Financial Reporting Standard) measures.
Respondents noted that introducing amendments before the implementation of IFRS 18 could result in duplication or inconsistency, particularly given the expected enhancements to disclosures relating to management-defined performance measures. So, the JSE has decided not to proceed with amendments at this stage.
An overwhelming majority of respondents supported the continued use of headline earnings per share (HEPS), which is a South African reporting metric, and the JSE would retain the obligation for primary and secondary listed issuers to disclose HEPS.
The governance framework requiring issuers to appoint an executive financial director would also be retained.
Respondents highlighted the administrative burden of obtaining JSE approval involving temporary vacancies. The JSE proposes an amendment to permit the audit committee to assume oversight responsibility during a temporary vacancy, without requiring JSE approval, provided the vacancy is filled within a prescribed period.
The consultation sought views on whether amendments should be made to the requirements for the establishment and composition of Social and Ethics Committees, Remuneration Committees, and Audit Committees.
The feedback did not identify a clear basis for reducing requirements in this area. There was strong support for maintaining the current requirements relating to Audit Committee roles and responsibilities. No amendments were proposed.
The consultation also sought views on whether the approach for General Segment issuers permitting narrative disclosure in certain circumstances rather than detailed pro forma financial information should be extended to Prime Segment issuers. There was no indication of a clear consensus in support of the proposal.
The JSE will not proceed with extending the General Segment approach to Prime Segment issuers, but it proposed an amendment to clarify circumstances in which equivalent disclosures have been prescribed by legislation or the requirements of another recognised exchange, to reduce duplication while maintaining appropriate disclosure standards.
The JSE also proposed changes to simplify the administrative process relating to restatement notifications provided to the JSE, without diluting the information provided directly.
Other simplification amendments proposed included removing the disclosure of accounting policy choice for goodwill (as there is no choice); duplicating disclosures relating to auditor changes already addressed through SENS; and auditor confirmation of the achievement of profit warranties, except in the case of related party transactions.
The consultation process also generated a number of suggestions aimed at reducing compliance costs and administrative burden for listed companies, but there was no clear consensus in favour of material changes, and no further amendments were proposed.
Based on the suggestions made, however, the JSE proposed an amendment to permit the distribution of the separate company financial statements through a web link or secure electronic access, rather than requiring these to be included in the annual report.
This was intended to provide flexibility in presentation and reduce formatting and production costs.