Board Matters Quarterly - Issue 14: December 2012
Year-end issues the audit committee should consider
3. Regulatory developments
Heightened regulatory activity continues to require the attention of boards including the AC. From the AC’s perspective, an awareness and understanding of laws and regulations and their effect on the company is important. New regulatory mandates are resulting in an expansion of the ACs’ oversight agenda that is timeconsuming and complex.
Heighten compliance environment
Locally, the Monetary Authority of Singapore (MAS) is bringing tougher corporate governance rules by issuing the revised Code of Corporate Governance (revised Code). The Singapore Stock Exchange (SGX) has also raised the hurdle for Mainboard listing by focusing on recent profitability and market capitalization instead of continuous profit requirements under the existing Mainboard admission criteria. To support Singapore’s growth as a global hub for both businesses and investors, the Ministry of Finance (MOF) has completed its review of the Companies Act, and the changes are expected to be implemented by end of 2013 (please see “Companies Act revamped to improve corporate governance” in the later section). In September 2012, the Ministry of Manpower (MOM) stepped up enforcement of the work pass rules to include new provisions for Employment of Foreign Manpower Act contraventions and increase penalties. Recently, the MAS also simplifies and enhances requirements on disclosure of interest in listed entities.
Enhanced anti-bribery efforts
On the international front, companies operating in foreign countries are increasingly subject to more intense anti-bribery enforcement by authorities in other countries. For instance:
- The UK Bribery Act (which came into force in July 2011) covers any act of bribery committed anywhere in the world by any commercial organization that conducts a business in the UK. The extent to which overseas companies may be liable under the UK Bribery Act remains to be seen.
- In February 2011, the Chinese Government passed an anti-bribery law that criminalizes providing “property to a foreign official or an official of an international public organization for the purpose of improper commercial benefit.”
- The anti-bribery provisions of the US Foreign Corrupt Practices Act (FCPA) also apply to foreign firms and persons who engaged in foreign corrupt practices. The US authorities have empowered their enforcement officials, who have increased the intensity of their focus on FCPA violations. In a single week in April 2011, the US Securities and Exchange Commission and the US Department of Justice levied nearly US$300 million in FCPA related fines against three companies. The FCPA enforcement continues to intensify, and is likely to get even stronger.
As such, the AC may want to consider taking a “deeper dive” into the company’s compliance system to ensure compliance with all relevant statutes. It is important to stay abreast of the latest developments, and to take the necessary steps to prepare for the implementation of the new rules.