JSE has developed a series of changes to listing requirements following consultations with a wide range of stakeholders. These initiatives aim to improve the competitiveness, attractiveness, and proper regulation of South Africa's capital markets.
Previous Reforms and Objectives
JSE has recently taken several steps to reduce compliance costs and decrease complexity for listed companies. These measures include implementing market segmentation, a project to simplify listing requirements, and abolishing the auditor accreditation model, which expanded the pool of firms capable of auditing such companies.
In November, the exchange released a consultation document regarding financial reporting costs, based on a survey that identified audit and financial reporting expenses as some of the most significant in maintaining a listing on JSE.
Stakeholder Consultation Outcomes
On Friday, the exchange announced receiving a 'significant number of submissions' from diverse participants, including institutional investors, analysts, sponsors, issuers, audit firms, and regulatory bodies. The exchange noted that the common theme emerging from discussions was the need to balance reducing regulatory costs and complexity on one hand, with providing investors with useful information and maintaining market confidence on the other.
Stakeholders generally supported measures to reduce administrative burden, provided it did not compromise transparency, governance, or investor protection. Investors particularly emphasized the importance of trading statements as a transparent and structured mechanism for providing the market with profit-related information, leading JSE to decide not to implement previously planned changes to net asset value thresholds, wording, or triggers related to these statements.
Amendments and Standard Preservation
As participants expressed concern that the current version might unintentionally discourage issuers from providing updated market guidance, JSE proposes an amendment that would encourage issuers to provide more timely market updates after publishing guidance, thereby supporting transparency without changing the basic structure of trading statements. Furthermore, feedback supported postponing changes to regulations concerning non-IFRS metrics, as introducing amendments before the implementation of IFRS 18 could lead to duplication or inconsistency.
Most respondents approved retaining the use of Earnings Per Share (HEPS), the South African reporting metric, and JSE will maintain the obligation for primary and secondary issuers to disclose HEPS. The governance framework requiring issuers to appoint a chief financial officer will also be preserved.
Procedure and Committee Simplification
Participants pointed to the administrative burden associated with obtaining JSE approval during temporary vacancies. In response, JSE proposes an amendment allowing the audit committee to assume oversight responsibility during a temporary vacancy without needing JSE approval, provided the vacancy is filled within the stipulated timeframe.
The consultation also addressed changes to the requirements for establishing and composing Social and Ethics Committees, Remuneration Committees, and Audit Committees. Feedback did not reveal a clear basis for reducing requirements in this area, and strong support was noted for maintaining the current requirements for the roles and responsibilities of the Audit Committee, so no amendments were proposed.
Regarding the extension of the General Segment approach, which allows narrative disclosure in certain circumstances instead of detailed pro forma financial information, to Prime Segment issuers, no clear consensus emerged. JSE will not extend the General Segment approach to the Prime Segment but has proposed an amendment to clarify the circumstances under which equivalent disclosure is mandated by legislation or the requirements of another recognized stock exchange body, to reduce duplication while maintaining proper disclosure standards.
Additional Optimization Proposals
JSE also proposed changes to simplify the administrative process related to reporting revisions submitted to JSE, without compromising the information provided. Other suggested simplifications included excluding the disclosure of accounting policy choices for goodwill (as there are none); duplicating disclosures related to auditor changes, which are already handled via SENS; and confirmation by the auditor of profit guarantees, except in cases of related-party transactions.
Although the consultation process revealed several proposals aimed at reducing the administrative burden and costs for listed companies, no clear consensus was reached in favor of substantial changes, and no additional amendments were proposed. Nevertheless, based on the suggestions made, JSE proposed an amendment allowing the distribution of individual company financial reports via a web link or secure electronic access, instead of requiring their inclusion in the annual report. This should provide flexibility in data presentation and reduce formatting and production costs.