Hong Kong’s regulator should set a standard for qualifying valuers, brokers and accountants say

Hong Kong’s Securities & Futures Commission should issue standards for qualifying the valuers of non-property assets such as brand names in mergers and acquisitions, following a similar move by US regulators, said the city’s brokers and financial industry experts.

The urgings follow several cases of mergers and acquisitions in the city with valuations that were deemed unreasonable, triggering a warning in May by the SFC.

“The SFC warning is a good start to alert the market to address the problem,” said Stella Law, a member of the Royal Institution of Chartered Surveyors (RICS) and a RICS-registered valuer. “However, we would like to see the SFC go further to ensure the quality of valuation in the market. It would be positive for the SFC to consider following the SEC to regulate more on valuations to ensure quality and protect investors.”

Property valuations in Hong Kong must be conducted by certified surveyors under the law, but there’s no standard or qualification requirement for non-property valuations, such as brand names, enterprise values or intellectual property.

“Without a clear certification process, it means anybody can be a valuer on transactions,” Law said. “This is hard for maintaining the standard.”

Hong Kong’s SFC could take a page out of the playbook of the US Securities & Exchange Commission (SEC), which supports and endorses the Certified in Entity & Intangible Valuations (CEIV) credential developed by the American Society of Appraisers (ASA), the American Institute of Certified Public Accountants (AICPA), RICS, major accounting firms, and others. The credential makes up for a lack of unified identity in the valuation profession, Law said.