Securities Fraud in Singapore: China and the Challenge of Deterrence


Throughout the past quarter-century, China has recorded remarkable levels of economic growth. China’s development, however, has left an unexpected mark on the global financial system: Chinese companies listed on other countries’ exchanges are increasingly facing serious allegations of securities fraud around the world. One significant casualty of this phenomenon is Singapore, a city-state and developing financial center in Southeast Asia. After betting heavily on Chinese stock as a growth engine for the Republic’s own burgeoning financial sector, Singapore’s reputation for regulatory prowess began to deteriorate amid repeated instances in which Chinese companies defrauded Singaporean investors. Local authorities face myriad incentives–chief among which are China’s economic muscle and the Singaporean government’s focus on economic development–to avoid prosecuting Chinese companies in Singapore. Yet the financial risks and collective action problems inherent to Singaporean securities litigation impede investors’ own private enforcement efforts. As a result, Chinese companies listed in Singapore are inadequately deterred from continuing to commit securities fraud. This Note begins by detailing the state of securities law enforcement in Singapore, and continues on to analyze the occurrence of Chinese fraud and the causes of Singaporean *121 regulatory forbearance. In light of this discussion, it considers a number of potential reforms to the Singaporean securities framework, ultimately recommending a combination of procedural and institutional measures to patch the “deterrence gap” that Chinese firms in Singapore have exploited to the detriment of the city-state and its investing public.