The Singapore Law Gazette

Develop a Robust Collective Action Framework to Safeguard Singapore’s Investors

Singapore seeks to be a global financial hub, built on a foundation of market integrity and strong regulatory oversight. The recent proposals by the Monetary Authority of Singapore (MAS) to strengthen civil recourse for investors are a laudable step in reinforcing this foundation.

However, to truly empower investors in protecting their interests against corporate malfeasance, a holistic reform of the legal ecosystem is required. First, the modernisation of the procedural framework for collective actions by introducing a flexible Group Litigation Order system. Second, extension of litigation funding mechanisms to provide access to justice. Third, the refinement of substantive securities law, particularly provisions in the Securities and Futures Act, to align with market realities and ensure timely redress for aggrieved investors.

Introduction

1. The Monetary Authority of Singapore (MAS) recently announced plans to strengthen avenues for civil recourse available to investors, a commendable and necessary step forward.¹Announced on 21 July 2025: https://www.mas.gov.sg/news/media-releases/2025/mas-appoints-first-batch-of-eqdp-asset-managers ; https://www.businesstimes.com.sg/companies-markets/mas-beef-civil-recourse-legal-action-investors-amid-shift-disclosure-based-regime By enabling investors to more easily seek compensation for market misconduct, the MAS is sending an unequivocal signal that market integrity and investor confidence are cornerstones of Singapore’s status as a premier global financial hub. These proposed measures, which include facilitating compensation claims following regulatory action and providing grants, will undoubtedly lower the initial barriers for aggrieved investors seeking redress.
2. However, while these initiatives are welcome, they address only part of a complex challenge. To truly empower investors and create a robust deterrent against corporate malfeasance, Singapore should undertake a holistic reform of the ecosystem for collective legal action. The path to effective investor protection does not end with regulatory assistance; it requires a legal framework that is procedurally efficient, financially accessible, and substantively just. For Singapore to be on par with other leading jurisdictions like the United Kingdom and the United States, it is imperative to address three critical areas: the procedural framework for multi-party litigation, the funding mechanisms that make such litigation viable, and the substantive law that governs liability and compensation. This article will explore each of these pillars, arguing that a comprehensive review is necessary to create a truly world-class regime for investor protection that fosters market discipline and enhances corporate governance.

I. Modernising the Legal Framework for Collective Legal Action

3. The first significant hurdle to effective collective legal action in Singapore is the inadequacy of its procedural rules.
4. The current framework for multi-party litigation, known as “representative proceedings,” is governed by Order 4, Rule 6 of the Rules of Court 2021 (previously Order 15, Rule 12 of the Rules of Court 2014). This procedure, inherited from English law, is rigid and notoriously ill-suited for the complexities of modern securities litigation.
5. The central deficiency of the representative proceeding is the requirement that all parties to the action must have the “same interest” in the proceedings. The Singapore Court of Appeal in Koh Chong Chiah v Treasure Resort Pte Ltd [2013] SGCA 52 set out the following legal principles on the ‘same interest’ requirement at [78]:
   1. The class of represented persons must be capable of clear definition. This is critical because it identifies the individuals who are entitled to relief and who will be bound by the judgment – members of the class of represented persons must be identified by an objective criterion which bears a rational relationship to the common issues being asserted.
   2. The proposed representative plaintiffs must adequately represent the interests of the class of represented persons, and must vigorously and capably prosecute the interests of the entire class.
   3. There must be significant issues of fact or law common to all the claimants in a representative action. To this end, the courts must carry out a comparison of the significance of the common issues between the claimants with the significance of the issues which differ between them.
   4. All the claimants in a representative action must benefit from the relief granted by the court, i.e., they must have the same interest in the relief granted by the court.
6. For securities litigation, whether the requirement of significant issues of fact or law common to all the claimants is fulfilled could depend on the specific facts in issue as regards each claimant. Investors in a publicly traded company invariably purchase shares at different times, and in reliance on a variety of public statements.
7. Further, there are considerable practical challenges in organising and administering a representative action wherein representative claimants must adequately represent the interests of the entire class of represented persons, and must vigorously and capably prosecute the interests of the entire class.
8. A more effective and flexible model can be found in English Group Litigation Order (GLO) system, established under their Civil Procedure Rule (CPR) 19.22. A GLO does not require a “same interest”; instead, it is available for claims that give rise to “common or related issues of fact or law”.²https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part19#19.22
9. A GLO allows a court to establish a “group register” of claims and manage them collectively. Crucially, it provides a mechanism to try common or related issues—for instance, whether a company’s prospectus contained a misleading statement—through a “test case” or a separate trial on one or more issues, including trials of preliminary issues, with the judgment on those issues binding all claimants on the register. Individual factual or legal issues, such as each investor claimant’s specific reliance, any particular communications between the investor and the defendant, and the quantum of loss, can be determined separately at a later stage. Further, under the GLO, different claimant representatives with their respective differing legal counsels can take charge of the progress and case management of different issues, in line with their particular expertise.
10. The practical utility of the GLO has been demonstrated in the example of large-scale collective action cases such as The RBS Rights Issue Litigation.³The RBS Rights Issue Litigation, HC-2013-000484 and others. There, thousands of shareholders of the Royal Bank of Scotland (RBS), comprising five different shareholder groups, including retail and institutional investors, sued the bank and its former directors over alleged misstatements in connection with a £12 billion rights issue in 2008. The action was based on the Financial Services and Markets Act 2000, alleging that the prospectus misstated RBS’ financial position in relation to its acquisition of ABN AMRO.
11. The GLO provided the procedural architecture to manage this large scale litigation in an orderly and efficient manner. There were three separate lead claimant groups, each with their own set of counsels, and two other claimant groups with smaller claim values which chose to follow the lead groups. The follower groups did not participate in the day to day conduct of the action by the lead groups. The Court ordered that each claimant should bear a pro rata and several share of costs, including adverse costs orders. Thus, the claimants in the follower groups also contributed to the lead groups’ legal costs. Subsequently, two of the three lead groups settled their claims, with one lead group proceeding to litigate the matter to trial.
12. Adopting a GLO-style regime in Singapore would provide a flexible and efficient procedural framework that is currently lacking, enabling better options for collective action.
13. Such a framework would also be well suited for other types of mass claims, including consumer protection,⁴See s 6 of the Consumer Protection (Fair Trading) Act 2003. product liability, data protection breach,⁵See s 48O of the Personal Data Protection Act 2012. and competition law cases,⁶See s 86 of the Competition Act 2004. where individual losses may be too small to justify standalone litigation.⁷E.g. VW NOx Emissions Group Litigation: the claimant groups collaborated and succeeded at a preliminary issues trial to determine Volkwagen’s liability in respect of its inclusion of a software function in certain vehicles which cheated engine emissions tests. See Crossley & Orts v Volkswagen Aktiengesellschaft (2020) EWHC 783 (QB). Subsequently in 2022, a £193 million settlement was reached for about 91,000 claims: https://www.vwpress.co.uk/releases/4763.

II. Unlocking Access to Justice Through Modern Funding

14. Even with a fit-for-purpose procedural framework, access to justice remains illusory if potential litigants cannot afford to pursue their claims. The financial reality is that a complex, multi-year securities lawsuit against a well-resourced listed company can incur substantial legal costs. Indeed, the GLO case studies in the UK show that substantial upfront legal costs would have to be incurred for collective action to even get off the ground.
15. While the MAS’s proposed grant scheme is a positive start, a grant alone is unlikely to be sufficient to level the playing field against a defendant with deep pockets. Thus, third-party funding (TPF) should be expressly clarified to be permissibly extended to securities collective actions.
16. Third-party litigation funding allows a specialist third-party funder, who is adept at assessing legal risk, to cover the claimants’ legal costs in exchange for a portion of the proceeds if the case is successful. This mechanism serves two vital functions: it removes the prohibitive upfront cost for investors and transfers the financial risk from the claimants to a sophisticated commercial entity that is equipped to bear it.
17. Historically, Singapore law prohibited such arrangements due to the doctrines of maintenance and champerty. However, there are several limited exceptions which enable TPF in certain scenarios. This was considered in the seminal case of Re Vanguard Energy Pte Ltd [2015] SGHC 156 (Vanguard). First, liquidators of insolvent companies may assign a cause of action and/or the fruits thereof to a third party.⁸Re Vanguard Energy Pte Ltd (2015) SGHC 156 – which considered the now repealed s 225 of the Companies Act 1967, now s 144(2)(b) of the Insolvency, Restructuring and Dissolution Act 2018. Second, generally, an assignment of a cause of action or the fruits thereof will not be struck down if:⁹Re Vanguard Energy Pte Ltd (2015) SGHC 156 at (43).
    1. it is incidental to a transfer of property; or
    2. the assignee has a legitimate interest in the outcome of the litigation; or
    3. there is no realistic possibility that the administration of justice may suffer as a result of the assignment.¹⁰Recently, the Singapore High Court in DNQ v DNR (2025) SGHC 152 allowed third party funding in the context of enforcement proceedings to recover substantial judgment debts ordered by a UK family court against the claimant’s former spouse. The Court considered that this fell within the third exception of the test laid down in Re Vanguard Energy Pte Ltd (2015) SGHC 156. In this regard, the following should be considered:
       1. whether the assignment conflicts with existing public policy that is directed to protecting the purity of justice or the due administration of justice, and the interests of vulnerable litigants; and
       2. the policy in favour of ensuring access to justice.
18. Since 2017, Singapore has already taken significant steps to modernise its stance. The Civil Law (Amendment) Act 2017 and the Civil Law (Third-Party Funding) Regulations 2017 created a framework for TPF in international arbitration and related court proceedings. Since 28 June 2021, the categories of proceedings were extended to include domestic arbitration, proceedings commenced in the Singapore International Commercial Court (SICC) and court, appeal and mediation proceedings relating to those.¹¹Civil Law (Third-Party Funding) (Amendment) Regulations 2021. See https://www.mlaw.gov.sg/news/press-releases/2021-06-21-third-party-funding-framework-permitted-for-more-categories-of-legal-preceedings-in-singapore/
19. The policy rationale—to enhance access to justice for those with meritorious claims but insufficient funds—applies with equal, if not greater, force to aggrieved investors, especially retail investors.
20. It may well already be the case that third party funding for investor collective actions would be permissible under the Vanguard test. However, it would facilitate greater access to justice for investors and other collective action claimants if there is express legislation or judicial clarification of the application of this framework to collective actions, and the parameters thereof.
21. Permitting such arrangements for securities litigation would create a competitive market for meritorious claims, ensuring that wrongdoing can be challenged regardless of the claimants’ financial means. This funding framework should also be extended to other areas where collective action is pursued. After all, generally in such cases, resource and power imbalance render individual claimants with practically little to no recourse, if not for access to funding to pursue their claims.

III. Refining the Securities and Futures Act

22. The final pillar of reform lies in fine-tuning the substantive law itself. Even with efficient procedures and available funding, a claim will fail if the legal requirements are unduly onerous or if procedural rules create unacceptable delays. Two aspects of the Securities and Futures Act (SFA) warrant review.
23. First, the measure of damages, and the limitations thereof, provided for civil liability under section 234 of the SFA should be reconsidered.
24. Under sections 234(1), (2) and (6), a claimant’s claim in civil liability is subject to a compensation limit pegged to the wrongdoer’s gain or the loss they avoided. The measure of damages would be the difference between (i) the price at which the capital markets products (CMP) were dealt in contemporaneously with the wrongdoing, and (ii) the price at which the CMP would have been likely to have been so dealt in at the time if the wrong did not occur.
25. However, under sections 234(1A), (2A), if the claimant can prove that they had relied on the false, misleading, or deceptive statement, information, promise or forecast, or in ignorance of the concealed or omitted material fact, had dealt in the CMP and suffered loss, then the claimant may elect to claim, as a measure of damages, loss that reasonably results from such reliance, such that the compensation limit does not apply.
26. This requirement of proving direct reliance is arguably tied to one of competing theories underpinning securities markets pricing.
27. Long-established U.S. jurisprudence, beginning with the seminal U.S. Supreme Court case of Basic Inc. v. Levinson, 485 U.S. 224 (1988), and affirmed most recently in Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014), has adopted the “fraud-on-the-market” theory. This theory presumes that in an efficient market, the market price of a company’s shares reflects all publicly available information, including any material misstatements. Therefore, an investor who buys or sells shares at the market price is presumed to have indirectly relied on the integrity of that price, and thus on the misstatement. This presumption is rebuttable, but it obviates the burden of proving each individual investor’s direct reliance on the specific misstatement. While detractors contend that the underlying assumption of the efficient market theory is empirically challenged, with advocates responding that such empirical critiques are based on anomalies,¹²Klock, Mark (2016) “The Enduring Legacy of Modern Efficient Market Theory After Halliburton v. John,”Georgia Law Review: Vol. 50: No. 3, Article 5. it should be understood that the Court in Basic Inc. v. Levinson opined that this approach does not hinge on whether the efficient market theory exactly represents reality; rather, it is only necessary “to believe that market professionals generally consider most publicly announced material statements about companies, thereby affecting stock prices”.¹³Basic Inc. v. Levinson, 485 U.S. 224 (1988) at 245.
28. A further theory of market pricing is one based on there being a continuous market of risk-averse informed traders, uninformed traders, and liquidity traders. In such a market, information may cause price movements, but the price movements become in turn a source of information.¹⁴Razeen Sappideen, “The Paradox Of Securities Markets Efficiency: Where To Next?” SJLS (2009) 80–108 at 94. When information is costly and there is noise, the price system will not aggregate information perfectly; markets cannot adjust to information fully and prices never fully reflect all information possessed by informed traders; instead, price movements are the product of entrepreneurial activity engaged in by individual traders attempting to beat the market.¹⁵Razeen Sappideen, “The Paradox Of Securities Markets Efficiency: Where To Next?” SJLS (2009) 80–108 at 96-100. On this view, the default position would be that individual investors would have to prove reliance on misstatements as it is not a given that they had traded in the market in reliance on the misstatements as opposed to other market information such as price movements and other signals.
29. However, even on this view, it ought to be appreciated that the price movements and other information and signals which constitute market information that resulted in the relevant market price at any time would presumably have already incorporated the alleged misstatements as signals which resulted in some price movements. Hence, there is a case for doing away the requirement of showing direct reliance having resulted in losses, subject to evidence to the contrary. If so, then the compensation limit should not apply regardless of whether direct reliance is proved or otherwise.
30. Second, the mandatory moratorium, or stay, of civil proceedings stipulated in section 235 of the SFA should be reviewed.
31. This provision automatically stays any private civil action when there are concurrent criminal or civil penalty proceedings initiated by the authorities for the same conduct. While intended to prevent prejudice to regulatory enforcement, this can leave investors in legal limbo for years, unable to pursue their claims for compensation while the often lengthy regulatory and criminal matters run their course. This delay can be particularly prejudicial given that the limitation period for a civil action continues to run from the date of the cause of action accruing.¹⁶S 6, Limitation Act 1959.
32. Investors might wait for the outcome of criminal or civil penalty proceedings in the hope of riding on them to claim compensation, only to discover that the regulator has entered into a consent order that prevents civil compensation claims, by which time their own limitation period may have expired.¹⁷See WAN, Wai Yee; CHEN, Christopher C. H.; and GOO, Say H. Public and private enforcement of corporate and securities laws: An empirical comparison of Hong Kong and Singapore. (2019). European Business Organization Law Review. 20, (2), 319-361, and the discussion on the case of the settlement in the China Sky case at the text for footnote 100. See also Alexander F.H. Loke, “The Efficacy of Securities Investors’ Rights In Singapore” SJLS (2009) 109-134, at 133. The stay should not be automatic. Instead, the provision should be amended to grant the Court discretion to impose a stay, allowing it to balance the public interest in the regulatory proceedings against the private right of investors to timely justice.

Conclusion

33. The MAS’s proposed measures to enhance investor recourse are a vital and welcome development. However, a world-class regime for investor protection and thus a securities market requires a holistic reform of the relevant procedural, legal, and funding frameworks. By replacing the unwieldy representative proceeding with a modern GLO system, embracing third-party litigation funding, and refining the substantive provisions of the SFA to align with market realities, Singapore can build a comprehensive and effective system for collective investor redress.
34. Such a system is not merely about compensating victims of corporate misconduct. It also fosters market discipline by creating a credible threat of private enforcement, enhances corporate governance by holding companies and their officers to account, and ultimately, cements Singapore’s reputation as a trustworthy, responsible, and dynamic global financial centre.