VICTIMS of the collapse in Singapore-listed China companies - or S-chips as they are known in the local market - might view the latest regulatory announcement by the Singapore Exchange (SGX) as being too little too late, but it is nonetheless a step in the right direction since it suggests it will be that much harder from now on for companies to pull off dubious accounting tricks at the expense of investors.

In his regulator's column on Tuesday, new SGX chief regulatory officer Tan Boon Gin flagged suspiciously large and adverse changes in the finances of companies with big China operations, including those which operate in the textile and sporting goods, manufacturing, heavy industries, packaging, electrical and electronics, retail and chemical sectors. "Some companies... made significant loans and advances to business associates, which were not part of the normal course of business. These debts were eventually deemed uncollectible and written off," wrote Mr Tan. Other examples cited were customer claims for compensation which were more than 10 times the value of the original sales, companies extending prolonged credit terms to customers and reporting dwindling sales, while making significant prepayments to suppliers for raw materials and deposits for capital expenditure and expansion only to later write off these significant amounts.

Although Mr Tan did not state the nature of the scam he is looking to address, it's not difficult to piece it together - list on SGX at a high price, perhaps place out shares at even higher prices when the time is right (as some did during the S-chip peak in 2005-2007; funnel cash quietly to cronies along the way under the guise of "loans to associates" or other inflated payments, then when the market takes a turn for the worse either because others in the sector have been caught and are under investigation or because overall sentiment has soured or because of both; quickly make large write-offs and write-downs to balance the books and hide the fact that money has been drained away.