Tuesday, September 30, 2008

Prospectus is too complicated

Dear Mr Tan

I think one of the key contentious point in this whole saga is that we should have read the prospectus for the issue ourselves to assess whether the product is suitable for us or not.

But the problem is the way the prospectus had been written. There's simply too much technical jargon for us to understand all the contents written in it. Although we have a responsibility to read it, is it actually reasonable for laymen like us to understand it? Because of this complexity, we have to depend on the integrity and expertise of the RMs or the bank officers selling the product to advise us properly on the risks. There must be a fundamental change in the way these prospectus are written so that the general public can understand them.

I believe the MAS has a duty to oversee this especially if the issue is to be offered to the general public for subscription. I am not an expert on how this can be done but surely they can tell if a prospectus has been written for a targeted audience or general public? If former, then the issue should not be allowed to be sold to the general public. If latter, then the prospectus must be written in a way that the general public can understand it. After all, the general public are not financial gurus.

I think the MAS has the duty to prevent such products from flooding the retail market by "testing" the suitability of the prospectus for digestion by the general public.

Thanks, KK

I hope that the Government will investigate the following:

2.1 Was there any fraudulent intent in the creation of these products? Were the products created with the aim of defrauding the investing public? Were the drafting of the prospectus, advertisements and other documents carried out with the intent of hiding the true facts from the investing public? Were the lawyers and other professionals involved in this activity?


Anonymous said...

Even some finance-trained people and lawyers find the prospectus hard to read, let alone commoners.

Unknown said...

I could be wrong, but I think some jurisictions (the UK) have some "ease of read" legislation for insurance contracts. Perhaps that should be extended to investment prospectus, that it must be written at a grade 6 or grade 8 level.

Anonymous said...

The current risk profile done by done is way too skimpy.

Financial products sold should be ranked based on RISK nature of PRODUCT, NUMBER OF 'BASKET' FACTOR (did you divide your funds into 7-8 basket) and AGE FACTOR and CONSUMER's LEVEL of FINANCIAL LITERACY.

There should be a survey questionaire to test the savviness of the consumers. If consumers score low on financial literary, or has a high age, putting most of life savings, buying a higly risky product; they are NOT allowed to buy; unless they provide BLACK and WHITE to write that they are not mis-sold and they bear all responsibilities.

Anonymous said...

Yes, i totally agree that the prospectus are too hard to understand. Even for the experts. If before purchasing an investment,we have to hired a lawyer to explain it to us,then why the need for investment? As all the meagre interest that we earn will go to the lawyers,at the end,we have earn nothing and yet expose to risk.

Anonymous said...

Not sure if GIc or Temask purchased any structured products? Anyone has any ideas?
Are these products also considered complex by the experts in Financial world? .....Only Rocket scientists could understand them well?
Hope someones could throw some lights.

Everlearning said...

When the citizens realized that they are squeezed in their household budgets, than it points to the revelation of GIC or Temasek's investments overseas bringing in profits or losses.
This is a tell-tale sign I believe (just my opinion) and that we should not be enticed to live beyond our means - don't love and lavish on material comforts.

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