Tan Kin Lian's Blog: What is a fair compensation for mis-selling?

Sunday, September 28, 2008

What is a fair compensation for mis-selling?

I asked a question, "If the distributor offer to compensate 50% of your loss, will you accept it?"

About 20 investors replied to my email account and to this blog. Most expect compensation of 80% to 100% compensation. A few replied that 50% is fair.

I hope that the investors will take the following points into account:

1. The advertisement did highlight that under a credit event, the investor can lose up to 100% of the principal.
2. The investor did sign a lot of documents (and they may be unaware of what they signed) which will cover the distributor against liability.

We can argue that the distributor has a sense of duty to make sure that the recommended product is suitable for the investor. But the investor has to bear some responsibility as well. This point is highlighted in a e-mail sent to me by MS. A few investors commented that the chance of getting compensation is small.

I hope that the expectation of the investors can be moderated.

9 comments:

Anonymous said...: Hi Mr Tan,
I am a High Notes 5 holder. I feel strongly that DBS misrepresented the risk of the High Notes 5 since in Mar-08, their VP also sent us a letter stating : " It would take several reference entities to suffer credit events" before we lose our principal sum.Hence it is only fair that DBS compensates the High Notes investors, at least the value of the Notes in Mar-08 (which happened to be 44%).; September 28, 2008 5:43 PM
Anonymous said...: I'm one of those who think <=50% is more realistic and achievable.

Not forgetting we may be right morally, and legally, it can be totally different.

Moreover, it's unlikely the FI or Court will allow >50%compensation, as this may open the floodgate for future cases, & may trigger drop in share prices of the local banks, which create agony for the shareholders...and never-ending grievances.; September 28, 2008 5:50 PM
Anonymous said...: MS 's argument is flawed. The consumers were aggrieved and victims of misrepresentation or unethical selling, mis-selling and maybe even cheated . There should be nothing lesser. They should be compensated fully.
Asking the investors to bear responsibility is asking them to admit liability.
I don't think investors should 'confess' their part in the fiasco because there never was.

Justice; September 28, 2008 5:50 PM
Anonymous said...: I think elderly people like retiress with very low risk profile definitely hope to recover 100% capital, while younger investors and higher risk profile are more willing to settle for a lower(say 50%) compensation, as they have a good chance of making back the loss by using the 50% compensation to invest in some blue chips in stock market and hold for few years.; September 28, 2008 6:08 PM
jkss said...: I am sold the High Notes 5.

In H10 of the Sunday Times today, it was mentioned that "financial advisers are required to collect information about a client's financial objective, risk tolerance, employment status & financial situation, among other things, before they can make a recommendation on an investment product" under the MAS Financial Advisers Act.

My need analysis report was send to me and was dated the next day after I bought it. I only met the RM for the first & last time. How strong is my case for full compensation?; September 28, 2008 6:17 PM
Anonymous said...: I can't imagine what the situation will be if investors get back nothing and FI do not have to compensate a single cent at all. It will be like a endorsement from government for them to continue selling toxic products and cheating people hard-earned money.; September 28, 2008 7:06 PM
Anonymous said...: Dear Mr. Tan,
You are right to moderate the expectation as I can read from the response to you that the investors have very high hope on what you try to do and can do for them.

Though I will sign the petition, in my case,I actually expect only what ever would be liquidated based on the contracts when all investments are realised by the trustee and move on and learn a lesson. This is despite that I strongly felt that the sales materials and prospectus are highly misleading (But to prove that in a court of law is another thing),the sales process is flaw in may cases (But to prove that again is very difficult) and that the financial institutions should not have sold this high risk products to retail investors ( But then it has been approved by MAS so it is difficult to pin the fault on them)

I will of course not invest or buy anymore products from the RM anymore but just stick to shares and bonds that I can understand. I have also lost money on shares and bonds but that is an investment risk that I can understand.

I hope all investors realised that Mr. Tan can only do so much for you and we should be thankful to him for spending time and effort to help all investors. Unless MAS acts, the impact will be limited.; September 28, 2008 7:29 PM
Anonymous said...: I disagree that compensation should be pegged to Mar 08 or at any interim point before the maturity of the Notes. Most (if not all) of us fully intend that the investment will be held till the end to realise the maximum potential of the Notes. Since we were misled about eventuality failure of several entities, we deserve compensation at full maturity.; September 28, 2008 7:49 PM
Anonymous said...: I agree with point 1 and 2.But under circumstances that retiress and those who are not as educated,they were being mis-sell and mislead into investing when they don't even know or understand what it is stated. They have place the money in by trusting the FI and the RM's 'sweet words' and their professional reassurance.It has just betray the trust of ordianry folks.And by not compensating of minimal amount of compensation,it really makes people out there lose trust on the FI and banks.I hope MAS will step in their foot to do something about it as there is not 1 or 2 people being mis-sell.There are a whole loads of them with the same situation.; September 29, 2008 1:04 AM