General advice to investors of structured products

1. Lodge your complain

The first priority is for each investor to lodge a formal complaint with the financial institution indicating how they had been misled into investing in the structured product. MAS have asked the financial institution to deal with the complaint expeditiously and not to take an “overly legalistic approach”. They also advised that is not necessary for the investor’s statement to be made under oath (i.e. no need for statutory declaration).

It is important for the investor to make a truthful statement to outline how they were misled into investing in the product. Many investors told me that they were misled by the advertisement, sales brochure, and/or assurances and explanation by the sales representative (given verbally or by e-mail).

Many investors were told, or had led to believe, in some of all of the following statements:

> That the funds are invested in the bonds of the reference entitles
> That all of the reference entitles have to fail, before we lose our entire principal
> That their principal is protected, if we keep the investment to the maturity date

I wish to give the following guidelines to prepare your statement to support your complaint with the financial institution. You must give a truthful statement, to the best of your knowledge and memory.

Your statement should cover the following points:

> Your name, NRIC, address, telephone
> How did you get involved in the investment?
> Which financial institution, branch, amount invested, date
> What happened when you purchased the investment?
> Were you alone or accompanied by another person? Who?
> What did the representative (who sold the investment to you) tell you about investment?
> Did the representative tell you about any guarantee on your investment?
> Did they make you sign any form regarding the investment? Did you understand the content of the form? Was it given to you before or after you agreed to make the investment? Did you read the form? Did you understand the content?
> Did you rely on the advice of the representative in making the investment? Which were the important aspects of the advice?
> Do you have any other statements to make regarding this matter?

If you fear that the financial institution will challenge with by using the forms that you have signed (for which you were not properly briefed), you can prepare your statement under oath (i.e. statutory declaration) with the assistance of a lawyer.

You can contact Glenn Knight (Telephone Ms Ivy Goh 68999888). His fee is $120 plus GST to prepare the statutory declaration.

2. Outside of “vulnerable group”
MAS have asked the financial institutions to give priority to the vulnerable investors. These are the elderly, low educated and the first time investors. The financial institutions have agreed to take full responsibility for these vulnerable investors who have been mis-sold. The full responsibility includes compensation for part or the full amount that they have lost. This is an encouraging first step.

I wish to ask the other investors, who do not fall into the “vulnerable group” to be patient and to strong. If you have been equally misled into investing in these structured products, and it seems to be clearly the case, you have a strong case to ask for compensation. But, you have to be reasonable in your expectation and may have to accept partial compensation that is lower than the “vulnerable investors”.

You should take the first step now and lodge your complaint.

3. Structured products not connected with Lehman Brothers
If you have bought any structured product that is not connected with Lehman Brothers, you can also file a complaint now against the distributor for mis-selling, if the structured product is different from what you had been led to believe at the point of sale.

For example, if you were told that it is “like a bond” or “low risk” and it actually had credit default swaps or were invested in high risk assets (such as collateralised debt obligations), you can file a complaint now. Do not wait for any of the swaps or assets to fail.

4. Interview with the financial institution
After lodging your complaint, you will be asked by the financial institution to attend an interview. You can attend it with a family member or friend.

At the interview, you have to state the truth as contained in your statement. You should explain the circumstances in which you were sold the structured product and the assurances and explanations that you have received from the sales representative. You can explain your low risk profile and preference.

If the financial institution shows the forms that you have signed, you can reply that you were not informed about the content or that it was not explained to you or that it was written by the sales representative without your consent (if this was indeed the truth).

You should state the truth and not worry about its legal implications. Let this matter be decided by the independent person or by the higher authority. Just state the truth, to the best of your memory.

MAS have asked the financial institution to avoid taking “an overly legalistic approach).

5. Negotiate with the financial institution
The financial institution is required to give you a reply within three weeks. If they offer compensation, you can discuss with them to reach an acceptable sum.

You should consider for 50% to 80% of your invested sum, depending on your personal circumstances. (This is a rough guide only. You can decide what is best for yourself).

If they reject your complaint, you can ask them to state their reasons in writing.

6. Complaint to FiDREC
If your complaint cannot be settled directly with the financial institution, you can send it to the FiDREC (see www.fidrec.com.sg). You can visit their office and get the help of their full time officer.

FiDREC is independent of the financial institution. The officer will explain to you on how the process works.

7. Collective legal action
You can consider collective legal action if the matter is not resolved at FiDREC.

Legal action can be expensive. You should consider it only as the last resort.

If several investors are willing to take collective legal action, you can approach a lawyer and get the lawyer to brief the investors as a group. You should also find out the legal cost and how they are to be shared by the investors.

8. Contact with fellow investors
I will be putting you in contact with fellow investors who bought the structured product from the same financial institution. I will give you the name, e-mail address and contact numbers of the other investors. You can call or e-mail them. You can appoint a leader among the group to arrange meetings.

You can meet on Saturdays from 5 to 7 pm at Speaker’s Corner in Hong Lim Green. I will book the place for the next few weeks.

9. Get updates from my Blog
You can get updates from my blogs:
www.tankinlian.blogspot.com

Do not send individual e-mails to ask me on matters that can be found in my blog. I have to cope with 50 to 100 e-mails a day and cannot find the time to attend to each person individually. It is even difficult for me to read your e-mail and give a reply.

Tan Kin Lian
www.tankinlian.blogspot.com
kinlian@gmail.com