Friday, October 17, 2008

MAS Media Release on Structured Products

Opening Remarks by Heng Swee Keat, Managing Director, MAS, at the MAS Press Conference on the Sale of Structured Products to Retail Investors

Many individuals who purchased structured products linked to Lehman Brothers are worried about their investments. MAS has been actively working to ensure a fair resolution for these investors. We have also been communicating our actions to the public since the issue first came to light in the middle of September. Our first priority has always been to help affected investors. Let me touch on what we have done and how we have put in place a serious and impartial resolution process to deal with investors’ legitimate concerns.

2. First, we are making sure that HSBC Institutional Trust Services (Singapore) Ltd, the trustee for the Lehman Minibond Programme, carefully considers all options and acts in the interests of investors. If a new swap counterparty is available, investors would have the opportunity to vote on this option. In order to assist investors make an informed decision, MAS will appoint an independent financial adviser. We expect the trustee to know whether options will be available to noteholders by the end of next week.

3. Second, each FI now has an independent person to oversee the complaints handling process relating to the sale of the Lehman Minibond Programme, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 Linkearner Notes. These persons are Gerard Ee, Hwang Soo Jin and Law Song Keng. We recognise that the complaints handling process has not been easy, particularly for customers of some FIs. But as circumstances for each case may be different, this is the best way to deal with all the complaints. The independent parties will ensure that customers get a fair hearing. We have set a very clear timeline for complaints to be resolved. All the FIs have also set up internal review panels which are chaired by their CEOs. The panel is expected to conduct a thorough review of each complaint and decide on a course of action within four weeks. The decision will then be communicated to the customer.

4. Third, for affected investors who are not satisfied with the FIs decision on the matter, we have established a fast-track process to refer the case to the Financial Industry Disputes Resolution Centre (FIDReC). The FIDReC mediation process is free for consumers. If a case goes to arbitration, it will cost the consumer $50. FIDReC will consider all relevant evidence whether written or oral. Statements can be prepared by consumers themselves and need not be made under oath. All FIDReC’s adjudicators are well respected professionals. The chairman of FIDReC is Mr Goh Joon Seng, a retired High Court judge. As over 80% of customers invested S$50,000 and below, FIDReC is the right avenue for them to pursue their claims. FIDReC normally deals with claims not exceeding S$50,000. In the case of the structured products, however, the FIs have agreed for FIDReC to hear deserving cases.

5. We have also said that if there are breaches of our regulation, we will take action against the financial institution or individuals involved. MAS has required the independent parties to highlight these breaches and potential cases of mis-selling to MAS. They have already brought a number of possible cases to our attention and we are following up on them.

6. Normally, as you know, MAS does not comment on our dealings with individual institutions. However given public interest in this matter, MAS confirms that we have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the FIs or poor sales practices by their representatives. We will make an announcement on any actions we are taking when our inquiries are completed.

7. MAS urges any affected investor who has a genuine claim that you were mis-sold the product to make sure you lodge your complaint with your FIs. MAS requires FIs to have a rigorous process to look into every complaint and resolve them fairly, giving due weight to the views of the independent parties.

8. Clearly, there is a range of investors who bought these products. Some are well-educated professionals. Others are sophisticated investors. The group we are most concerned with are the vulnerable customers. We are focussing on cases of mis-selling to vulnerable customers and on cases where the products were clearly inappropriate for them given their circumstances. We have required the FIs to give priority to these cases. They should not take an overly legalistic approach to mis-selling in dealing with these cases.

9. For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor’s profile and circumstances, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility in such cases. We welcome this commitment and expect all FIs that have sold these products to take the same approach. They must do the right thing and ensure a quick and fair resolution for these customers. We have communicated this to their CEOs.

10. Thank you, I will now take your questions


Anonymous said...

Para 8 & 9 seems to indicate that MAS favours a case by case basis in resolving the matter. Case by case based on well-educated professionals, sophisticated investors and vulnerable customers.
Oh my god, how to be fair and practical to categorise and define this way? This is also favoring the FIs.

Anonymous said...

Why we need to make a statement when complain to Fidrec?
Would the complaint letter suffic?
Any views? Thanks.

zhummmeng said...

This is first time that we hear comments from MAS regarding the issues of mis-selling. It it heartening to know that they too feel and recognise a certain group of investors were mis-sold considering their profile and circumstances.
I hope that that this will be the defining moment for the industry and will trigger a chain of reformation and fine tuning to existing guidelines to change the ways financial products are sold and also the products themselves will get stringent test and evaluation before allowed for sale.I hope that section 27 will be enforced seriously and that it will be the guideline the financial advisers conduct their business. To take a step further to ensure that this section 27 is NOT circumvented by FIs and their consultants MAS MUST conduct audits
frequently otherwise it will become a dead letter later and forgotten just like many of the notices and guidelines issued in the past.
Certain activities that can contribute to mis-selling like roadshows and gifts should also be examined.
We will continue to watch the development.

Betsybug said...

Oh my. "Vulnerable customers" - what does this mean?

Does that mean I have to have:
1) A piece of paper from my RM that clearly state something like "Don't worry, DBS HN5 will NEVER EVER fail. Please invest now", or
2) DBS cannot now find any piece of form with my signatures on them, or
2) I need to be an 80 year old retiree who don't know English

in order to stand a chance at getting compensation? How many of us have the above attributes? My point is that the whole process lacks transparency - among other things we do not know what qualifies as evidence. DBS was the issuer and arranger of the Notes and now they are judge and jury too.

Anonymous said...

I have a Masters, not yet retired but not so sophisticated in investment - I guess I'm screwed! Is this how MAS wants FI to proceed. When they took money from us, were they so careful to distinguish between us? NO! They just took!

Anonymous said...

I think MAS is trying some clever damage control moves - make a show of resolving some cases of "vulnerable customers" and move to close down the whole show. Tell everyone to move on. Basically let the rest of us to rot. What an eyewash.

Anonymous said...

It's time FIs be PROACTIVE and contact the elderly (not wait for them to write complaint letter). How many out there have NOT written a complaint letter, because they don't know how?
Then again, how objective can the FIs be? Perhaps for the "vulnerable", there MUST be a safeguard, e.g. family member, independent party.

Anonymous said...

i think this is a fair trial as it is the old, uneducated and illiterate which deserves most attention. It is quite heart breaking to see old folks loosing their hard earn $$ and "coffin $$". This also serves to weed out "opportunistic" investor who wants to ride on the wave of claiming "mis-selling" and demand compensation.

Anonymous said...

the statements are very sweeping, they are more of a technical readout, of a clarification of possible proceedings, of a general memo to quell displeasure rather than any sort of assurance, much less insurance, the most its saying is they are not sitting around, they are ACTUALLY monitoring into this, they are basically doing more than ALSO reading news updates and twitching fingers, waiting the next big one, they are probing bit by bit where they can, when they can, as an overseeing agency, thats all. it did not promise anything, it did not explain indepth into anything, it did not warrant any action or ramification. it is a wall of text that said next to nothing other than they SEEM to be doing their job EVERYONE expecting them to say they are doing. they are drawing up maps of systems they CLAIM to be perfectly in place to handle such crisis/matter, on top that, they try to claim they actually have SOME legal power to come in hassle anyone FOUND (read: CONVICTED) of false doing. Atlas they DIDNT really (want to) mention that everything is still SO SO FAR AWAY from any form of a judgement, much less a conviction, in this ongoing fiasco.

read it again. carefully.

if anyone smart enough and put two in two, the recent guarantee would go all the way up to end 2010, this is more less the timeline they
are working along on but they are NOT saying so. Affected parties of this fiasco, THATS your guiding compass for whatever you are thinking or planning about, retrieving, seeing your money or whatever whatever. For now.

again if anyone find this post offensive, i apologise sincerely if it had been anyway miscommunicated and will gladly remove it by all means necessary.

Anonymous said...

Mr. Tan, if it wasn't for you, we wouldn't have seen actions taken.

Thank you for showing Singaporeans the power of courage. Its now time to learn from Mr. Tan and stop getting scared.

If every Singaporeans stood together, we wouldn't have been bullied times and again.

Richard Goh said...

MAS has finally called this press conference to address public concerns on the investment failures.

As a financial authority, MAS should not hesitate to investigate into the dealings and circumstances which led to most retail investors crying foul.

The fact that investments which failed are seemingly fragile and reflect to some extent, ineffective regulation and supervision of the financial institutions which sold the questionable products.

One aspect which was only lately known to exist is the risk profiling of investors.

Investors have made known recently that the procedure was not carefully adhered to in finding out if the product suits the risk-profile of the would-be investor.

The procedure is at best superficially rushed through after a deal is closed.

When FIs set tight sale targets for their managers, it is no wonder that short-cuts may be taken to market these high risks products.

Sale brochures are known to emphasize objectives which FIs are too concerned in their bid to win over the retail investors when highlighting risks factors should be equally important.

Shouldn't it be time now to review and revise the "As to Zs" that will make investments safer to all.

In the interest of the public and if proven, victims of misrepresentation must be compensated and those who mismanaged must be held accountable.

Anonymous said...

Last time msa was the best in the world, when their salaries were lower.
Now may be the salaries are too high, so can't afford to send teams to conduct thorough audit?????

Anonymous said...

The mis selling is not only to the old and uneducated though those are more obvious.

MAS needs to wake up to the fact that the sales brochures and advertisements are so misleading that many educated peole including me and many of my friends who are graduates fell for it.

May be the only difference is that we did not place our entire savings into it.

Anonymous said...

My mum was 75 when she bought this. She is Chinese speaking but not lowly educated. She was accompanied by me - a degree holder - but yet we were both mislead. I worry she doesn't "qualify". This is rather upsetting.

Those who "qualify" are likely those who would have no idea how to write a letter of complaint in the first place.

They didn't mention how they could help this group complain.

So it doesn't soundn't like a good thing after all?
Koh Soo Hiem

Anonymous said...

The way I forsee - there's very little hope for the educated and younger investors to recoup loss.

Anonymous said...

I totally agree with Zhummmmeng. MAS should also stop insurers from giving incentives to distributors, as this will antice themn to do 'forced' selling. Some insurers are giving trips, gifts to top sellers. Is this right? Sad to say a lot of things goingd on, why MAS is very quiet about it. The industry is managed by businessman who may be former agents, their objective make money and not protecting customer interest. Product pays more commission they go in. Mr Tan, there could be other 'time bombs' like dual currency, hedge funds, land banking etc. Hope your blog could create more awareness and maybe those distributing could put their processes right.

Anonymous said...

I am a victimised 70-yr old retired civil servant. It appears this case-by-case basis is similar to that as adopted to the "performance bonus" given yearly to civil servants. Those who angkat their superiors and work less(but know how to sweet-talk) will get more bonus. Those who work hard but timid and cannot express are being bullied and left out. In this case it is worse. It look like that those who can express their cases to the FI better will get more sweets. For myself I cannot talk well. How?

Anonymous said...

I am a Certified Public Accountant with 20 years of experience in accounting field. But this does not mean that I am a financial expert that understood Minibond. I’m now doubtful how much the FI manager knows about Minibond when he was promoting to me, who recognised myself as a risk adverse. From the product name, interest rate of 4.25% and the regular quarterly payment, I genuinely thought it was a "bond". "Lehman" was not mentioned in the brochure. A lot of trust was on the FI manager who represents the largest finance company in Singapore. I even sign on the paper to acknowledge I was given the prospectus when he said he does not have a copy then and will send me a copy, which was many weeks later. I wrote to the FI and it now refer me to what I have signed. I seriously considered myself being misled and MAS should help people like me too. We are good citizen who pay our income tax diligently. I will be very disappointed with the government if this is the way they handle it.

Mrs Foo

Anonymous said...

Mis-sold is a mis-sold. There are no qualifications to it, whether educated or illiterate. I hope that MAS is not trying to divide and conquer. We need to stay united and fight for what is right!

Anonymous said...

now you only see desperate ntuc agents operating roadshows. Be careful of these product pushers.The year is ending and they can be so desperate that they will do anything to sell you toxic packages(revosave with vivolife) to qualify for MDRT or some incentive trips.They will guarantee and promise anything to get you to buy. It is any how sell now. Whether you are young, old, blur, or retarded uncle or aunites, as long you can walk past their pasr malam stall you can be a victim.
They tell you home is safe.They are trying to scare you that other insurance companies are not safe, that other companies may go bust.Did you see their ad in news paper? This is unethical tactic. Don't fall for the trick.
These agents have no conscience at all.

Anonymous said...

Actually, with the MAS statement, nothing much has changed. The poor investors still get push to lodge complaints to the FI that sold them the product. Just like in the last few weeks, most cases would be dismissed.

Why cant MAS set up to receive the complaints like in HK?

Anonymous said...

Dear Mrs Foo, which FI are you in?
I have bought Minibond Series 7 from Hong Leong Finance and wondering will I get the same reply for my lodged in complaint....still awaiting for their reply to me.

Anonymous said...

I viewed that MAS shall in the first place study and evaluates is there any misrepresenation in the brochures and the sales information that has been used by the FI/banks to sell these Minibonds to their risk aversed customers,esp. to those that has the intention to place their saving in fixed deposit but some how being pursuaded to divert their FD amount onto these Minibond by their Finacial Consultant advise ....that is the root caused of the problem arising for most of the cases.

Anonymous said...

Hello, those so called vulnerable people cannot even read and write, so how they complain to FI? In S'pore everything must be black and white, law by law. If they don't know how to write a complaint letter to the FI then does it mean no need to compensate? You think the FI will call and ask, "hello uncle u buy mini bomb and lose money, plse come to my bank i return the money to you". Wait long long. So MAS action is useful or not or wayang only?
I saw Mrs Foo's comment that she as a CPA for 20 yrs also got cheated. Don't dispair, u are not alone, Some of us got Professional Engineer title or MBA and PhD also got cheated. It's not a question of whether you are educated or not. Everyone on Kin Lian and LionInvestor blog are educated, so means we all should just "move on"? Come on MAS....if this is what u are saying, i think a lot of people will protest again, may be there will be a riot.
It was too clever a concealment that 99% will fall into, the balance 1% are from the Gifted Program and unfortunately most of us are not. May be MAS should use the Gifted Program to qualify whether u are cheated or vulnerable. I beg u not everyone in MAS understand the complexity inside the prospectus as well, may be the one who vetted it too. Sorry I wrote this because I can't help wondering what hope is there for most of us?

Anonymous said...

Rating for Warren Buffett AAA+ MAS FFF-

Anonymous said...

I understand the plights of investors who have lost their money. But I think instead of criticising what the government is doing, we should try to understand why. It's not easy being where they are. A lot of decisions they make are policy calls, and they must have their reasons why they're doing it this way. I think it's fair that the old retirees are given priority. They are after all those we sympathise with the most. I'm sure in other cases if there is clear evidence, there will still be hope. When people make money no one thank the government. When they lose they'll point their fingers to the government. Let's be fair to them.

MSLeong said...

As one mini-bond "gullible sucker", after reading and listening to so many empty statements from various organisations since Leyman crashed, my only thought now is :"What's the bottom line?".

zero cent on the dollar payback?

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