Saturday, October 18, 2008

Speech at Speaker's Corner - 11 Oct 2008

Embargoed, 6 p.m. Saturday 18 October 2008

Yesterday, on 17 October, the Monetary Authority of Singapore held a press conference on the sale of structured products to retail investors.

MAS said in its release:

QUOTE
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.
UNQUOTE

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 has 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:

a) That the funds are invested in the bonds of the reference entitles
b) That all of the reference entitles have to fail, before we lose our entire principal
c) 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:

1. Your name, NRIC, address, telephone
2. How did you get involved in the investment?
3. Which financial institution, branch, amount invested, date
4. What happened when you purchased the investment?
5. Were you alone or accompanied by another person? Who?
6. What did the representative (who sold the investment to you) tell you about investment?
7. Did the representative tell you about any guarantee on your investment?
8. 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?
9. Did you rely on the advice of the representative in making the investment? Which were the important aspects of the advice?
10. Do you have any other statements to make regarding this matter?

I will ask the contact person for each group (according to the distributor financial institution) to help the other investors, especially those that were not well educated, to prepare the statement and to help you to lodge it with the financial institution.

Vulnerable investors
MAS has 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 a 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”.

Let us take this at the next step. In the meantime, you should lodge your complaint.

Formal inquiries by MAS
MAS has also said that they have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the financial institutions or poor sales practices by their representatives. They will an announcement on any actions we are taking when our inquiries are completed.

If the laws have been broken or if there were failures in the internal controls and/or sales practices, there is a better chance for the investors to get a higher compensation from the culpable parties. Let us wait for the results of this investigation.

Replacement Manager
The MAS statement said that the trustee for the Lehman Minibond Programme is 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. To assist investors make an informed decision, MAS will appoint an independent financial adviser. The outcome will be known by the end of next week.

If a replacement manager can be found, it will may the investors to reduce the loss as the underlying assets can be kept until a better time to realise a higher value. I am in contact with one party based in Hong Kong that has expressed interest to take over the management. They are now in touch with the trustees and the regulator.

I hope that other parties, especially the financial institutions based in Singapore, will come forward to make a bid for this contract.

Appeal to the Media
I wish to appeal to the media to convey the message to the other investors of these structured products who have not yet lodge their complaints.

Please inform them that they should lodge their complaints now, if they have been misled into investing in these products.

Tan Kin Lian

3 comments:

  1. MAS has been acting passively until the Hong Lim Speech on 11 Oct (thanks to Mr Tan for all the effort) triggering the media to show the stories of the helpless elderly. I feel very very sad about this whole thing not because I stood to lose $100k in this but more when I saw so many elderly were hurt. I’m 40+, educated, in management position yet I was convinced by the RM into buying this poison trusting that they are bond with low risk… Even until news of Lehman bankruptcy leading to minibond became worthless came out in the news, my RM was still innocently telling me that “we all did’nt know Lehman’s bankruptcy will affect minibond… what can I say now ? I did’nt record down her words to prove she might not be trained to know enough to advise … now under media pressure MAS will ensure the ‘Vulnerable’ got compensated since it is obvious evidence itself. But who is what hard evidence can we Non-vulnerable show ? Worse still we have to keep it from others, we feel shame to let others know in case we are labelled as the greedy and foolish ones…

    BH

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  2. Mr. tan,
    How is this statement different from our complaint letter we sent earlier?
    Do you have any sample or template statement?
    Thank you in advance for your advice.

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  3. Dear Mr. Tan KL,
    For those invested in High Notes 2 which has come close to an early termination, short of another 2 defaults in the 100-name list (as no credit event has been triggered by any of the 8 reference entities), what can they do now? The indicated price is only abut 10% of original investment.

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