Retail investors in UK can only buy mutual funds. I don´t understand how come banks can market products riskier than mutual funds to retail investors in Singapore in the first place.
REPLY
Singapore's regulatory approach is modelled along the UK system, i.e.
1. Financial institutions are given freedom to design and market their product
2. The financial institutions have to behave responsibily towards the consumers.
3. If they fail in their duty, the Financial Services Authority will impose heavy fines on the institutions and get them to compensate the consumers for their losses
If MAS in Singapore adopt the same approach and impose heavy penalties on the institutions for wrong doing, you will find that the risky structured products will not be sold in Singapore.
MAS has the power to bring the institutions to court for breaking the provisions of the Financial Services Act, Securities and Futures Act and the Trustees Act. I hope that they will carry out their duty to enforce the law.
If MAS in Singapore adopt the same approach and impose heavy penalties on the institutions for wrong doing, you will find that the risky structured products will not be sold in Singapore.
MAS has the power to bring the institutions to court for breaking the provisions of the Financial Services Act, Securities and Futures Act and the Trustees Act. I hope that they will carry out their duty to enforce the law.
In the first place,those kind of products shouldn't even be approve for sale to retail investors.
ReplyDeleteIf spore's regulatory approach is modelled after the UK's, and if such instruments are not allowed to be sold in Uk...then how come it was allowed in spore..it does seem strange...????
ReplyDeleteBut what if MAS' fine is less than the profits already made by the bank e.g. DBS from all its High Notes series? Doesn't this mean the culprit gets away with his ill-gotten gains?
ReplyDeleteBanks and distributors in the UK frequently sell structured products to retail investors. The bulk of the products sold are simple capital protected FTSE linked notes, however there has recently been a number of products which use soft protection (a 90% barrier for example). These can definitely be considered risky products.
ReplyDeleteSaying structured products are riskier than mutual funds is erroneous, many structured products have principal protection (albeit the protection is subject to the solvency of the issuer), whereas mutual fund success relies on the adroitness of the given manager, and i'm not sure how many mutual funds have benefited wholeheartedly from the last week's stock tumble.
I found this statement among my Minibond risk disclosures document that stated the following:
ReplyDelete"For types of advisory service regulated under Financial Advisors(Chapter 110) XXXX (Name of the RM handled my purchase)is:
Authorised to:
*.....
Not Authorised to:
*Advise on structured deposits"
Can anyone advise whether the Minibond belongs to "Structured deposits" ? Can it be the RM who sold me the product is actually not authorised to do so ?
Structured products are sold to qualified investors, not ordinary retail investors in the UK.
ReplyDeleteMutual funds are highly regulated and are regularly audited to make sure the fund manager is not engaging in high risk activities.
Mutual funds are also not permitted to participate in short-selling. The pricing of mutual fund is updated weekly and you can find the corrected value is easily available to everyone.
On the other hand, structured products hide behind a mask of opacity while personal bankers and relationship managers mis-sell these financial products to ordinary retail investors.
Something is obviously wrong here.