Tan Kin Lian's Blog: Ask MAS to provide guidelines on mis-selling

Wednesday, November 19, 2008

Ask MAS to provide guidelines on mis-selling

Dear Mr. Tan

Can you help to lobby MAS to come out with some guidelines on mis-selling. That will help ordinary man a lot.

For examples MAS can say the following situations are high likelihood of mis-selling.
1. Sold product the buyer not originally wanted
2. Concluded sale (such a complicated product) within 30 mins
3. Sold without going through line by line of the marketing brochure
4. Sold without giving prospectus
5. Prospectus was given after sale concluded
6. Sold on repetition of the Reference Entities but did not mention RISK of other link products (just mentioning link is not enough)
7. RM did not read prospectus before selling to the clients

I think you expect your doctor to read the details of the drugs before prescribing it to you or children? I just think that it is not right to sell by mis-representation, but eliminate their responsibility by thick documentation.

LKH

REPLY
I will post your views in my blog first. I will decide later on how to approach MAS.

11 comments:

Anonymous said...: As a country we love experts, at least that is what the prevailing institutionalized political ideology promotes. If we want to do something (let us say, merge NTU with the University of Singapore) we invite experts. We pay these experts substantially (some would say excessively, but never mind about that). So what are "experts"? Presumably, experts know more than you and I. THat's why they are xperts. And that's why we invite them in the first place. The same is true for experts closer to home, like say doctors, lawyers and relationship managers. They are so by reason our their expertise. I engage a plumber not because he is an dioiot but because he has expert knowledge of pipes and how to fix them. So relationship managers selling risky pruducts cannot just claim that they are ignorant. Banks cannot claim that they are ignorant that their relationship managers are ignorant. And MAS cannot claim that banks are ignorant.Otherwise why are these people and institutions there in the first place. Because they are knowledgeable and moreexpert than you and I, right? Or are they now confessing that they are no better thanyou and I?; November 19, 2008 9:03 AM
Anonymous said...: Dear Mr. Tan,

The banks during sales have obligation to access suitability of these products to individual ordinary investors. You can't be expecting us to self-decide the prescription simply by dropping a pile of medical books to read.
Many investors had declared that they are conservative while these products are such high-risks(referring to Pinnacle Notes), so who should be responsible now.; November 19, 2008 9:36 AM
Anonymous said...: I would like to suggest again that the use of the term HIGH RISK be dropped. Risk is a function of the times. What is not risky today is risky tomorrow (or vice versa). Risk is also a function of the person's judgement. For a professional zookeeper, feeding a white tiger is not much of a risk because he knows the procedures and he does it EVERYDAY. However a new zookeeper will find the risk much higher.
What I want to emphasise again, is that there is no point to say the banks missell a HIGH RISK product. You guys are all barking up the wrong tree!!

I opine that the only argument in favour of investors, is when the RM says "If one entity fail you still have the other entitities in the basket". ANYBODY who had been informed in such a way, is definitely mis-sold, because he is incorrectly informed of the way he is supposed to anticipate Risk.

He can go straight to the bank and sue the bank. The bank will surely lose...

But if you go about starting to talk about high risk stuffs and other things, you can argue till the cow come home and you will not be sure if you win. Because Lehman etc. were indeed big names and at some point in time, they are low risk.

REX; November 19, 2008 11:41 AM
Anonymous said...: U are right in that the professionals/experts fail in their professional skills they profess to have and the duties of care they owe to their clients/customers.

Citing Pinnacles CLN 7 as an example, the complexity of the note is compounded with a potential Equity Bonus Counpon element.

The 6 REs' have two roles:

1. As reference entities in the primary protection of the CDS - FTD (First-to-default) basket under which the swap counter party is MS Service Inc;
and
2. They work as the basket of companies (for the Equity Option) under which the swap counter party is MS & Co Int plc.

The RMs by their respective education & training may not be able to comprehend the FTD REs dual roles let alone the FTD REs are structured for the use by hedge fund in speculation, hedging and arbitrage purposes. Those who know little about the complexity of the product commit innocent misrepresentation from the outset. Those who are more senior and experienced make use of their knowledges to lead the customers to believe that the capital is invested in the equity of the 6 REs. The 'Informed Decision' by the customer in this respect is the result of the 'fraudulent misrepresenation' by the experienced RMs.

The list of CDOs will only be decided after the accumluation phase and as spelt in the Base prospetus is to be decided by the Trustee. It may be reasonable that the RMs are not ready to advise the customers for Serie 1 & 2 which are the earlier batches of PS notes. Nevertheless, when it comes to the launch of Series 6,7,9 & 10 the material information such as there will be a list of CDO consist of 100 to 150 names to be drawn by the determining agent & these are also REs in the underlying assets CDO basket reference portfolio is again missed out (as it shouldn't be as CDO list for Series 1 & 2 had been drawn & other later series should be in the same arrangement), it is absolutely not accepted against the 'expertise' they profess to be.

Finally, the recommedation/Fact Find form is the same standard form used for Unit Trust/Fund with no regard to the complexity of the structured product. It has no significance & irrelevant to the structured product they recommend.; November 19, 2008 12:35 PM
Singapore Kopitiam - Voices of Singaporeans said...: Dear Mr. Tan:

Are you aware that MAS also invested in complicated credit-linked notes, though only 0.1% of its portfolio in such investments are involved as revealed by Finance Minister Tharman Shanmugaratnam in the Parliament:
http://forums.delphiforums.com/n/mb/message.asp?webtag=sunkopitiam&msg=13556.1

If the Financial Regulator MAS has been involved in investing in complicated credit-linked notes, would there be a conflict of interests when it tries to regulate the Financial Institutions, let alone helping the desperate retail investors who may have lost their investments in minbonds, DBS High Notes, Pinnacles, etc

Regards,
Victor Sun
Singapore Kopitiam - Voices of Singaporeans
http://forums.delphiforums.com/sunkopitiam; November 19, 2008 1:59 PM
Anonymous said...: I agree that MAS should come out with some guidelines on mis-selling or else the bank will just reject you as they like.

Ask MAS, what is their definition of mis-selling. At least investors and FIs has a common understanding.

Also ask MAS for their definition of vulnerable group as some FIs like DBS don't have such definition.; November 19, 2008 3:49 PM
Anonymous said...: Dear all, Latest report from HK regarding a woman investor sues DBS(HK)on mis-selling.Please read the followings:

“港一名妇女投资损失告星展误导(香港） (2008-11-19)

(联合早报网讯) 香港明报报道，自从雷曼相关产品“爆煲”后，不少事主均投诉遭银行误导购入有关产品。牵涉其中的星展银行，日前遭一名居于北角半山的妇人入禀高院，指因银行误导而使其蒙受损失，但未透露是否涉及雷曼相关产品的销售。

　　星展﹕不评论案件
　　原诉人姜胡玉英(译音)，报称居于北角天后庙道云峰大厦。被告的星展银行(香港)有限公司，其发言人昨表示不会评论正在进行司法程序的案件。
　　未透露是否涉雷曼产品
　　入禀状透露，原诉人因被告的误导及虚假陈述而招至损失，惟入禀状中没进一步透露详情，只表示她入禀前已透过律师于上月11日去信被告，将有关细节及详情告知。
　　率先向客户赎回雷曼相关投资产品的星展银行，早前曾有大批雷曼事主到其中环总行抗议及递交请愿信，事主甚至企图冲入银行，一度与保安员推撞；亦有事主入禀法院控告星展，就有关产品销售索偿。
　　星展集团乃率先公开宣布，就不符合销售标准的个案订出赔偿总额的银行。据星展早前公布的资料显示，集团向部分新加坡及香港客户购入雷曼相关投资产品，有关拨作补偿的支出约3.6亿元。
　　立法会早前通过授权立法会调查雷曼迷债事件小组委员会，引用《立法会(权力及特权)条例》彻查引发迷债风波的真相，由于星展银行乃有份出售迷债的19间银行之一，届时其高层亦将会被议员轮流传召出席聆讯。“; November 19, 2008 4:32 PM
Anonymous said...: REX 11:41AM,

You are wrong to say these CLN products are low-risk. As DBS said, HN2 and HN5 are not low risk. According to my interview with DBS, HN2 targeted the investors with the risk level equal to GROWTH (4 out of 5, I think). However, DBS sold it to me who
had a risk level of only Balanced, (one level below GROWTH).

On the other hand, I do suspect their criteria to rate the risk level of investors. For me, my saving ammount (actually belonged to my whole family) contrited 900 out of 3300 points. Furthermore, no one would like an ivnestment
of high risk but with return capped around 5%. Therefore, the strucutre of the product itself is
evidence of mis-selling as no such product could be sold out without tricking involved.

XH; November 20, 2008 1:28 PM
Anonymous said...: Hello here is Rex 1141 responding to XH 1:28

I am just making a matter of principle, that High Risk and Low Risk has no meaning just as High Speed Internet and Low speed bandwidths. Not so long ago, even 56K modem is considered very fast. Today 1M bandwidht is considered slow by some. What the heck "risk" means? Caveat Emptor! Buyer watch out and make your own judgement!! There is no end to debating, you can disagree or agree. In a stable environment, where 5 banks with each 100 years of solid success.. how could anyone of them fail overnight? How are you supposed to know that such solid bank can go bankrupt overnight? Therefore my view is always, if you tell the RM/FI, what the hell you sell me this high risk product, you will be challenged. As you said, how can the RM sell a high risk product with low return. The bank also didnt understand the complexities or else pretend not to understand, but you can never prove it, that is the problem!! But if you tell the RM/FI, what the hell you bluffed me and said if one bank fail there is other 4 bank, why my money all gone now with 1 bank down?
The 2nd argument is better and cuts away all subjective discussions on Risk.

REX; November 20, 2008 9:46 PM
Anonymous said...: I recently heard experts = ex- pert; November 20, 2008 11:35 PM
zhummmeng said...: I approach it differently, ie. how to avoid mis-selling and this is enshrined in the section 27 of FAA and other section.
1.As as s a responsible adviser you must be honest,competent and always put your clients' interest first.
2. Know your products well. Evaluate how the products can give the best to your clients. Ask yourself whether is there another product within the company that can best address the cleint's needs more efficiently and effectively. In short ,is the product good for my cleint.
3.know your cleint by conducting a need analysis. Evaluate his financial circumstances, his needs, his risk appetite and identify the best solution to his needs.
4.never push product for personal interest or any other people's interest except the cleint.
5.second line of check by supervisor. Is the supervisor competent, honest and also have cleint's interest first?
If advisers adhere to the above mis-selling can be avoided.
As far as MAS is concerned it is not that there are no laws governing the way the clients recieve advice, it is that MAS has failed to enforce the law. I wonder why?; November 25, 2008 10:23 PM