Tan Kin Lian's Blog: Bank claims to be "order executor"

Monday, November 03, 2008

Bank claims to be "order executor"

Dear Mr Tan,

I have attended interviews with OCBC Securities( on Jubilee Notes) and ABN AMRO (on Minibond) and the interviewers are using the argument that they are acting as ”Order executor” for customer and thus exempted from giving financial advice as required by Financial Advisers Act. If FI who are distributors of these products can claim such immunity when the products they sold are more risky than insurance or unit trusts, then this is really an unregulated product and the FI are trying to push the responsibility back to MAS.

It is like allowing Chinese medical Hall to sell prescription drug without a licensed Pharmacist but the same drug when sold in Pharmacy must be supervised by Pharmacist. The consequence is disastrous!

I hope you can publish this in your Blog so we can have more reader input on this argument from FI and also confirmation from MAS.

Thank you,
Benedict

23 comments:

Anonymous said...: If that is acceptable, in fact all FIs whether banks, finance companies and brokerages can all claimed that they are order executors only and therefore exempted. That being the case, all FIs and RMs are exempted so the Act is irrelevant which can not be!; November 03, 2008 1:38 PM
Anonymous said...: They were the executors alright. They chopped our heads off.; November 03, 2008 1:48 PM
Anonymous said...: You should send this email to MAS. I have always thought MAS is very good at passing the buck.

I knew this would happen. that is why I said no when ABN AMO asked me for an meeting. I said, "in your dream." I will not meet with you and be humiliate by you.; November 03, 2008 1:56 PM
Anonymous said...: Shall we write a collective letter to MAS to clarify their stand?

I cannot believe ABN AMRO/ RBS can say this.

If MAS/ FIDRec also holds the same view, then I'll lose faith in the entire system.; November 03, 2008 2:08 PM
Anonymous said...: Not all advisory activities are regulated under the Financial Adivsers Act. I have already written to MAS for clarification on whether activities pertaining to Minibond investment comes within the Act. No reply as yet. I will update all interested when I receive notification from MAS.

MAS has however written to state that Minibond investment is a debenture and not a structured deposit. I have also written to seek further clarification on this.

Based on my understanding from reading of various sales documents and the relevant Acts, it appears that an Adviser can either be authorised to 'Advise' on certain products or he may just be authorised to 'Deal' in the products. My guess is that for some FA, they are not permitted to provide any advise to customer and can only act on instructions by customer to execute orders.

You should check with the FA concerned whether there was documentation on 'Financial Planner Recommendation and Analysis' that might show that RM had made representation that product was suitable for you.

You may want to consider writing to MAS describing how the product was sold to you, asking them to consider whether the FA was merely acting on your instructions to execute the order or had they actually provided 'advise' to you and induced you to make the purchase.; November 03, 2008 2:32 PM
Anonymous said...: It is unacceptable that these bokerages now claim they are only "order executor". In that case why was it not clearly indicated during the sale? Any Tom, Dick or Harry can be a distributor in this case. Just get completed application forms to Lehman and earn the commission - so simple!

I support a petition to MAS to clarify this "order executor" nonsense. I suggest we open the petition to all and not investors who bought structured products only as I believe many will have interest in this as it determines what the responsibities of these bokerages are when selling financial products.; November 03, 2008 4:10 PM
Anonymous said...: What nonsense it this !!!
MAS need to clarfiy - how can bank and bokerages now claim they are just "order executor"; November 03, 2008 4:12 PM
Anonymous said...: All those concerned should try to obtain an answer from MAS. However this may not be easy. I had written more than two weeks ago but to date, no answer on this point from the authorities. Instead, they referred my letter to the Securities firm. How to get an answer from MAS? Perhaps, we should pay them a visit?; November 03, 2008 4:54 PM
C H Yak said...: A "distributor" or "order executor" can stil be liable for mis-representation.

Just like an housing agency. They are represenating the "principal" meaning the FI.

Even if the agent is "conned" by the principal, they can still be liable for "innocent misrepresentation". Check with your legal expert.; November 03, 2008 5:41 PM
Anonymous said...: This is a tricky topic, some of the products sold may be on an execution only basis. This depends on the documentation which you signed before the deal was done.

If you had indicated that you do not wish to provide any or some of the information then they will take it as you do not need any needs analysis. Therefore I think that you may need to check your docs first.

For execution only sales, the onus will be on the investors. sigh its unfortunate that this loophole exists.

For those caught in this, you could consider if your RM did ask you any questions regarding your age, investment objective, wealth or financial needs. if he did, you could ask them why they ask this since they don't need to determine the suitability of the product to you and yet claim to give non-advisory sales.

Section 31 of FAA is on securities hawking. If you had no intention of buying the MB, but then they pitch it to you without doing a needs based analysis as they don't need the info, then shouldn't it be caught under securities hawking.

BTW, MB is a debenture not an Structure deposit as defined in the SFA. You can read the guidelines on structured deposit. SD must be 100% guaranteed. This MB is a Credit linked note transferring risk to the retail investors.

Though I didn't invest am still feeling your pain!! unfortunately FIs really Law 100 marks but ethics and morals -10!!!; November 03, 2008 5:45 PM
Anonymous said...: WHY do i get the funny feel these 'interviews' sound so much like those complain stories on TimeShare

they invite you in, they sit down with you individually (or in same groups) and pour you tea and went on and on and one about how established they are, there might be one or two group claps, shouts or smiles of jubilance, you are shown more pictures and papers how established they are, whala you are convinced they are.

The only difference is YOU already paid up.; November 03, 2008 5:48 PM
ym said...: http://www.bloomberg.com/apps/news?pid=20601109&sid=aBJ_0ULSgrjY&refer=home

seems like angmohs also got the same problem..; November 03, 2008 5:53 PM
Anonymous said...: What this could mean is that ABN AMRO after analyzing all the facts realized that they are in trouble. Looks like they realized that there is something wrong with the minibonds & they cannot admit to providing advice or they will be in trouble. Someone said that they stopped selling after Series 3. Not sure if this is true. Could it be that they stopped selling because by then they realized that there is something wrong with the product or they realized that they have been mis-selling or mis-representing the product. Looks like they have got themselves into a bind. How can they say that when the very reasons they assign RMs to their customer is provide financial advice. In most cases, the RMs perform the financial needs analysis and then make the recommendation in the document. I hope MAS & CAD is on-the-ball & not falling asleep. I hope they are tracking this closely & realized the significance of this action the bank is taking. Looks like someone is guilty and trying to take evasive actions. If they are doing this, then their reputation as a bank is going to go down the drain. I hope the big bosses of RBS is taking note of this. In the end some people in ABN AMRO Singapore may just end up in deep trouble, not just lose his job, if they continue along this line of trying to evade responsibilities rather than biting the bullet & honorably doing "the right thing".; November 03, 2008 6:39 PM
Anonymous said...: Dear Mr Tan Kin Lian,
I suggest you should publish in your main blog the article from Bloomberg mentioned by ym 5.53pm. It is a very good article for all the affected investors & especially to wake up our politicians, MAS and CAD to take some definitive actions! I think the cows have come home & given birth already and we are still waiting for for some clear leadership & definitive actions from them...; November 03, 2008 7:08 PM
Anonymous said...: this will put the PM in difficult position. he wanted to create an caveat emptor financial hub and this has backfired. Alan Greenspan already admitted hands off is not a good idea but our leaders and MAS seem to think it is good and to be as competitve with Hong Kong. Then MAS should hire Greenspan and pay him multi million dollars to dismantle the markets and free up all FIs and advisers to do anyhting they like.; November 03, 2008 8:18 PM
Anonymous said...: "MAS need to clarfiy - how can bank and bokerages now claim they are just "order executor""

Why not the bank and brokerages diversify and start selling drug, heroin, and many dangerous but highly products since time are bad, after all they are just "order executor".; November 03, 2008 9:00 PM
Anonymous said...: Many of us purchased from OCBC Securities did so via another FI which is a reseller. OCBC claimed that they are just an "order executor" while the FI claimed that they are just an introducer to OCBC. Both organisations are pushing responsibility away.

If such claims are true then isn't it that any mama papa shop on the void deck can also take such orders.

As it seems MAS is refusing to look into this matter, I feel a petition is called for to investigate such claims otherwise all FI and banks will eventually claim to be just order executor.; November 03, 2008 10:13 PM
Anonymous said...: The FIs are really good at playing "tai chi" and finding covers...

son of singapore; November 03, 2008 10:30 PM
Anonymous said...: Attention: Mr Hwang Soo Jin – Independent Party for CIMB GK Securities, DMG & Partners Securities, Kim Eng Securities, OCBC Securities, Phillips Securities, UOB Kay Hian.

I trust you are reading this, and appeal that you act quickly. This thing about Securities Firms absolving their responsibilities under the "Order Executor" role has been going on for TOO LONG, as early as 15 OCT when a group went to OCBC Sec (published in several web-blogs and news media). Now, many other Securities Firms are taking the "Order Executor" stance.

The Securities Firms say as "Order Executor" they do not give "ADVICE" on product suitability to individual investors. However, what about the PRODUCT SPECIALISTS with the Securities Firms, who have evaluated the products and deemed them as FIT FOR MARKET? Was there any oversight or non-disclosure of risks to the IFAs/investors?

Dear Mr Independent Party, we urge you, besides ensuring the Complaint Handling Process is in order, please extend your investigation and assure us that we are not victims of wrong-doings by the Securities Firms and any oversight by their Product Specialists. Surely you must know besides Bottom-Up "case-by-case" investigations, there must also be a TOP-DOWN thorough, independent investigation of the Securities Firm, by someone like yourself or a 3rd party Auditor.; November 04, 2008 1:03 AM
Anonymous said...: I agree MAS and Mr Hwang Soo Jin need to clarify the increasing use of the defence that ther are just "order executor" by FI, especially the bokerage houses:

This is getting from bad to worse and extremely frustrating; November 04, 2008 9:21 AM
Anonymous said...: I support 10:13pm that:
"As it seems MAS is refusing to look into this matter, I feel a petition is called for to investigate such claims otherwise all FI and banks will eventually claim to be just order executor."

We should petition MAS to investigate these claims and inform the public about the duty and responsibilities of FI when selling financial products. Until then, no one should buy anything from banks and bokerages.

John Tan; November 04, 2008 10:23 AM
Parka said...: There is no such case in order executor in this case.

In fact, I have just emailed OCBC Securities telling them so.

All companies own a duty of faith to their customers. The Financial Advisor Act is just an extension of that.

Let me use the old supermarket analogy again. When the supermarket sold some milk that killed their customers. They customers sue the supermarket. The supermarket then sues the milk maker.; November 04, 2008 6:31 PM
Unknown said...: theres a problem with your analogy

the supermart KNOWS the milk maker is down and out, they CANT claim a cent

if YOU are the supermart, do you think YOU would let those customers claim YOU?; November 04, 2008 11:33 PM