Written by Ng E-Jay (sent by e-mail to Tan Kin Lian)
18 Dec 2008
Mr Tan Kin Lian has revealed on his blog that he was approached by a bank relationship manager who wishes to confess to giving wrong information to investors of failed credit linked notes due to his ignorance about the risks of the product.
According to Mr Tan, this relationship manager has agreed to sign a statement, and will be approaching other relationship managers who are in a similar position to do likewise.
This relationship manager should be applauded for doing the right thing.
However, Mr Tan Kin Lian also revealed that the bank had, in Mr Tan’s words, “put pressure on him (the RM) by stating that he would be held personally responsible to compensate the customers, if he admitted to giving the wrong information.”
Such a threat by the bank is in clear contravention of the Financial Adviser’s Act (Chapter 110).
Under the Financial Adviser’s Act, the Financial Adviser (in this case, the bank) is responsible for the conduct of the Representative (the relationship manager) in respect of providing financial advisory services. If the Representative has mis-sold a product, whether out of ignorance or willfully, the Financial Adviser must take responsibility for it, and also decide whether or not to take action against the Representative. In the case of criminal activity, the Financial Adviser is obliged to lodge a police report, or give an explanation to MAS why a police report is not lodged. These rules are found in the Financial Adviser’s Regulations, which is subsidiary legislation enacted by MAS in support of the Financial Adviser’s Act.
A wrongful act cannot be covered up by telling the Representative to keep quiet about it. That would be outright fraud, the most serious offence under the Financial Adviser’s Act.
Furthermore, Section 68(1) of the Financial Adviser’s Act states that “A person is not excused from disclosing information to the (Monetary Authority of Singapore), pursuant to a requirement made of him under this Part, on the ground that the disclosure of the information might tend to incriminate him.”
Hence, it is not only morally right for the relationship manager to disclose that he has mis-sold a product, he is in fact required to do so under the Act.
We should encourage all Represenatives in similar situations to do the right thing by confessing to mis-selling the structured products and credit linked notes.
In my opinion, MAS should issue a blanket amnesty for all Representatives who mis-sold the credit linked notes due to ignorance. This would encourage more of them to come forward.
It is also very clear to anyone who is an industry practitioner that banks have high sales quotas for their relationship managers and exert tremendous pressure on them to meet those sales quotas.
Furthermore, the Financial Adviser’s Regulations make it clear that Representatives should only sell products in which they have competence. Since the Lehman-linked structured products deal heavily in arcane instruments like Credit Default Swaps (CDS) and Collaterialized Debt Obligations (CDO), it is not likely that the majority of Representatives would have the competence of explaining these underlying instruments to clients and appropriately advising them on the risks involved.
It is the banks and other financial institutions which should take full responsibility for the structured products fiasco.
- ► 2013 (304)
- ► 2012 (1270)
- ► 2011 (1873)
- ► 2010 (2369)
- ► 2009 (1655)
12/14 - 12/21
- Mis-selling of ILPs in the UK
- Letter of confidentiality
- California Governor order 2 day Unpaid Leave
- Cost of banks
- Survey by FISCA - Financial Services Consumer Asso...
- No claim discount on motor insurance
- Financial product has high penalty
- High charges in this investment-linked plan
- ProTrader - learn trading in a simulated environme...
- Survey - visitors to my blog
- Survey - Compensation on CLN
- Volunteers to help get 100,000 signatures
- Regular visitors to Tan Kin Lian's Blog
- US Lawyers Visiting Hong Kong
- HK Banks set up legal fund
- Buying a property - get a property report
- Investors of failed structured products to know ou...
- Encourage bank relationship managers to do the rig...
- MAS Ensures Progress in Complaints Resolution
- Bank RM has courage and integrity
- Offer of compensation
- SCMP:Lehman claims' bill HK$257m
- Financial advice
- Means testing for subsidised wards
- Downgrade to Medishield
- Fair charges on life insurance policy
- Fair compensation from insurance companies
- Search for a private property
- Offer of voluntary assistance
- Distributor can recover the compensation from the ...
- AsiaOne: Slip sliding into depression
- A crooked product or a crooked system?
- Helplines - for managing mental stress
- Coping with rising health care cost in Singapore
- Mental depression and suicide
- ERP and MRT in Singapore
- Video of my speech at Speaker's Corner - 13 Dec 20...
- Last Meeting on Speaker's Corner, 27 Dec 2008
- ▼ 12/14 - 12/21 (39)
- ► 2007 (1803)
- ► 2006 (696)
- ► 2005 (159)