Singapore, 17 December 2008...
MAS today provided an update on steps taken to ensure that the 10 financial institutions (FIs) that sold DBS High Notes 5, Lehman Minibond programme notes and Merrill Lynch Jubilee Series 3 LinkEarner notes deal with investors’ complaints in a rigorous and fair manner.
2 Over the last 10 weeks, MAS has been working closely with the independent persons (IPs) who were appointed to oversee the complaints handling and resolution process to ensure that the FIs make good progress in handling and resolving their customers’ complaints. MAS’ investigations are also progressing.
MAS review of process and assessment framework
3 In consultation with the IPs, MAS conducted on-site visits to assess the handling and review of complaints, including observing the internal review panels in action. Following these visits, a few FIs were asked to increase their resources, including engaging external firms to supplement internal staff where necessary.
4 We are working with the IPs to ensure that each FI has a robust assessment framework to identify indicators of potential mis-selling and offer fair financial settlement where appropriate. The IPs have provided feedback to MAS on how the FIs have applied the framework across a sample of actual cases. We are also ensuring that the assessment framework is consistent across FIs.
MAS’ investigations and regulatory actions
5 MAS is also looking at FI-wide issues, such as the selling practices and policies within each FI, as part of its formal investigations. The investigations cover, among other matters, the FI’s due diligence into the structured notes, the procedures used at the point of sale, including how the FI ensured that the notes were sold to clients whose investment objectives and risk tolerance matched the risk profile of the notes, and the training and supervision of relationship managers. As part of these investigations, MAS is requiring each FI to produce documents relevant to these matters and is interviewing senior management.
6 MAS has worked with the IPs to ensure that any potential FI-wide issues identified in the course of investigations have been incorporated into the assessment of individual complaints. Where issues have been identified, we will take into account the extent to which the FI accepts responsibility and deals with complaints rigorously and fairly before deciding on the appropriate regulatory measures or sanctions to be taken.
Progress of complaints’ handling and compensation
7 As of 14 December 2008, the 10 FIs have received 4,978 formal complaints: 815 for the DBS High Notes 5, 4001 for the Lehman Brothers Minibond programme notes, and 162 for the Merrill Lynch Jubilee Series 3 LinkEarner notes. All the FIs now have teams working long hours to meet the MAS’ review targets. In some cases, these teams comprise 100 to 120 case officers. Consistent with MAS’ expressed views, the FIs have agreed to review complaints based on principles of fairness rather than taking the strict legal position that they would if the matter went to court.
8 Over 90% of the complainants have been interviewed and FIs’ internal review panels have come to provisional decisions on approximately 80% of these cases. Most FIs are resolving complaints according to MAS’ timeline. Others need to put in more effort to catch up. MAS and the relevant IPs are monitoring their progress closely.
9 Based on the current case load, the FIs have informed MAS that they aim to complete the reviews for all except the more complex cases by no later than end January 2009. Some clear-cut decisions have already been communicated to investors.
10 Shane Tregillis, Deputy Managing Director, Market Conduct Group, MAS, said, “We have asked the FIs to conduct some final due diligence on the remaining complaints to ensure that they have taken into account the IPs’ recommendations, likely issues arising from any MAS’ investigation findings and to check for general consistency in the application of the complaints resolution framework. This is expected to take a few more weeks. Although these steps will extend the current timetable for communication to investors by a few weeks, we believe that the final outcome will better serve investors’ interests. Accordingly, most investors can expect to hear from their FI on the outcome of the review of their complaint starting mid January 2009.”
11 However, from a review of a sample of cases, it seems clear that some complainants should be prepared to take responsibility for their investment decisions. MAS will provide a further update on the complaints resolution process at the end of January. Mr Tregillis added, ”We are working closely with the independent parties to ensure that all of them meet our requirements in reviewing and resolving complaints. MAS will continue to oversee the process to ensure all customers’ complaints are resolved rigorously and fairly.”
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