I have the worry that SIAS statement dated 7 February 2009 and MAS affirmation could actually weaken the investor position, un-wittily. As a result, the FI could corner the investor even if they are in the complete wrong.
Let me give you a HYPOTHETICAL illustration below.
1. FI offers 30% compensation
2. If the investor accepts, the investor will only get 30%. Investor will lose the possibility of full claim (the rest of 70%), reimbursement of costs and compensation for distress. The FI saves 70% of compensation and other related compensation. Most importantly, FI escapes being punished under the Financial Advisor Act.
3. If the investor rejects, the investors will have to fight on his own. That means investor forfeits the original 30% compensation. Investor will have to take out money and time to fight the case, and not to mention the stress and anguish of injustice investor has to go through. While the FI fight the case as an institution with full resource and support eg. full-time staff, corporate lawyer, financial advantage etc. Whilst, the investor has to fight as an individual with bare knuckle and with little knowledge and financial resource. This is another situation of “institution vs individual” and “strong vs weak”.
With the above illustration, FI stands on the upper hand.
If my analysis is correct, and if I were the advisor for the FI, I would be well rewarded by advising the FI to compensate all the investors with investment below $100,000 a compensation of 30%. I think more than 90% of the investors will accept it, as the investors are being cornered. The FI will amass their might to fight the remaining disgruntled 10% investors.
This is an effective strategy. Using the military metaphor, you have effectively segregated and castrated your opponents, thereafter using “an army of Goliaths to fight an infant David”.
If the FI chooses to take advantage of SIAS’s statement, I hope not. The investor will lose out greatly both in terms of unfairness and injustice.
It is unfair because the investor will likely be cornered to accept 30% compensation even if the FI is in the complete wrong. This is especially so when the investor invested less then $100,000 and below. The original words of comfort from MAS that “complaint handling should not be based on legality but guided by principle of fairness” will come to nothing. The investor is misled and suffered loss, he could only recover 30% compensation. Investor is unlikely to spend more than 100,000 legal costs (Note: Structured notes is complicated and legal will not be cheap.) to fight the remaining 70% or $70,000 claim.
It is unjust because investor who is being misled, if investor accepts 30% compensation would have to pay for “70% of the FI who misled”, suffer “anxiety and anguish” and see the FI “escapes punish by law under the Finance Advisor Act”. It is unjust because if investor rejects the 30% compensation, he stands alone fighting a disproportionate battle against the FI. Hopefully, the money invested is not the investor’s coffin money or cash reserved for children tertiary education.
I think FI will take maximum legal leverage. This is because admission to mis-selling is self-incriminating that FI contravenes provision of the Financial Advisor Act.
I really hope that my deepest fear of injustice will not occur to ordinary people.
FROM: CASHEW NUT
Let me give you a HYPOTHETICAL illustration below.
1. FI offers 30% compensation
2. If the investor accepts, the investor will only get 30%. Investor will lose the possibility of full claim (the rest of 70%), reimbursement of costs and compensation for distress. The FI saves 70% of compensation and other related compensation. Most importantly, FI escapes being punished under the Financial Advisor Act.
3. If the investor rejects, the investors will have to fight on his own. That means investor forfeits the original 30% compensation. Investor will have to take out money and time to fight the case, and not to mention the stress and anguish of injustice investor has to go through. While the FI fight the case as an institution with full resource and support eg. full-time staff, corporate lawyer, financial advantage etc. Whilst, the investor has to fight as an individual with bare knuckle and with little knowledge and financial resource. This is another situation of “institution vs individual” and “strong vs weak”.
With the above illustration, FI stands on the upper hand.
If my analysis is correct, and if I were the advisor for the FI, I would be well rewarded by advising the FI to compensate all the investors with investment below $100,000 a compensation of 30%. I think more than 90% of the investors will accept it, as the investors are being cornered. The FI will amass their might to fight the remaining disgruntled 10% investors.
This is an effective strategy. Using the military metaphor, you have effectively segregated and castrated your opponents, thereafter using “an army of Goliaths to fight an infant David”.
If the FI chooses to take advantage of SIAS’s statement, I hope not. The investor will lose out greatly both in terms of unfairness and injustice.
It is unfair because the investor will likely be cornered to accept 30% compensation even if the FI is in the complete wrong. This is especially so when the investor invested less then $100,000 and below. The original words of comfort from MAS that “complaint handling should not be based on legality but guided by principle of fairness” will come to nothing. The investor is misled and suffered loss, he could only recover 30% compensation. Investor is unlikely to spend more than 100,000 legal costs (Note: Structured notes is complicated and legal will not be cheap.) to fight the remaining 70% or $70,000 claim.
It is unjust because investor who is being misled, if investor accepts 30% compensation would have to pay for “70% of the FI who misled”, suffer “anxiety and anguish” and see the FI “escapes punish by law under the Finance Advisor Act”. It is unjust because if investor rejects the 30% compensation, he stands alone fighting a disproportionate battle against the FI. Hopefully, the money invested is not the investor’s coffin money or cash reserved for children tertiary education.
I think FI will take maximum legal leverage. This is because admission to mis-selling is self-incriminating that FI contravenes provision of the Financial Advisor Act.
I really hope that my deepest fear of injustice will not occur to ordinary people.
FROM: CASHEW NUT
REPLY
The position stated by SIAS is correct. If the investor goes to FIDREC or take legal action, the offer by the financial institution is automatically withdrawn.
I believe that a fair offer is 50% of the amount of the loss, i.e. that the loss should be shared equally between the distributor and the investor. I hope that the financial institution will agree to offer 50%, so that most of the investors will accept it as a fair offer.
So now you know that our pledge of "Justice and equality" is just pure rhetoric. Choose your leaders carefully, otherwise it is just verbal promise while happily letting in foreign sharks to cannabilise you.
ReplyDeleteSIAS is usurping your role.It may be acting on behalf of MAS who is trying to avert a crisis for the FIs. FIs know that they are at losing end if the cases go to court, not only their reputation but also losses.Consumers' confidence will be dented.There will spin offs and the spin offs will eventually affect the life insurance industry where mis-selling is even worst and rampant. Miss-selling is central to the issue and mis-selling definitely there was and in every case.
ReplyDeleteInvestors must decide. Going for class action will be the best without the 'help' of SIAS because it will be fought to the bitter end. To lose most is the FIs.
does that mean that the only option left for investors is to go for a class suit?
ReplyDeleteHi 12.45 AM
ReplyDeleteI never believe in "turf". I do not regard the role of helping the investors should belong to one person.
It is all right for the investor to seek help from SIAS. Listen to what is their advice, and make your own decision.
SIAS and MAS wants the investor to take the offer from the financial institution. I hope that the offer will be at least 50% of the amount that has been lost. I consider 50% to be a fair offer.
50% means FI and investors share the responsibility of this whole CLN saga.
ReplyDeleteHow about the issuer? For the case of Pinnalce, Morgan Stanley is still around. Aren't they responsible for creating a CLN product but didn't execute it in accordance to the prospectus? Showing 5-7 REs in marketing material, while during execution, they sell protection for 100-125 REs?
Where was SIAS all this while, while investors have to gather in Hong Lim Park almost every week-end, in groups amongst themselves in some places and in some legal office discussing, groping and fearing what would be the outcome of their investment and whether they could recover part of their money.
ReplyDeleteNick,
ReplyDeleteYou made a good question, but nobody agreed we were cheated from goverment. I rather be cheated by Mandiff. At least goverment agree the investors are cheated.
Now even we do not know the value of mini bond, how we know the FI compensate the fair value
ReplyDeleteWhat I am afraid SIAS might compromise the interest of the investors for the sake a settlement.
ReplyDeleteThe FIs are anxious to get over. The longer it is delayed it is to the detriment of FIs.
It is understandable why MAS wants to resolve this amicably without the issues going to court. When the FIs are push to a corner, their lawyers will then point their fingers at MAS for not playing a strong regulatory role. So naturally MAS and its leaders want to put this behind it as soon as possible. Look at it this way, it is not just the 100K that you lose but the possibility that the leadership and governance of our country is being put into scrutiny. This has far ravaging effects on the collective leadership that we have prided ourselves on all these good years. At stack would also be the recurrant high salaries of the top management of MAS. How can they give all this up just because of your 50K and 100K one time investment with your eyes open?
ReplyDeleteMAS need to act like SFC Hong Kong to make the FI compensate 100%. The FI have the means to reclaim from the issers. This is the proper chain. Sadly, MAS failed in her role. Now trying to rope in SIAS to try to prevent the lawsuit. Let's not fall for it.
ReplyDeleteSIAS is trying to claim some credit now after all the hard work that is done by Mr Tan KL. But in the process they might just do the investors a great dis-service. Sad...
ReplyDeleteThe FI should just pay 100% refund and get it over with. Sure they can argue that there are undeserving people like those who are high risk takers who will benefit from this.
ReplyDeleteBut do note that it is the FI's duty of faith to do a proper check in the first place before selling these items. The fact that FI isn't require to perform that duty of faith is a lack of regulation or incompetence of some people letting these products into the market.
Agree with Concerned 11.08am. Where was SIAS all this while. When we intended to hold a forum with brokering house and requested the presence of SIAS. Guess what- nowhere to be found.
ReplyDeleteI strongly agree that a fair compensation has to be at least 50% regardless whether the investors fall into the vulnerable catogeries. I personally have not receive any offer yet but feel that we are letting the FIs off to lightly if we accept a 30% payout. However, in times of difficulties if the investors need the money urgently it is difficult to ask them to walk away from the offer while suffer more anguish and stress to wait for the outcome of this saga which definetly will take years. It seems that MAS might have misrepresent their data findings in their last announcement. It is so frustrating that our government is siding the FIs and make the SPH give the wrong impressions to the rest of the Singaporeans again and again. I am starting to realise our 'dirty' our country can be.
ReplyDeleteFor those bought from brokers via IFA, it is nothing, 0 cebts.
ReplyDeleteThey need help the most, but they (FIs) hv done the legal doc almost water tight, and go to court also might not hv hope.
So it is not right or wrong, but whether u are in upper hand kegally.
I think SIAS was right to point out that if one wants to pursue the matter further in court or FIDREC, one will have to forego the partial compensation offered by the FI. But I don't think SIAS had advocate anyone to accept the offer and not to go to FIDREC or the court. This is a personal decision based on the merit of each case whether to pursue or not. For example, if I were only offered 10% or 20% of my $50k investment in High Notes 5, I would be more inclined to fight a class action if I strongly believed I have been misled in buying the notes. If my investment is S$10K or S$20K, I don't think I bother to stress myself to fight further. Each person has his right to decide for himself. And I really support a class action against the FI which created and sold the toxic products, because the cost can be shared and the action is unprecedented and historic in nature, at least in our history. There is no basis to believe the investors will lose the case in court.
ReplyDeleteMAS should suspend the license of the FI refusing to settle
ReplyDeleteEach failed structured product has its own underlying securities & toxicities. The FIs would have known by now how they have faired in the failed products & how much they could fairly compensate. Investors should take the implications thereof & decide for themselves what are fair compensations for themselves.
ReplyDeleteWith SIAS being roped in to avert a
ReplyDeletelegal confrontation one can see that MAS is worrying that the reputation of the FIs will be tarnished.
Investors have right to full compensation if they were mis-sold and misrepresented. It is like a crime committed against the investors
and the regulator avoiding the issue.
The warning of losing the offer by FIs seems like a threat if the case goes to FIDREC or the court. SIAS is assuming that the investors cannot win in court and there was no mis-selling.
My reasoning is if there was mis-selling and misrepresentation by the RMs there is very strong case against the banks or FIs. The RMS can be subpenoed as witnesses to testify for the investors.
Investors must think carefully. Justice must be done and should not be tempered with.The FIs must not be protected if they have committed wrongs.They must be punished and so are the salesmen who acted as their agents.
I think Mr TAN KL's suggestion of 50% is fair. Whether we have been misled or not, the moment we parted our money, we have already taken a risk.
ReplyDeleteAnd we have to pay a price for taking that risk.
Jasmin
WILSON
ReplyDeleteI like to add on to your view that " ... I think SIAS was right to point out that if one wants to pursue the matter further in court or FIDREC, one will have to forego the partial compensation offered by the FI..."
This is NOT a usual civil dispute. This is a MIS-SELLING situation and they were directed by MAS to handle the complaint.
[a] Will MAS investigate had it not so WIDE SPREAD
[b] Will FI offers anything at all if they are 100% clean
[c] When FI offers even $1 compensation, it speaks VOLUME.
I wrote this article because I saw POTENTIAL of UNFAIRNESS and INJUSTICE could be inflicted upon investors.
FROM Cashew Nut
SIAS was nowhere when we need them. Our group specifically requested their help when we were trying to get an open forum with the bokerage firm. All these non-support contributed to only 1% getting compensation from securities firm. Now SIAS want to offer their help (to the FI, as I read it), I say go fly kite. We don't need you as we know who you are aligned to.
ReplyDeleteJumping on the bandwagon to gain credibility or a proxy for the regulator?
ReplyDeleteTrust neither.
Investors must be clear about what they want and go for it.Legal actions against the FIs for mis-selling is the trump card to get full compensation. The FIs will lose. Don't be confused by the noises.
gogo!
ReplyDeleteI agree. Don't trust SIAS. I am planning to give up my membership. My message to SIAS - do something useful to the investors with action to prove your genuine intent to help. Many have lost faith of you over the past months.
ReplyDeletefinaly we got a chance to see hows our goverment treat us.
ReplyDeletethis is just one of their projects.
For minibond series 2 and 3, ABN Bank still show market value of 50+% on their latest bank statement to investors. If they offer compensation of less than 50%, how do they expect customers to accept that? Surely Customers will choose to go FIDREC to fight for more or wait for Minibond remaining value to be returned in future.
ReplyDeleteIn the first place the F1 should NOT be expected to PAY a single cent, if there is no prove that misselling has happened.
ReplyDeleteAs the shareholder of the FI, I think the goodwill of FI has been taken for granted.
FI should fight seriously with those who are unreasonable.
The FIs should be sued and they know it is not good. That is why MAS roped in SIAS hoping to resolve the matter without going to court.
ReplyDeleteThe moment the legal action is commenced I can bet the share prices of the FIs will plunge.
There are plenty of evidence of miss-selling. The witnesses can come from the RMs themselves. Many of them are willing to testify.
If SIAS is serious to help, investigate why a much lower % of those who bought from bokerages are compensated. They are more closely aligned to bokerages and can act as a voice for the victims to get their fair compensation.
ReplyDeleteThe news that UOBKH cheated on their trading exam is enough to show that UOBKH has poor control and it's traders are not honest and unqualified to handle sale of these complex products.
Hi,
ReplyDeleteI am not on the side of the FI but we have to face the fact that it is not easy to prove there was misselling when the recording was not done in the first place.
In the court, if there is no concrete evidence, then it would be your words against their words, what will happen? Unless there is no compensation at all, if not, just receive whatever the compensation is and forget about the whole issue. I also lost money in the Aviva Capital Guranteed Product sold by the DBS, what to do? $13,000 lost leh, not a small sum at 2005. But we have to move on right?
I still have not got letter from FI yet.
ReplyDeleteStraits Times 11-02-2009 page B24 reports that UOB Kay Hian fined
ReplyDelete$ 115 k for examination breach, Singapore's largest brokerage. How can the largest brokerage firm in Singapore get away with such a light punishment?
Why need recording when you can have the evidence from the horses' mouth?
ReplyDeleteThere are at least a dozen of RMs willing to testify against their former banks.
To take class action against the FIs may be a good idea, as the cost can be shared to engage a senior counsel to fight for the investors. One concern is whether there will be extra cost on top of what is agreed upon at the beginning. For instance, if the investors lose the case, will the FIs claim legal cost and other expenses that those who join the class action must folk out? Is there a max each investor will share? Can anyone enlighten me please?
ReplyDeleteI share the concern by the loser 9.51 pm in case we lose the case completely, do we have to pay legal costs to every FI's solicitors? It will come up to a substantial if not astronimical amount. The SC can advise us on our exposure. Would it be better we choose a typical case to sue a particular FI, and if successful, we use this case (precedence)to seek compensation from other FI's. Perhaps we can discuss further during the seminar.
ReplyDeleteI refer to ".. would it be better we choose a typical case to sue a particular FI, and if successful, we use this case (precedence)to seek compensation from other FI .." posted on February 12, 2009 11:57 PM.
ReplyDeleteThis is an interesting option.
ALTERNATIVELY, we may sue a PARTICULAR RM (instead of the FI, an institution), so that systematic problems of FI and RM will be surfaced.
- The RM has to pay for own legal cost.
- If FI pays for RM legal costs, then it will be up to MAS to deliberate and PUBLIC to see.
From CASHEW NUT
Hi,
ReplyDeleteIf every investor whether receives compensation or not unite together to take the FI into court, then there is still a chance to win the case. But I doubt so when some of the investors already opt out when they are being compensated in one way or another. You can predict the outcome if really going into the court.
For the RM, if they were being retrenched, would the judges buy their words? The defence counsel would definetely say the RM bore hatred against the FI. Anyway, could the RM remember vividly every case he or she dealt with is a matter of concern.
responing to Cashew Nut, If you sue RM only, the court may rule he is not 100% responsible for it. What happen then? Can RM afford to compensate a large amount? At most he declares bankrupt. What then you want to do to him?
ReplyDeleteIf the RMs tell lies they will be charged for perjury. This is serious and punishable offence with max.7 years jail sentence. Would the RMs lie? Don't think so but the truth and nothing but the truth.
ReplyDeleteThe RMs and the FIs are jointly and severally liable. It means you can sue either one and both are responsible. of course you can sue the FIs for the mistakes of the RMs.
ReplyDeleteTo friend who wrote "... If you sue RM only, ... Can RM afford to compensate a large amount? .."
ReplyDeleteSuing the RM is really the LAST RESORT but a CHEAP solution. Cheap solution will have cheap return.
What option do we have ... FI who has the BUCK will not be compensating because it is self-incriminating... MAS position and approach is also clear.
Suing the RM may bring some comfort to the saddened investors.
FROM CASHEW NUT
I think sueing the RMs is throwing good money over bad. The sensible way is to see what the senior counsels will advise as they are the only ones with the knowledge and experience to tell which one is the best approach and which one gives the best chance of winning and compensation (to sue the FIs or the RMs). Of course the counsels must also tell us what happen if we lose the case and the approximate share of cost by each participant. Don't forget that we are talking about class action where the group of investors must act in tendam and in agreement with the advice of the senior councels. Personally I don't think it makes sense to spend money just to take revenge on those RMs who can hardly pay back any of your losses. If they are backed by the FIs then we are against the FIs not the RMs.
ReplyDeleteWILSON
ReplyDeleteThank you for this GOOD REMINDER and COMMENT .. "Don't forget that we are talking about class action where the group of investors must act in tandem and in agreement with the advice of the senior counsels. .."
FROM. CASHEW NUT
RMs are the representatives of the FIs and whatever they did the FIs are responsible too. There is a agent/principle contract. The agents or RMs did on the behalf of the FIs.
ReplyDeleteAll insurance agents , RMs FAs, planners hold a representative license.
Whoever you sue both will be involved.
Suing the RMs is to get them to vomit out everything, what they did , instructed to do by and with the approval of the FIs. It is like extracting a confession about the FIs or to get the RMs as whistle blowers.
Anyway, your lawyer should know the best strategy to take.The goal is to get someone spew out all the filths and wrong doings of mis-selling.Only admission of miss-selling will justify FULL COMPENSATION.
Can I move on to FIDREC or even join in class action after I have accepted offer of compensation from the bank.
ReplyDelete