Tan Kin Lian's Blog: Banks get guidelines on treating customers fairly

Tuesday, April 07, 2009

Banks get guidelines on treating customers fairly

4 April 2009

The Editor
Forum Page
Straits Times

I refer to the article “Banks get guide on treating customers fairly” (ST 4 April).

I congratulate the Monetary Authority of Singapore for taking the appropriate steps to address this issue. However, may I raise a matter of public concern?

Does this imply that in the past, it was all right for the banks to treat customers unfairly? For example, was it all right for a bank to design a complex financial product that give a poor return for the risks embedded in the product and sell the product to an unwary public, without disclosing the relevant information that are available and known by the product issuer?

Were there already laws in place that were supposed to protect the consumers against unfair or predatory practices?

I recall that there were specific requirements under the existing section 199 and 200 of the Securities and Futures Act and under Section 27 of the Financial Adviser’s Act.

A petition was signed by 983 people who alleged that they were misled into investing in several credit-linked notes, such as the Mini-bonds, High Notes, Pinnacle Notes and Jubilee Notes. This petition was lodged with the Monetary Authority of Singapore on 8 October 2008. It requested the MAS or the Attorney General to investigate if there were breaches of relevant provisions under the existing law.

To my knowledge, there was no announcement on the outcome of the investigation, or if such an investigation had been conducted.

If the investment banks that created the products or the financial institutions that sold the products had failed in their duty under the existing law, surely it is the responsibility of the authority to charge them in court and allow the matter to be decided by the court?

If the court had found that the law was vague, then a subsequent step should be taken to clarify the law through new legislation or regulations.

Let me illustrate with this example. Someone broke into a house and took away an expensive notebook computer. The owner lodges a report to the Police. Should the Police now issue a new guide to explain what is house-breaking and theft? Surely, it is the duty of the Police to charge the culprit, with sufficient evidence, and let the court decide on the matter, based on the existing law?

Tan Kin Lian

7 comments:

zhummmeng said...: It seemed only the banks did big damage and insurance companies didn't. What the banks did was exposed and although it came to a billion at the most it has overshadowed the bigger picture.
The insurance companies and their salespeople have caused far bigger damage and because they were never exposed or brought to attention people think these companies and salespeople never committed fraud, mis-selling and unethical practices like the banks.These people are even worse if you dig deeper into what they have committed.
There are few reasons for it. First most don't really know whether they have lost in insurance plans . This loss can amount to billions of dollars through early, premature surrender or termination. Investment loss is far bigger than the structured product loss if you consider the CPFIS.
Secondly, generally policyholders are fearful or clueless about their rights and because their agents are their relatives or friends that they forget the whole matter when they are aggrieved.
Thirdly , no one to take up the cudgel for them.
I hope Mr. Tan's Consumers Association will fill the gap, not only to provide education on insurance matter but to help policyholders review their insurance policies to check for mis-selling, misrepresentation and inappropriate recommendations and to advice on legal suits.
If MAS is not doing this then the consumers must come together to fight for their rights.
Thanks to the crisis. If not,the consumers would not have realised the structural fault and inadequacy of the financial system.; April 07, 2009 9:37 AM
Concerned said...: New guidelines by MAS - damage control???? The only way to avoid future such fisaco is to avoid buying structured products sold by FIs.; April 07, 2009 11:38 AM
David said...: Mr Tan,

I think they will respond something like as follows:

"
Thank you for your feedback and petition.

We have reviewed the existing laws and they are adequate to protect the consumers against unfair or predatory practices and have not found any grounds to prosecute any financial institutions under existing laws.

However we will not hesitate to do so if they are found to contravene these laws in future"; April 07, 2009 6:52 PM
Unknown said...: Never trust the banks. In good time when the sun is shinning bright they lend you the umbrella although you don't need.They will try ways and means to entice you with gifts and all sorts of incentives to make take the umbrella you don't want.
When there is sign of overcast they threaten you. When it is raining they snatch away the umbrella mercilessly. This is how the banks operate.
What about the investors who got burned by the banks? Are you powerless to take on them?; April 07, 2009 10:14 PM
Koh said...: No point in giving more quidelines, etc. - in short paying lip-service. Where there is proof/evidence of contravention of any laws. etc., MAS should take the necessary legal action straight away - no more dilly dally!!; April 08, 2009 6:00 AM
Cashew Nut said...: FRIENDS
MR TAN title is very aptly tactful "so what about the Law". We are all going round cycle on "fairness", "guidelines", "FI to investigate" etc.
* The real issue is that there is already law in place, and MAS does not need to come with NEW GUIDELINES to deal with the PAST MIS-SELLING.
* NEW GUIDELINES are only good for future conduct.

CASHEW NUT; April 11, 2009 12:03 AM
Parka said...: Guides are useless. Law is ultimate.; April 16, 2009 1:58 PM