24 June 2009
HONG KONG: The Securities and Futures Commission (SFC) may take disciplinary action against some financial institutions due to misconducts related to the mis-selling of risky derivative products to individual investors, Martin Wheatley, chief executive of the market watchdog, said yesterday.
The SFC has completed its investigation into 11 of the 19 banks that had distributed toxic Lehman Brothers "minibonds" to individual investors, Wheatley told legislators yesterday at a public hearing on the issue by the legislature.
Seven of the banks have been served with a notice of proposed disciplinary action (NPDA) while the other four will soon be served with a similar notice as apparent evidence indicated mis-selling of risky debt derivatives, he said.
Disciplinary proceedings will be taken against these banks unless they agree to compromises, he said.
Sending out an NPDA is the first step the SFC will take after it has decided to start disciplinary proceedings.
A NPDA sets out the findings of the SFC investigation and indicates the sanctions the SFC considers appropriate to impose.
Wheatley did not elaborate on the likely disciplinary sanctions.
But, according to the Securities and Futures Ordinance (SFO), which governs the operation of the SFC, the market watchdog is empowered to discipline regulated persons or firms who are found guilty of misconduct.
Sanctions that could be taken by the SFC include revocation of license or registration, suspension of licence or registration, prohibition of application for licence or registration, fines up to $10 million and reprimands.
Individual investors, who have bought minibonds or other toxic derivatives products, welcomed the latest move by the SFC but claimed that the move is far from enough to force banks to buy back the toxic financial products at their original investment value.
"It is too mild a move. The SFC should have applied for the establishment of a Market Misconduct Tribunal to handle these serious market misconducts," said Peter Chan, chairman of Allied Victims of Lehman Products.
"Banks (that distributed the toxic products) have tried their best to avoid redeeming all the toxic financial products at full face value. The SFC should have taken disciplinary sanctions much earlier," he added.
Wheatley said the market watchdog will complete its investigation of the remaining eight banks as soon as possible.
He also confirmed during the hearing that the SFC had received complaints about mis-selling against financial institutions from investors who had bought credit-linked notes (CLN) and equity-linked notes (ELN) from them.
Many of these investors, who have suffered huge losses from their investment in CLNs and ELNs amid the volatile market in the past several months, claim that they bought CLNs and ELNs only because of mis-presentation by financial institutions.
The market watchdog has not started investigation on these complaints yet, Wheatley said.
He said the SFC had received 8,400 complaints against financial institutions, mostly alleging mis-selling of Lehman minibonds.
Wheatley declined to comment on reports that BOC Hong Kong had offered to buy back all minibonds it distributed at 40 percent discount to the original investment value.
Wheatley is scheduled to attend another public hearing on the minibond issue by the legislature this Friday.
MAS should also take action against the FIs and the RMs if there was mis-selling instead of trying to find a way out for them.
ReplyDeleteMAS should regulate the people who sell financial and insurance products
stringently and the companies that manufacture the products.
The products these days are complicated, dubious with one aim and that is to con unwary,clueless and ignorant customers into buying.
Look at the insurance products , aren't they scam? Look at the bank structured products, aren't they betting products?
Unless MAS controls these people and companies the man in the street will be at the losing end.
They will be victims of scam.
I think the problems are too big and too widespread for MAS to take action. MAS will be overwhelmed if they do.
ReplyDeleteThat's why they can only issue new "guidelines" after all this fiasco.
And they are supposed to be the best, as reflected in the gahmen policy of best pay for best talent.
You are right that malpractice among insurance agents is big and out of control.It didn't happen yesterday.
ReplyDeleteYet it is not late for MAS if it really wants to do a clean up.
Singapore must not succeed as a financial hub at the expense of consumers especailly local consumers.
Anon: June 24,2009 11:30pm
ReplyDeleteWhy the same problem is tackled by the HK SFC and not by the SG MAS?
By your logic, Are you saying that the problem is HK is not too big and not widespread? I beg to differ.
It is not the scale of the problem but the decision of the respective govts that decide to action of the regulatory body. My impression is that HK SFC was initially reluctant to act but had no choice once the HK govt instruct it to do so.
Hence no disciplinary action by MAS does not reflect well on the SG govt. Where is the fairness and justice to the ordinary folks?
I refer to this comment "Anonymous said ... I think the problems are too big and too widespread for MAS to take action. ... That's why they can only issue new "guidelines" after all this fiasco." June 24, 2009 11:30 PM
ReplyDeleteI know you are aggrieved as well. I just like to give you an hypothetical story. "A young girl was raped. She reported to the police. The police said sorry, there were overwhelmed because there were too many rape cases. He asked you to talk to the rapists and settle fairly among yourselves."
Whist HK SFC has initiated disciplinary action against their banks and financial institutions for their misconduct in selling toxic financial products to their citizens, what action has so far been taken by our MAS?
ReplyDeleteIt is far from enough just issuing guidelines without implementing measures to ensure fairness and justice to be given to our ordinary citizens who were in reality bank depositors but misled by our banks and financial institutions to purchase the toxic financial products and hence had become investors and entailed heavy losses of their savings.
Being the watchdog of the government, MAS has to exercise its authority on banks and financial institutions which failed to follow their expectation, guidelines and requirements. Nobody is scared of a dog which can bark but cannot bite. The SGX and LTA have done pretty well in supervising the business operators under their purviews and this has been seen by majority of our singaporeans. However, this is somehow lacking from the MAS who was seen as trying to find way out of it!
MAS is looking for escape route for the FIs or hope by dragging its feet they will be forgotten.
ReplyDeleteIn this first place, MAS should not have allowed those structured products to be sold. The prospectus are so complicated and complex that even the professionals do not undertstand them. Furthermore, the prospectus is only given after you signed on the dotted line and there is no cancellation of the purchase. This is further compounded by the RMs who at best do not understand the structure of the products and at worst trying to sell the products to the customers so that they could fulfill their quotas and earn more commissions.
ReplyDeleteLast time the prevenetive measures were so good that no one in SG need to experience such "unpleasant experience".
ReplyDeleteNow even the correct measures taken to rectify the situation lag way behind HK.
Shd learn from HK people who are more experienced (experienced such things before, and is more experienced in handling such cases.)For example, they buy back from all victims thus compensate everyone more fairly.