On the issue of the credit linked notes, someone made a comment in my blog that, under the law, if you agree to a disclaimer to absolve the distributor from liability, you do not have any case - even if the distributor is negligent or fraudalent. He quoted with a purported knowledge of the law, as applied in Singapore.
I disagree with his comment. I believe that fraudalent acts, including the intent to cheat, cannot be covered by such disclaimers. I also believe that negligent acts, cannot be covered by such disclaimer, if they cover matters that the distributor, as a financial adviser, ought to know.
For example, if I see a doctor, I expect that the doctor ought to know that certain drugs are dangerous and unsuitable to be prescribed to a patient. The doctor cannot get away by asking the patient to agree a general disclaimer to absolve the doctor from liability.
The challenge to the consumer, in the case of the credit linked notes, is in finding the money to take a legal case against the distributor who gave wrong advice. The consumer does not have the means to challenge a financial institution, who has access to the top lawyers in town.
In many countries, the consumers can depend on the following avenues to uphold justice:
a) The regulator - who has the duty to enforce the law
b) The consumer association - who takes up the matter to protect the interest of consumers.
c) The politicians - who speak and act for the ordinary people to win their votes
d) Lawyers - who takes the risk under a contingency fee system
Take a look at what happens to similar cases in America or Hong Kong. Action has been taken by some of these parties.
Unfortunately, these channels are not available to consumers in Singapore. It is a sad state of affairs here.
Tan Kin Lian
It seems that at this juncture, neither the regulators, the consumer association nor the politicians are willing to help the many victims of failed Lehman products. Legal course is the only option.
ReplyDeleteHowever, the scheme proposed by MIAG is disadvantageous to smaller investor. They pay the same upfront fees but will receive smaller quantum when they succeed.
How do you define justice?
ReplyDeleteFIs may think that they have done their best towards the consumers. Consumers, however, think otherwise.
starlight
Hi Starlight
ReplyDeleteJustice has to be administered by judges, who have to act in fairness, impartiality and integrity. It has to be judged by the general public.
Hi Starlight
ReplyDeleteAs a member of the public, do you feel that it is all right for unwary people to be cheated of their savings? Can they trust their banks and relationship advisers to give them proper advice on financial products?
Is it their fault for being trusting? Can our judges say, "Bad luck to you, for not opening your eyes? "
Can the judge say, "You sign the disclaimer. Case closed". Is this justice?
Hi Mr Tan,
ReplyDeleteI may not be thinking along the same line as you.
Laws are created by humans and judges are also humans too, bounded by the thick books on law before passing a sentence.
What is considered fair to person A may not be so to person B.
For example, a person died in a drink-drive case. The driver at most banned from driving, pay a fine or even jailed for some weeks/months but never jailed for life. BUT to the victim's family, a life is lost forever and is there justice or fairness done?
Well, we can argue on the intention which is the driver did not kill the victim purposely and thus the type of "light" punishment he received from the judge.
I guess it is the intention that FIs/banks are relying on ie they did not go out to cheat at all.
I view this structured product saga as a chicken and egg problem.
It takes both hands to clap.
The banks/FI certainly have a role to play by not disclosing the risks, complexity of the products etc to the clients. I don't think the advisers or banks themselves are fully aware of the downside risk too. The clients also have a role to play. In an ultra low interest environment, almost everybody is attracted to products which give a slightly higher interest. They trusted the advisers and banks since they have better financial knowledge. But in the end, the clients lost lots of money and the FIs/banks denied responsibilities.
I recalled your suggestion that FIs/banks to partially compensate the investors which I think it is fair. But in reality, this did not happen to all investors.
I am one who was rejected and did not receive a single cent. I was very angry and disappointed. I filed complaints to Maybank and MAS. In the end, the verdict was just a rejection and full-stop.
So I gathered that it may be pointless for me to continue to pursue further.
I recalled The Serenity Prayer:
God grant me the serenity
to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.
In this world, there are simply too many things that we can't change and thus we have to learn to accept.
Having said that, Mr Tan, you are amazing because this structured product saga did not affect you and yet you put in so much time and effort to try to resolve it.
This selfless attitude is something all of us want to see in the leaders of our country.
Thanks.
starlight
Not so clear cut
ReplyDeleteFor those unhappy, remember 10,000 bought these products.
Only 5,000 complained, 5,000 didn't.
Dr Money said, “I don't recommend that you buy structured products. But it isn't because of the risks. Those are low.”
http://tnp.sg/columnists/story/0,4136,179234,00.html?
"Unfortunately, these channels are available to consumers in Singapore."
ReplyDeleteDo you mean NOT available?
Mr Tan there is a typo in your last paragraph. Should read "are not available".
ReplyDeleteWhether the distributor of the CLN has committed a fraudulent or negligent act, as a member of the public; what I will want to see is whether the system (which takes pride in itself) does indeed adddress the following :-
(a) If a fraudulent act was committed, whether Authorities had taken any action against the distributor, as a fradulent act is a criminal act under the Penal Code.
(b) If a negligent act was committed, all aggrieved parties should be able to sue for "damages" under our Common Law system, and the "rule of law" as Mr Tan had wrote should be fair to the aggrieved parties. And the definition of the "aggrieved parties" should not simply be left to the distributor himself. It should be adjudged with fairness. To adjudge this, the legal system must be fair and available to them.
But to pursue fairness, we find the legal system is totally biased towards the resource-constrained consumers who could be well or uneducated.
Agreeing to a disclaimer is equivalent to a private settlement. Some aggrieved parties could reached private settlement, but I believe their consent to settle will not prejudice others who are still aggrieved and not compensated, who should sue for "general damages" under Common Law. The avenue in law should be always available. Then it is a question of financial affordability of the poor consumers and the risk of loosing the case to opposing expensive / aggresive corporate lawyers whom are known to practise with unfriendly or even unfair tactics to the simple consumers / commoners.
We had witnessed the case of a Media Corp actor who was jailed even though he tried to or had entered into a "private settlement" with an injured party due to drunk driving. This is a one-to-one case. But the Authorities still prosecuted him and he was found guilty on the serious neglient act of drunk driving and jailed. He was jailed even though he had shown remorse.
Now the CLN debacle involves the masses - thousands of people & millions $. The few FI involved have financial muscles of billions if not millions of dollars.
To simply ask thousands of people involving millions $ to reach private settlement with these financially rich FIs is in itself a neglect of responsibility by those in authority.
If the (a)regulator stays out, (b)consumer associations are muted, (c)politicians asked the aggrieved to move on, and (d) if it is even illegal for public spirited "heroic" lawyers; if any, to take risks to help consumers sue under a contingency fee basis, I tend to agree with Mr Tan that it is a sad state.
Can we call this as "Uniquely Singapore" against the average consumer?
Hi Starlight,
ReplyDeleteI do not know the exact detail of your case. But I do know many cases involving innocent victims queuing up to withdraw their matured FD in front of the teller and RMs approached them and sold them the toxic products as FD or BOND. If this is not CHEATING, then what is CHEATING?
Steve
A disclaimer doesn't absolve the giver of advice of blame. Circumstantial events are needed to justify the disclaimer.
ReplyDeleteDear Starlight
ReplyDeleteHope you can consider the following:
[1] Do you think there is justice when MAS chooses not to investigate while FI responsibility is stipulated in S27 of Fin Adv Act?
[2] Do you think there is justice that another dept of the FI can carry out the complaint against them which involves statutory breach?
[3] Do you think there is justice when investor has to submit written complain and complete questionaire in FI format, while FI can respond in their own timing or offer partial compensation without giving reasons?
[4] Do you think there is justice when investor being cheated has to accept partial compensation on no liability basis?
I do recognise that there is always different point of view. However, I am still questioning myself whether investors are treated with compassion or not?
You know when an investor fights a lone complain against the FI, it is an "unarmed David" fighting "an army of Goliaths" to draw the metaphor from the scripture. Investor is alone. FI has full time managers, in-house legal, experienced bankers, corporate lawyer, litigation lawyer etc.
FROM CASHEW NUT
With MAS, you die your business. What protection? Protection not for you consumers but for the FIs. The FIs pay huge taxes; the insurance agents pay more taxes if they can con more commission; the RMs also pay more taxes if they can fleece old folks with huge life saving.
ReplyDeleteFinancial hub? cannot have rules, lah. Rules stifle the business. If you have rules then North Korea cannot put money here; Mugabe cannot wash his money in our laundry shops.
Hi steve and cashew nut,
ReplyDeleteThere is NO justice in this world.
A layman has no means to fight against the FIs simply because the latter have enough cash, time, knowledge & others to turn black into white. We all are aware of this reality.
The FIs are always have an upper hand and have an edge over the "victims".
starlight
Accept it, u r not rich in this unique country, so what justice? I hv never seen it, except bankrupt or go to jail. Unless u r OHL, u can engage the queen counsel to sue the FIs. Sad but what to do? Just read the World Bank survey 2 days ago on Teletext, titled "S'pore performed well in World Bank survey", if u read the details and read between the lines, u realized that we are the bottom 35% in the ability to choose the leaders, freedom of expression,....,etc, and a lot more. Even the press want to mislead. I lost all my money also, but what can i do, helpless, despair, sigh...,move on.
ReplyDeleteBrother or sister Starlight
ReplyDeleteI don't mean to pick at you. I just want to extend your comment that "There is NO justice in this world. ... The FIs are always have an upper hand ..."
What you said is true, that is why we need leaders or government or regulator. I like to draw on the scripture again. Chapter 5 of Nehemiah recorded that Nehemiah reprimanded Jews who took advantage of fellow countrymen. That is why Nehemiah is a leader and governor of the exile Israelites.
FROM CASHEW NUT
According to the Straits Times, there is a Singaporean billionaire who claims that he lost close to a billion dollars in forex trading due to the incompetence of a bank's reporting system.
ReplyDeleteThe lessons are clear.
1. Capitalism works best when there is an able, willing and capable policeman monitoring the "system".
2. Rich or poor. Nobody is safe when the policeman is on vacation. If the rich does not stand up for the poor ... eventually the rich will also be "fixed" in the same manner.
3. To all you middle-class millionaires out there .... If a billionaire can also be bullied by a bank ... what chance do you think you have?
The next time you are invited to be seviced by a private banker. Instead of thinking that you have finally arrived in Singapore high society. Take your money and run.
4. When you sing "Stand up for Singapore" on 9 August this year.
Ask yourself what is going through your mind.
Are you standing up for a flesh and blood fellow Singaporean ... like Mr Tan Kin Lian with his work on these structured products?
Or are you standing up for expensive, fancy public buildings like the Esplanade ("Durian") that does not belong to you anyway.
When I stand up for Singapore. Will "Singapore" return the favour and stand up for me when I need help?
There is a Chinese translation of Mr Tan's post:
ReplyDeletehttp://wayangparty.com/?p=10404
Chinese educated readers may like to take a look for better comprehension.