I post below, the wordings of section 27 of the Financial Advisers Act. I believe that MAS should consider if the licensee (i.e. distributor) has breached this section and ask them to compensate the investor for the loss or damage as required under sub-section (3). But I am not sure if I have read this section correctly, in respect of the mis-representations to the investor of the credit linked notes. What are your views?
Recommendations by licensees
27. —(1) No licensee shall make a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation if the licensee does not have a reasonable basis for making the recommendation to the person.
(2) For the purposes of subsection (1), a licensee does not have a reasonable basis for making a recommendation to a person unless —
(a) he has, for the purposes of ascertaining that the recommendation is appropriate, having regard to the information possessed by him concerning the investment objectives, financial situation and particular needs of the person, given such consideration to, and conducted such investigation of, the subject-matter of the recommendation as is reasonable in all the circumstances; and
(b) the recommendation is based on the consideration and investigation referred to in paragraph (a).
(3) Where —
(a) a licensee, in making a recommendation to a person, contravenes subsection (1);
(b) the person, in reliance on the recommendation, does a particular act, or refrains from doing a particular act;
(c) it is reasonable, having regard to the recommendation and all other relevant circumstances, for the person to do that act, or to refrain from doing that act, as the case may be, in reliance on the recommendation; and
(d) the person suffers loss or damage as a result of doing that act, or refraining from doing that act, as the case may be,
then, without prejudice to any other remedy available to that person, the licensee is liable to pay damages to that person in respect of that loss or damage.
(4) In this section, a reference to the making of a recommendation is a reference to the making of a recommendation expressly or by implication.
(5) This section shall not apply to any licensee or class of licensees in such circumstances or under such conditions as may be prescribed.
Tan Kin Lian
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Credit Linked Notes
14 comments:
I just leave a comment to show my support on Mr Tan. How could he be so kind and nice to help others when others almost giveing up fighting for themsevles.
If I read it correctly, the onus of duty is on the FI or seller, because the act is drafted as "No licensee shall make a recommendation .... if the licensee does not have a reasonable basis for making the recommendation .." The the negative sentence structure makes the seller's burden even heavier.
If that is true, when a complaint is made the RM has to provide basis on how she arrived at the recommendation. I think I am correct!
From CASHEW NUT
Mr. Tan, FISCA must teach the consumers about section 27, their rights to responsible and competent financial planning and the right approach to their needs and Not product pushing. Also advise who are the advisers who can dispense this.
Investor can sue, not MAS.
Investor has to prove 3b and c.
MAS never enforced this section and that is why the fiasco happened.
MAS must be blamed for it.
MAS can absolve itself by atoning for the mistakes by hauling up the RMs and the FIs for violating the law.
MAS should see by now that leaving to FIs to self regulate didn't work but abused . MAS must know that FIs would not shoot their own foot.
These laws must be forced upon them to make sure the RMs and insurance agents use the need based approach to clients' needs. Not only that to ensure recommendations are of reasonable basis the RMs and the insurance agents must be accountable and liable for the outcome otherwise there is no fair dealing.
MAS must police the industry and plant spies or make easy for whistle blowing for the public and the salespeople to whistle blow their colleagues if they suspect them of unethical practices.These measures are necessary as the salespeople and the FIs have proven that they cannot be trusted to regulate themselves.
The lure of commission and money drove many to commit unethical practices especially the agents who qualified for MDRT. Anecdotal evidences of their unethical practices are a plenty.The CEOs and the senior management know but keep both eyes closed because internal implementation and enforcement would affect the bottomline.
To pr-empt another debacle MAS must swiftly act to put in place these laws and enforce them.
The greatest culprit of all debacles is the COMMISSION. It is is root of all evils. Something MUST be done . No matter how difficult and painful the righteous , honest and competent practitioners must be protected against the product pushing salesmen and women who are tarnishing the profession.
It is now or ever.
that right. the "victims" just whine and complain, but do not get their butts off their cushy chair to do something for themselves.
If you feel aggrieved, go to speakers' corner, join the lawsuit.
The distributor may mount the defence that their sales representatives had collected the personal profile of the investor and found the financial product to be suitable. Also, the investor had signed a statement to waive the liability on the distributor.
I am not sure, how this point can be contested, in legal terms. Any ideas?
MR TAN.
Your comment is correct in legal terms. ie investor was tricked into signing document to the favour of FI. My fear is that Singaporeans has lost sense of justice even for their own money; how about thinking about some old uncles and aunties that they still think their coffin money is still in fixed deposits. My grave worry is Singaporeans stop at legality and cannot think beyong eg Justice, fairly, conscience !
An island is land without soul. Country is land with a soul! Is Singapore your country?
Watchman
The obvious appproach would be to obtain a court order to obtain the contact details of the sales representatives.
From there, you then bring the sales representative onto the witness stand and cross examine him/her to determine if he/she is telling the truth. It is fairly common for lawyers to bring out inconsistencies in the testimonies to show that the witness is not telling the truth.
Thus far, all of the focus seems to be on FIs rather than the sales representatives.
Why hasn't anyone brought any lawsuit against the sales representatives?
They are the ones who profited directly from the comissions.
If there is any falsification or misrepresentation, it would seem easiest to prove that the individual was the one who did it as opposed to proving that it is a company wide conspiracy at the FI.
Of course not all sales represenatives will be able to pay. However as I understand it, there are many sales representatives who are happily living the yuppie lifesyle of condos and BMWs after having lost the life savings of their former clients.
And quite a number are still in the business of selling new products to new customers.
A final plus point is that like the investors who lost money, the sales representatives do not have limitless resources to pour into lawyers. They are faced with the same limited resources. Hence if an investor files a lawsuit, there is a good chance of a settlement to recover some money as opposed to a full battle in court.
To get the FIs you must first get the RMs or the sales reps. As a rep of the FIs both are severally and jointly liable.
Since MAS has said the investigation on the RMs is not copmpleted, maybe should wait for the ammunition from MAS to take the RMs and FIs to court or ride on the coat tail of the MAS
prosecution of the RMs.
I think your lawyers should be
aware of this.
Need to get lawyers involved? How many are willing to take up such cases which are against the banks? Also, what about their fees? Already bleeding from this saga, continue to bleed for the lawyers' fees?
Must fine the FIs for flouting this law heavily until they cannot recognise their brothers and sisters.
Also the RMs revoke their licsnse and fine them until they have to sell off their condos, cars and everyhting they robbed from the old folks and uneducated csutomers.
This section 27 is going to the break the camel's back for investors.
When MAS's investigation shows the RMs failed to meet this section in the conduct of the sales process then mis-selling and misrepresentation were committed because product pushing borders on malpractices and half truth.Like their counterparts in life insurance they lie and con and tell half truth when they peddle products.For insurance agents the law will soon catch with them.
So you investors, hang in there and wait for more ammunitions for your legal case.
If there is no fine for breaching the Financial Adviser's Act, then what is the Financial Adviser's Act for? Might as well thrown this act into the rubbish bin.
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