Tan Kin Lian's Blog: Singapore bars 10 firms from selling structured notes

Tuesday, July 07, 2009

Singapore bars 10 firms from selling structured notes

By Lee Siew Hoon, Channel NewsAsia | Posted: 07 July 2009 1728 hrs

SINGAPORE: The Monetary Authority of Singapore (MAS) has, for the first time, imposed bans on the sale of structured notes by 10 financial institutions (FIs) which had distributed toxic structured notes linked to the collapsed US financial institution Lehman Brothers.

The bans took effect on July 1 and will remain in place until MAS is satisfied there are adequate measures to address the findings of its investigation into the sale of the failed structured products last year.

The 10 FIs are ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Philip Securities and UOB Kay Hian.

MAS revealed this as it released the findings of its investigations into the sale of the failed structured products last year.

The regulator found that the 10 FIs had policies, procedures and controls in place for the sale and marketing of the structured notes, but the extent of due diligence and level of internal controls differed among them.

As a result, MAS said there were various forms of non-compliance with its notices and guidelines on the sale and marketing of these investment products.

MAS said some of the specific failings included insufficient steps taken by some FIs to ensure that all their financial advisory representatives were properly trained before marketing and selling these products.

The regulator also noted that some FIs had assigned risk ratings to the products that were inconsistent with risk warnings stated in the prospectus and pricing statement.

According to MAS, there were also weaknesses in how some FIs ensured that their sales representatives were properly equipped with accurate and complete information about the structured notes.

As a preventive measure, the regulator said FIs must rectify all weaknesses identified in the investigations, appoint an external person identified by MAS to review action plans and report on implementation, and appoint senior management staff to oversee compliance with MAS' direction.

MAS said that until it is satisfied with the measures put in place, the FIs will not be able to distribute structured notes.

MAS also gave details about how the FIs have compensated investors who bought structured notes.

Hong Leong Finance paid S$57.6 million to 2,048 investors who bought the structured notes that it distributed. This is the highest amount of compensation paid out to retail investors.

Hong Leong Finance is also barred from selling structured products for two years.

Maybank offered S$25.3 million to 1,100 investors, while ABN Amro paid 262 investors S$14.1 million.

DBS Bank compensated 197 investors S$7.6 million.

The three banks will be banned from selling structured products for six months.

According to MAS, the total settlements for decided cases amounted to S$105 million.

The six brokerage firms, which also sold the structured notes, paid a total of
S$2.74 million to 297 investors.

UOB Kay Hian and DMG & Partners will get a six-month ban, while the others will be barred from selling structured notes for a year each.
http://www.channelnewsasia.com/stories/singaporelocalnews/view/440970/1/.html

36 comments:

Anonymous said...: What is the point of banning.
Who want to buy?
We just want to recoup our losses.
But seem not in their interest.
Really heart breaking.; July 07, 2009 8:16 PM
Anonymous said...: oh oh, this is the smoking gun, and all these FIs are going to get sued. regardless of whether MAS is going to force the FIs to compensate investors or not, they are going to have to cough up the money when they get sued.

join the lawsuit and you are likely to get the full amount back. this is full evidence from the government there is misselling.; July 07, 2009 8:41 PM
Anonymous said...: There is no mention of RMs being punished for failing to conduct need analysis which resulted in inappropriate recommendation and mis-selling. The investigation is still much to be desired.It focused on the FIs internal compliance lapse and inadequate training.Is this to lessen the gravity of the fiasco ? If the RMs were to be blamed for mis-selling then the compensation should be different. It should be full because the investors acted on the advice of the RMs. The investigation is biased and manipulated to distract the real cause.; July 07, 2009 8:42 PM
Anonymous said...: When CONMAN walk into the bank, the CONMAN try to rob the bank and escape with 100m, killing 2 person. Finally when the CONMAN was caught, he was sentence that he is not allow to ROB any banks or kill anybody for the next 6 to 24 months. Is this some kinda of joke?; July 07, 2009 8:44 PM
Anonymous said...: What does it all mean, the ban I mean? Anyone get punish? Or investors are paying for lessons learned and we all move on?; July 07, 2009 9:03 PM
Anonymous said...: Ban for what? We just want faireness and compensation! Look at HK MAS & HK Government! & look at our SG equivalent!; July 07, 2009 9:22 PM
symmetrix said...: Finally, MAS has seen the light. As expected, MAS did not go the whole hog in punishing the FIs. A ban on selling is just a slap on the wrist of the FIs. The fact that FIs did make some compensation is not enough to get them off the hook.

Banning the sale of structured products does not help those already burnt by this fiasco. FIs should be fined, and the fines collected should be paid to those who got no or meagre compensation, in some proportion to be decided later. Only then can I consider this case closed.

I hope this MAS report can be used as evidence for the plaintiffs in a court of law, in the upcoming legal suits against the FIs.; July 07, 2009 9:41 PM
Anonymous said...: Banning the banks from selling the structured products is no big deal to the banks when they have so many other products to con consumers.
EG. Posb is conning people into switching their existing medical plan to their plans.Isn't it another dangerous thing they are doing?
What about other insurance products, unit trusts etc.? Are the banks allowing their RMs to sell the way the minibonds were sold? Is banning one product affecting the business of the banks? The right thing to do is
1. to compensate all the investors fully
2. to punish the RMs for failing to conduct properly according to section 27 of the FAA; for violating the fit and proper criteria of the FAA. Revoke their license.
3.fine the FIs heavily for violating the FAA and SFC.
4. MAS to admit for lapses in the administration and enforcement of the law .
Anything lesser than this is travesty of justice.; July 07, 2009 9:41 PM
Anonymous said...: Ban, no body buy anyway. Any loss?

But we hv to suffer in silence for losses for a very time to come.
Why so unfair? Sad.; July 07, 2009 9:47 PM
Anonymous said...: MAS did not address the sufferers' problems. We get cheated by the FIs and yet MAS as a government body did nothing to help the sufferers.; July 07, 2009 9:51 PM
Anonymous said...: no point grumbling over here anymore.
2 options: 1.take legal action. 2. protest like hk investors.; July 07, 2009 10:13 PM
Anonymous said...: wah, MAS is more effective than the SEC. SEC was told Madoff was a fraud, they did not investigate. Now MAS investigate and ban the selling. This is indeed first world. What more do you all want? You all want the CEOs to be hung? Most of them are well connected like Madoff ok! Don't play play.; July 07, 2009 10:29 PM
Anonymous said...: Dear all,
Look at the key statistics
(a) Number complaint 5,551
(b) Case receive offers 3,607 or 67%
(c) Compensation Value $104.6 million
(d) Investment Value of case decided $324.5 million

33% sound good? You know why many are still disappointed.

It is the English. The 33% is the value of compensation vs the original investment value of ONLY those who are offered. ie there are still 1,194 cases (or 35%) not compensated. I am not surprised that these 35% of not-offered investors may comprised of at least 70% of the investment value complaint lodged. Hence, if you recalculated the "value of compensation" vs the "full investment value of ALL complaint", the Compensation Rate could be ONLY "9.6%".

[$104.6m^ / ($324.5m^^ + $324.5/0.3 *0.7^^^ = 9.6%]

Anyway, we are not able to calculate the compensation value, until MAS disclose the total investment value of those who lodged complaints.

Yours "Maths Teacher"

-------------------------------
Note ^ being amount compensated
Note ^^ being investment value of 30% investors who are offered
Note ^^^ being investment value of 70% investor who are NOT offered
(Assumption: 70% of investment value are not offered; although they may be 35% of the complained investors by headcount).; July 07, 2009 11:15 PM
Anonymous said...: I am really puzzled. While MAS used nice number to create an impression that many investors are compensated.
(a) How come they did not punish anybody under mis-selling?
(b) How come they allow the FI to compensate without admission of liability?

I am really puzzled. It is like going to Geylang and walk for 10 months, yet still cannot find a prostitute; but at the same time can tell the prostitute don't do business for 6 months to 2 years?

I am really puzzled. Maybe I am 'not a scholar' !; July 07, 2009 11:38 PM
Concerned said...: Banning those FLs from selling structured products? There has been no sales of structured products since Lehman Brothers imploded. This is putting the cart before the horse. The ban should have been done before Lehman Brothers saga when MAS should have notice that FLs did not comply with the Financial Services Act and the various non-compliance of its notices and guidelines, relationship managers not adequately briefed and training for the job. Those millions of losses should have been prevented.
Now, it is time for compensation for misrepresentation and fine for breaches of those act and not ban on sales of structured products.; July 08, 2009 12:07 AM
Anonymous said...: Frankly speaking barring the banks from selling structured products is not really a punishment. Think deeper, after all these publicity and education, do you think there is a market for such toxic products. Think deeper again, do you think the banks still have the gut to sell anymore after all these compensation.

I think it is a punishment for the misguided investors to hear that this is a punishment for those who has misguided you!; July 08, 2009 12:08 AM
Anonymous said...: Haha, what an analogy. Maybe after walking for 10 months to sample the life there become buddy buddy with the pro so want to have exclusive for the next 6 months to 2 years depending on who can give better service?; July 08, 2009 4:42 AM
Anonymous said...: Ban for 6 months ? What for when nobody is buying structured products anymore ? It is like saying cannot sell this food for 6 months, and when you look at the food closely, they have already expired and cannot be sold anyway.

Isn't it obvious that MAS is putting up a wayang show - just to save their face !! Cos they are looking real incompetent compared to the HK side !

MAS - since the banks have flouted the rules, please tell us what are the penalties/fine for each rule they flout according to the law ?

MAS - investors were clearly cheated, are you going to penalise the banks and demand FULL 100% compensation ??? This is the crux of the issue, and you have not address that.

The 6 months ban mean nothing to investors who have lost their life savings !! Wake up MAS !!! DO THE RIGHT THING !!!; July 08, 2009 5:20 AM
Anonymous said...: Finally MAS starts talking after a minimal payout has been given to shut the investors mouth. If MAS is just and FAIR since the FIs are guilty, make them pay the investors in FULL 100%. Why talk now when WAR is over.

I agree what has been expressed. They BAN FIs for structure products looks good, FIs are very innovative and may come up with 'UNIQUE SINGAPORE' Product and the whole problem starts all over again.

Maybe GE is round the corner and wants to look good

Why CRY over SPILT milk.

Someone is SLEEPING out there; July 08, 2009 5:40 AM
Anonymous said...: Such products still can sell?
Who will buy?
Thout shd be disappeared for good.

HK never talk about banning.
Who dare to talk about banning in HK now? 60% & the cheif still not happy.; July 08, 2009 6:32 AM
Anonymous said...: "U hv made a lot of mistakes in the past, please do not make mistake again in future".
This is punishment?

How abt people who hv suffered from their mistakes?
Just ignore them.; July 08, 2009 6:55 AM
Anonymous said...: Banned from selling structured products? Those equity-linked notes/deposits are equally complex. Are these also toxic?

Laymen have little means to know whether the products introduced by the banks are toxic or not.

If a toxic product, after wrapping becomes attractive with layers of smoke-screen, there would still be buyers.

Whose fault?

starlight; July 08, 2009 8:04 AM
Anonymous said...: MAS, are you protecting yourself by taking this meaningless measure against the wrong doers? it is time to examine MAS's role in this scandal.; July 08, 2009 8:09 AM
Anonymous said...: There is no market for structured products already, ban or no ban no difference. Who is MAS bluffing?What does the Harvard trained think? They think the investors are idiots or waht?
The right thing to do is to fine the FIs heavily, double the amount they sold to the investors.
For the RMs they will continue to do what they had been doing, this time on different products.Fine them also heavily as stipulated in the FAA. Revoked their license if they found to have flouted the FAA blatantly and willfully because of greed.They are indeed not suitable for this job.
As for MAS, kick yourself in the ass for not enforcing the rules that have been in place since 2001, the FAA and the CEDLI.If you have been sincere this fiasco would have been avoided. The RMs would have conducted themselves properly and the approach to clients' needs would have complied with the reasonable basis.
Meantime, in order to move on ALL investors must be compensated in FULL.; July 08, 2009 9:14 AM
Anonymous said...: hello all,
do not waste your saliva. MAS is putting a show, who cares you small common citizen, the big boss in the govt and MAS has millions of dollars in their salary, why they take the trouble, you cannot do anything, not allow to protest, like the hongkonger, so just shut your mouth. Just be faithed.
small fly; July 08, 2009 10:45 AM
CC said...: These numbers tell only part of the story. To me, the report and article by Francis Chan is a big step and a step in the right direction.
MAS, I think ,is making this move to try to restore some confidence in the financial industry. Too little too late.
The FIs and RMs must be held accountable for these violations.
Madoff was found guilty and punished to the fullest extent of the law. A ban is a slap on the wrist and unless there is punishment, in a few years time, this will happen again.; July 08, 2009 10:45 AM
Anonymous said...: Ban for up to 2 years - It is a joke!

Who in the right mind would dare buy structure products from any FI over the next 2 years? The sad fact is that the so called "punishment" matted out is not doing any good for the aggrieved investors who have lost their lifelong saving nor does it do to the reputation of Singapore as a financial centre.

The financial institutions in Hong Kong distributing Lehman Brothers products are prepared to offer compensation to ALL minibond investors a minimum of 60% of their invested amount vs the compensation offered by Singapore distributors of a mere 16%. None of the local press reported the offer make by HK financial institutions to investors and that SFC in Hong Kong [Securities & Futures Commission) has rejected the offer saying that it is too low - the governing authority are helping HK investors to get compensation from FIs.

It is true that 67% of investors [in number] in Singapore were compensated but this is a distorted picture. Is this the way to calculate compensation? The right way is to take the amount compensated over the amount invested as it is done in HK. The Singapore distributors are able to paint this distorted picture by making small compensation to investors because there is no local SFC to fight for them.

If MAS does an in depth study to Minibond, it would discovered that even if a sophisticated investors read and understand the prospectus and pricing statement, they would still be misled into what they thought they bought. It may be embarrassing to admit an oversight that has partially contributing to this unfortunate event, but who can righteously said that anyone or any institution is 100% perfect and make no mistake. It is wiser to admit the mistake, helping the investors to recover their money as much as possible, fix the loophole and move on.

If local financial institutions compensate investors fairly [I personally think the amount offer by HK FIs are fair], they still have the financial muscle and knowledge to recover the money paid in compensation by retrieving the collateral securities from overseas trustees. As it is now, individual minibond investors has no financial means or knowledge to take action to do so.

This comment is posted in the hope MAS can take the leadership role to help investors to recover their investment.; July 08, 2009 11:12 AM
Anonymous said...: Hello REX comments as follows.
Indeed the ban by MAS on the banks selling SD's is the biggest joke of the week.
Let me give a simple analogy. A drunk driver wrecklessly hits 100 pedestrians killed almost all of them at the road junction in Orchard Road. The judge says, ok, pal you are banned for driving for two years. Go home. Is this fair? In reality, the banning is part of a complete package which has to include some form of monetary penalty payback. The drunk driver must be forced to make good, pay a BIG fine, go to jail whatever as a mark of compensation for his wrong doing in addition to the ban.

How can the FI's just merely get a ban and don't get any fines or order to pay compensation to the victims? It is a big joke. Ha ha ha, what kind of MAS is this. MAS selamat!! Selamat means Peace. Peaceful MAS. Don't want trouble from the FIs who are stronger than the poor investors who loss money. Yes MAS Selamat Viva La Mas Selamat. Stupid!
REX; July 08, 2009 12:09 PM
Anonymous said...: Dear Mr.Tan,

Since it is illegal for unhappy victims to protest and demonstrate against the latest decision by MAS, could we send a petition letter (signed by all unhappy victims) to the PM and MAS voicing our unhappiness? I remember the last time you sent a letter on behalf of the victims, MAS said that it would not respond to third party petition. If it is signed by affected victims, I suppose they cannot ignore it this time.; July 08, 2009 1:28 PM
Anonymous said...: Hi all,
Its pointless and waste of time to write these comments, those big boss of MAS and the govt. may not read this blog. Why not go to Hong Lim park and put up placards and cheers so that to alert the media for publicity. But make sure it is well organise and have to be calm.
busybody; July 08, 2009 2:34 PM
Anonymous said...: The gahman don't allowed us to protest like HK minibond victims but we can exercise our vote at the next election.

Do we want a heartless and incompetent gahman that only enriches themselves & their cronies but do not care for the citizens ? Please inform all your friends and family to vote wisely !! Elections round the corner !; July 08, 2009 6:33 PM
Anonymous said...: The News refer to "Toxic" products sold by Banks. Since they are confirmed toxic, why nothing is mentioned about controlling or going after the creators of the toxic products like Morgan Stanley, Merril Lynch and DBS?
It is like punishing the Rojak seller only but let the maker of toxic rojak free.
May be these product creators are too powerful to touch?; July 08, 2009 10:08 PM
Anonymous said...: Sir or Madam (post on July 08, 2009 10:08 PM)
What you said is really eye-opening "why nothing is mentioned about controlling or going after the creators of the toxic products like Morgan Stanley, Merril Lynch and DBS?" .... No wonder DBS has the lowest payout ratio? I thought they are best behaved?

FROM CASHEW NUT; July 09, 2009 6:21 AM
Anonymous said...: Fellow investors,

MAS really gives you more good years. Remember who shouted 'More good years', 'Swiss living standard for Singapore' etc. Don't forget Swiss investors are being compensated.; July 09, 2009 8:09 AM
Anonymous said...: Have a look at the progress in Hong Kong. Mr Kam may have misunderstood the situation in Singapore but at least the politicians there are stepping in to help their citizens. Here our politicians do nothing. Their mind-set is only the poor and the retrenched needs to be helped or the small group of private property owners who have to put up with a foreign workers housing in their estate. How big is that group? What about those who have been taken advantaged of? Is this a small group? Each affected person has a family to feed, relatives and friends. Should they not also fight for justice for people who have been wrong? People who also elected them into their political office thinking that they will represent them? They may have underestimated the political cost of doing nothing to help.

Ip supports banks' offer in minibond settlement

Eight independent lawmakers, led by Regina Ip Lau Suk-yee, yesterday met representatives of the Hong Kong Association of Banks in an attempt to resolve the Lehman minibonds saga.

Katherine Ng

Thursday, July 09, 2009
The Standard

Eight independent lawmakers, led by Regina Ip Lau Suk-yee, yesterday met representatives of the Hong Kong Association of Banks in an attempt to resolve the Lehman minibonds saga.
The meeting was mainly focused on the settlement offer by 16 distributor banks that was revealed by The Standard last week, which has won the support of many lawmakers, sources said.

The meeting between the HKAB and the lawmakers went smoothly and the banks were close to concluding an offer, said Ip, who is also the founder of the Savantas Policy Institute, a think-tank.

Ip said the eight lawmakers in her delegation were speaking on behalf of 3,000 Lehman minibond investors in Hong Kong and they hope to resolve the issue of compensation as soon as possible.

" The investors have been seeking help from us, and I have received 1,000 cases," she said.

Other lawmakers in Ip's delegation included Lam Tai-fai, Jeffrey Lam Kin- fung, Samson Tam Wai-ho, Leung Ka- lau, Paul Chan Mo-po, Chan Kin-por and Philip Wong Yu-hong, sources said.

The lawmakers cited the report issued by the Monetary Authority of Singapore on Tuesday, which said up to 75 percent of the investors in the city state may be able get some of their money back as they had filed complaints. "They said the MAS report showed only a 32.2 percent repay ratio, which is much lower than the current proposal [from 16 Hong Kong distributor banks] which calls for paying back up to 70 percent," a banking source said.

Lawmakers were said to support the banks' proposal as it was "more reasonable" and a better offer when compared with the MAS deal, according to sources familiar with the situation. Last week, representatives from the banks approached the Securities and Futures Commission, presenting a formal proposal to settle the issue concerning compensation for investors who had bought minibonds linked to the collapsed US financial firm Lehman Brothers.

The proposal said banks would offer an average of 60 percent of principal invested or 70 percent to those investors aged over 65. They also agreed to top up the difference if collateral is sold at higher prices in the future.

Meanwhile, Democratic Party legislator Kam Nai-wai suggested Hong Kong follow the Singapore model.

Kam yesterday said he would meet the financial secretary to discuss the matter.

"According to the Singapore model, up to 95 percent of investors could get their money," Kam said, offering data different from that quoted by the HKAB.; July 09, 2009 10:02 AM
Anonymous said...: now this gives me more valid reason to migrate to HK - never mind the pollution, overcrowding in HK. at least they got responsible regulators over there to take care of normal investors like us and most importantly, they listen to the voice of their citizens well.; July 11, 2009 2:34 PM

Tuesday, July 07, 2009

Singapore bars 10 firms from selling structured notes

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