If big banks get to settle with the SEC without admitting or denying any wrongdoing, what good does a settlement do in the end?
By Eleanor Bloxham, CEO of The Value Alliance and Corporate Governance Alliance
FORTUNE -- To admit or deny -- that is the question -- or one of them anyway, that the SEC will have to address when they respond to Judge Jed S. Rakoff's review of the regulator's recent settlement with Citigroup. Although Citi has agreed to pay $285 million and make minor reforms, the bank is neither admitting nor denying that they failed to properly disclose the risks of mortgage-related investments to clients in the run up to the housing crisis.
My comment: At least this is one step better than Singapore, where wrong doings go unchallenged - due to lack of regulatory action.
Settlement without admitting or denying wrongdoing can still work provided the $$$$$ amount is large enough to cause some pain to the bank. And maybe cause some of the managers and directors involved to be sacked (CEO will be safe of course).
ReplyDeleteUS$285M is quite low for Citibank. SEC could have gotten more. US$1B will be more appropriate settlement.
In Singapore, it will be caveat emptor and big companies, banks and MNCs can do no wrong, as long as all legal paperwork are processed according to law of S'pore.
The judgement by Chief Justice in the recent dismissal of DBS High Notes case is particularly disturbing. Becoz the CJ actually said that illiteracy and total non-understanding of contracts is NO excuse. This means that banks are actually not required to compensate a single cent even to 90 yr old ah mah with Pri 1 education and cannot read or write and can only speak Hokkien. As long as you are above 21 and not insane, you are bound by any contract you sign and bound by the letter of contract law.
Dear Mr Tan
ReplyDeleteAlong the lines of the "casino exclusion" safeguard.
Suggest we also have a "derivatives exclusion" safeguard for investors.
No financial institutions are allowed to sell derivatives type products to such investors.
Investors who register themselves under this safeguard cannot be made liable for any derivatives products they buy. Since they are registered, obviously any derivatives they buy have been mis-sold to them.
HN5 investors are bound to contract law strictly but
ReplyDeletethe contract is uncertain and DBS can escape that??
When the ignorants signed the dotted line there were other regulations to ptotect the ignorants (this happened in other parts of the world) but for reasons unknown to the ignorants, these regulations stopped fucntioning for this particular bank.
I thought under the law, you cannot sign contract if you cannot read or write.
ReplyDeleteHow to challenge authority if you can’t find or afford expert witnesses? In a closed shop like here, who dares speak as expert for the aggrieved without being ostracized by his peers? It’s more a case of closing ranks between govt and big biz for obvious reasons.
ReplyDeleteIn the DBS High 5 Notes case, this Bank not only deny no wrong doing, with the backing of the Govt and the Court, refuse even to pay out a goodwill sum to aggrieved clients, many of them old customers of the Bank for decades. And gleefully calculate how much they could get from the losers on legal fees incurred in the Court proceedings.
ReplyDeleteAnd their RMs still try to sell NTUC Income investment products to existing clients. Just treat this bank as a temporary store for your money, and nothing else. But keep tabs on where DBS China got the money to lend out S$23 billions to the people there in China, most probably mostly in the form of Property related loans. Hope they dun TT our money over to China to lend out. Even though DBS Bank and its parent Company are watching UOB Bank like a hawk, with the prospect of eating up the latter, think it's safer to park some of our money in UOB, which has taken a rather conservative approach to avoid being eaten up by the bully.
God forbid that, as then the Govt would have full control of the whole local banking industry. OCBC Bank is already kawan kawan, let's pray UOB will remain independent of the clutches of the Govt.
From the Chief Justice interpretation of Singapore contract law, even if you cannot read or write but you go ahead to put your thumbprint on a contract, you are deemed to accept all the contract clauses in totality, and shall be bound by the same. This is caveat emptor to the extreme i.e. the attitude is that if you don't know what it is, why you still put your thumbprint on it??
ReplyDeleteOf course what the salesman say or didn't say to induce you to put your thumbprint doesn't seem to matter in Singapore law.
In Singapore the only conditions for contract to be void or legally unenforceable is 3 things:-
1. Party to contract is below 21 yrs old.
2. Party to contract is medically deemed of unsound mind.
3. Contract matter is illegal e.g. contract to kidnap somebody, or to go splash red paint on doors.
The stupidity of this contract law is followed blindly to the hilt. Bet that if Lina Wang's fortune is stationed here, the Singapore Court will rule in favour of the Maoshan fengshui man Chan, on the basis Lina made and signed on the will, never mind whether the will is forged, as long as the cheating concerns a fortune not related to the Govt.
ReplyDelete