Read this blog for the actual wordings of section 199 of the Securities and Futures Act.
The Act defines "securities" to mean any unit in a collective investment scheme. I consider a structured product to fall under this definition.
Section 199 stats that no person shall make a make a statement, or disseminate information, that is false or misleading in a material particular and is likely to induce other persons to subscribe for securities, if he knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.
The structured product are so complex that the representative (i.e. relationship manager) may not be aware that the statement they are making (i.e that the product has low risk and is like a bond) is false or misleading.
However, the financial institution that employs the representative "knows or ought reasonably to have known" that the statement or information is false or misleading. It is their duty to be aware about the nature of the product when they train the reprsentative to sell the product to the retail investors.
In my view, the financial institution has breached section 199 of the Act.
I hope that the MAS or Attorney General will take up this matter on behalf of the thousands of investors who have been given false and misleading information to invest in the structured products.
I hope that the MAS or Attorney General can negotiate an out-of-court settlement where the distributor shall buy back the product from the retail investors for 50% to 80% of the invested sum. A higher percentage should be given to the elderly and illiterate investors who were misled into the investment.
By buying back the structured product at the negotiated value, the distributor can reduce its loss from the recovery of any residual value arising from the liquidation of the assets of the structured product.
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