Announcement: All investors in credit linked securities are invited to attend a meeting at Speakers’ Corner today, Oct 18, at 6pm. There will be two short speeches by Tan Kin Lian (in English) and another speaker (in Mandarin). Visit Tan Kin Lian’s blog for more.
MAS Press Conference on the Sale of Structured Products to Retail Investors
Opening Statement by Heng Swee Keat, Managing Director, MAS
Many individuals who purchased structured products linked to Lehman Brothers are worried about their investments. MAS has been actively working to ensure a fair resolution for these investors.
We have also been communicating our actions to the public since the issue first came to light in the middle of September. Our first priority has always been to help affected investors. Let me touch on what we have done and how we have put in place a serious and impartial resolution process to deal with investors’ legitimate concerns.
First, we are making sure that HSBC Institutional Trust Services (Singapore) Ltd, the trustee for the Lehman Minibond Programme, carefully considers all options and acts in the interests of investors. If a new swap counterparty is available, investors would have the opportunity to vote on this option. In order to assist investors make an informed decision, MAS will appoint an independent financial adviser. We expect the trustee to know whether options will be available to noteholders by the end of next week.
Second, each FI now has an independent person to oversee the complaints handling process relating to the sale of the Lehman Minibond Programme, DBS High Notes 5 and Merrill Lynch Jubilee
Series 3 Linkearner Notes. These persons are Gerard Ee, Hwang Soo Jin and Law Song Keng. We recognise that the complaints handling process has not been easy, particularly for customers of some FIs. But as circumstances for each case may be different, this is the best way to deal with all the complaints. The independent parties will ensure that customers get a fair hearing. We have set a very clear timeline for complaints to be resolved. All the FIs have also set up internal review panels which are chaired by their CEOs.
The panel is expected to conduct a thorough review of each complaint and decide on a course of action within four weeks. The decision will then be communicated to the customer.
Third, for affected investors who are not satisfied with the FIs decision on the matter, we have established a fast-track process to refer the case to the Financial Industry Disputes Resolution Centre (FIDReC). The FIDReC mediation process is free for consumers. If a case goes to arbitration, it will cost the consumer $50. FIDReC will
consider all relevant evidence whether written or oral. Statements can be prepared by consumers themselves and need not be made under oath.
All FIDReC’s adjudicators are well respected professionals. The chairman of FIDReC is Mr Goh Joon Seng, a
retired High Court judge. As over 80% of customers invested S$50,000 and below, FIDReC is the right avenue for them to pursue their claims. FIDReC normally deals with claims not exceeding S$50,000. In the case of the structured products, however, the FIs have agreed for FIDReC to hear deserving cases.
We have also said that if there are breaches of our regulation, we will take action against the financial institution or individuals involved. MAS has required the independent parties to highlight these breaches and potential cases of mis-selling to MAS. They have already brought a number of possible cases to our attention and we are following up on them.
Normally, as you know, MAS does not comment on our dealings with individual institutions. However given public interest in this matter, MAS confirms that we have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the FIs or poor sales practices by their representatives. We will make an announcement on any actions we are taking when our inquiries are completed.
MAS urges any affected investor who has a genuine claim that you were mis-sold the product to make sure you lodge your complaint with your FIs. MAS requires FIs to have a rigorous process to look into every complaint and resolve them fairly, giving due weight to the views of the independent parties.
Clearly, there is a range of investors who bought these products. Some are well-educated professionals. Others are sophisticated investors. The group we are most concerned with are the vulnerable customers. We are focussing on cases of mis-selling to vulnerable customers and on cases where the products were clearly inappropriate for them given their circumstances. We have required the FIs to give priority to these cases. They should not take an overly legalistic approach to mis-selling in dealing with these cases.
For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor’s profile and circumstances, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility in such cases. We welcome this commitment and expect all FIs that have
sold these products to take the same approach. They must do the right thing and ensure a quick and fair resolution for these customers. We have communicated this to their CEOs.
Channel 5′s report of the news conference:
———–
Read also:
Singapore probes misconduct in Lehman bonds sales (Forbes)
MAS investigates allegations of mis-selling of Lehman products (Channel NewsAsia).
——-
Hope it is not another pull the wool over your eyes wayang.
If MAS is genuine about putting things right not just for now but for the future it must start fine tune all existing guidelines regarding the way FIs and the advisers conduct their business and enforce them rigorously.
Section 27 of the FAA is a must for all FIs and the advisers from the banks or the insurance companies. Breaches of this section must be dealt with punitively.
As I said in some postings we need examples and that is have a few heads hung in strategic places in Orchard Road and Shenton Way to warn any would be rogues.
I may sound a bit harsh but considering the number of victims past , now and in the future this is a step towards making the market place a safe place.
The market place is created NOT to serve the interest of the RMs to earn huge commission to drive big cars, to help insurance agents to qualify for MDRT or TOT, the consultants to cheat the old folks or the FIs, both banks and insurance companies to create dubious toxic products, but to help the consumers to meet their financial needs and retirement.
I think Mr Goh should retire graciously. His pay should then be given back to taxpayers, or at least shared equally between Tan Kin Lian, Lucky Tan and Donald Tsang.
It saddens me that HKMA should take the lead to show concern for their citizens, way ahead of Singapore ministers, and we in singapore do catch up.
While we are at it, Tharman should also be ashamed.
And on Monday, the highest ruling body will have their sickening ‘show and tell’.
Damn.
All I can say is they have to move faster and to take control of the situation, like what these people proposed recently.
http://www.intelligentsingaporean.com/?p=3
Now investors pocket hurt.
They now looking for a shoulder to lift them from losses made in investment decision made by themselves.
I expect the worst.
Who else can voice up for them?
Sporeans do not like to voice up. Its not our culture to speak up for others. I am glad its so. Peace ah!
Is this a lesson to be learnt?
Our (HK) gov’t is not doing a good job as it sounds. It needed the political parties and victims march to tell them what to do and pressure them to kick start the HKMA investigation and other actions.
Also, the so called “Buy back” option is only a trick with an again misleading name. The banks are not “buying back” what we have paid, but only the market values of those rubbish. It actually will be close to zero values for some early series and probably only 20~40% original amount for better series.
By proposing such option, the gov’t basically trying to break up our flight for fairness to get our money back. They are not trying to help. If they’re they will be more proactive and proposing better genuine options.
If I had a choice, I would rather like a new swap counterparty option so that the minibond can continue till maturity when I can get my principle back.
I read with concern the position taken by MAS in focusing their attention on assisting “vulnerable customers” as a first priority. I can only assume that this category of investors are the less well educated who had relied on the RMs and their seeling skills.
Does it then mean that as a well educated person MAS is assuming that one is less vulnerable??
As a well educated person, one also rely on the knowledge of the RMs and the reputation of the banks selling the structured products. As a well educated person, one will ask relevant questions to satisfy oneself of the product and the risk inviolved.
When RMs from our reputable banks are trained to be very convincing and in fact say that the product is “safe” and “capital protected” (which one can assume they were told to tell customers during the training they receive), are well educated people supposed to be less vunnerable??
I urge the MAS to look into every case and not just focus on the less educated who may be more vunverable.
As a closing remark, my mother, who arrived in Singapore more than 50 years ago from a third world country and with no education, will never have placed her money in such products because of a simple philosophy – don’t do something you are not sure about. So, are the less educated more vunverable than a well educated person??
An subtle attempt to divide and conquer from MAS. Why categorize? Mis-selling to vulnerable investors or educated investors is the same, it is still mis-selling from the whole financial organisation. Again, it is MAS that decide on who are the independent parties. Can the investors have some say in the selection too?
concerned investor,
MAS is erroneous in making such assumption. A professor can be as clueless as anybody else unless he or she is trained in finance to be able to ask the right questions.
Study section 27 of the Financial Advisory Act(FAA) to see whether your mother had been misrepresented. This evidence can be found in the form your mother signed, called the fact finding form or Know Your client form. Your mother should have been given a copy of it according to the FAA too.Get an expert or competent adviser to look at the form to spot the mis-selling and misrepresentation. If the recommendation is inappropriate because of mother’s age, profile and circumstance you can use “recommendation not on reasonable basis.” to sue the RM and the FI
Education doesn’t determine whether you can be cheated or not. We are all trusting and that is why we get cheated . Suspicious people never buy and they don’t get cheated.For these people they are unknowingly practicing a risk management technigue called risk avoidance.
The MAS should investigate not just the misselling on the lehman high notes, but the total appropriateness policy undertaken by DBS and UOB.
I am personally helping an old lady (profile: 64 years, zero education, money from insurance policy) asked to buy structured notes, with payouts with embedded formula so difficult to understand. She knew that it was not a deposit but must be held to maturity, what she did not know was the payout formulae, and that she was not guaranteeed by DBS or UOB, she said “I buy from UOB, so UOB guarantee lor.”
I asked a PFC in UOB – for a Lyxor arranged fund — who guarantee, the PFC said UOB… of course she is wrong .. it was Lyxor .. not UOB she as a PFC does not know, so I question, the sales process!
The local banks must compensate if there is misselling — especially the aunties and uncless, otherwise how can they prosper forward!!!
UOB and DBS please face up .. check your process and people ..
I wonder whether our leaders and ministers can feel the anguish of the ordinary men and women on the street.
One key lesson learned from this whole fiasco is – no matter what kind of products offered in future, we will no longer trust any of them, especially so, given the kind of responses from government leaders and from MAS, the financial watchDOG!
I am not a retiree and I am english educated. Whenever I went to the bank to put in FD, the tellers at the banks would stare at me with BIG EYES asking me if I am interested in another promotion giving me more than the current FD interest’. They would insist that I talked to their young relationship manager. After half an hour with the relationship manager and when I refused to invest in their structured deposit , funds, notes etc, they would give me a look as if I am so ‘stupid’ . I always tell myself whenever I go to the bank, I must be firm to say “NO, NO’ when approached by the teller. I felt mislead by the teller, giving me the false information and also wasting my time with the relationship manager who thinks I am silly and a non-risk taker. I was also approached to buy Merrill L. Notes by a foreign bank. I asked the relationship manager, what happens to my deposit if the foreign bank collapse, she could not reply and got her colleague to explain to me. He said, ‘OH, the bank will freeze and sell their asset s and you get will back your deposit…only later’. All bullshit. When I told them, I prefer FD in SIN$ as it is safer, her reply was that banks here can collapse also. Thus FD has similar risk as NOTES. When I insisted ‘NO’, I am not going to buy the NOTES, I got a cold shoulder. I can fully emphatise with the chinese educated retirees. All the tellers and relationship managers are really really IRRESPONSIBLE and MIS-SELLING. They ought to be sacked or have their salaries cut and no bonus for this year.
Mr Tan, you are really GREAT. I hope you can help open the eyes of these top people and ask them to stop ‘harassing’ customers to invest invest invest…..
So who is at fault here? The MAS, The Bank, The Structurers, The Head of the Consumer Bank, The Branch Managers, The Relationship Managers, The Bank Tellers, The Simple Investors, The Savvy Investors, The Compliance department, The Lawyers, The Opening of the Financial Industry to welcome Sophiscated Products for sale in Mass Market?
I cannot understand why is all the fault pointed at RMs day in day out. By the way, I am an investor who has lost a 6 figure sum in stock market this year 2008. and I’m blaming myself for not cutting loss earlier last year, but lucky I push my stop loss button in Feb. I also have an Priority RM serving me in a US bank in Singapore and i do not blame her for not telling me US is crashing! I’;m also not the demanding sort of client and for any losses i incurred, I wont not blame my RM, who I knows she do not know more than me. The way i look at the whole chain of events that eventually point finger at DBS RMs, and other banks, i would just like to put my fair opinion…
I believe the RMs came to work in a bank and was trained with ethics and professionalism during their training. However the market is so diverse and complicated, how would RMs be able to know what is risky and what is not. Many RMs have not even invest before, if they have been in the business for less than 2 years. No money how to invest? If you asked their age and background, you would think most of these in local banks are investment savvy. They are not. Even those in private banks are not savvy too, they use text book theories to sell ideas. Even Economists and our Ministers who said we will avoid a recession are wrong. Do they come out and apologies? No. Do the papers and Singaporeans blame them? No also. Sum up all the news and forecast they made from November 2007 till June 2008, u realise all of them just merely give hope to the readers and viewers. Even Paulson do not know. So… if these Gurus are all wrong, how can investors and general public think RMs are be blamed? I hope the papers and reporters can start thinking deeper, investigate and publish the truth.
First to blame is MAS, for allowing these US bank products that are complex instruments to be sold to the masses. In the past, these things are meant for private banks only and only Accredited Investors and Sophiscated Investors can buy!!! not the layman!! MAS failed in its resposibility and point finger at the banks! MAS can go and blame the American banks who sold them the ‘SAFE’ ideas.
Next are the structurers. With the all clear given by MAS, structurers gets more greedy to launch products that makes more money when all the hype is there. Like IPOs. Look at warrant and futures investors, they lost big time, but where is the blame? MAS again for letting the foreign bank of Sharks to come into our market. So now, the once tightly regulated waters has sharks swimming around.
Next, the structurers who people in the bank worships them becasue of their rank, sold ideas to the business managers and the Head of consumer bank, who is not investment savvy and got up to that post because he is graduated from Harvard or Cambrigde and has work in reputed banks before, wanted more sales and revenues, and tell the business manager to deliver revenues.
The business managers who are also layman, tell the salesgirls and saleman, who are now RMs, to find fishes to feed the sharks. If they do not find, they will be outcast and shamed. To ‘help’ them get sales, the business managers tell the tellers to go and find fishes.
Sad to say, how many sales people know what are deriavatives? What are CDOs? Our Strait times journalist don’t even know 2 years back . All these people have not even gone to the States nor have not learnt what are they. So does RM know? they don;t know for sure. Somebody must have taught them instructions what to say. How much commission does the RM earns, I believe is just peanuts, they are just being made used by all their boss and bosses to feed them with fishes and $$$! U go and ask how much deos a RM earns and how much more tens of thousands do their bosses earns, you know who is more reponsible and who is less. Make that transparent before the whole of singapore gets fooled again.
I believe in such a situation, the people who are responsible for the failure of such products have left. And the people who are cleaning these shit are unclear too. Hope the authority own up to their failure to set the correct vision and punish those who are more responsible, eg the Structurers, The Head of Consumer bank who wants only $$$, the business mangers that force the RMs to get fishes to feed the shark in return for keeping their jobs. There are crooks, there are disguised crooks, there are also genuine RMs who are helpful. There are also greedy and stupid tellers who when told to go and kill a fish, she just go. U cannot blame them. If the RM and tellers are smart, they will not be doing what they are doing now. If they are smart, they would have gone into hiding instead of letting the whole of Singapore scold them and blame them. They also got families and children.
Best solution, MAS to dig their own pockets and pay back the money to Lehman investors. Stop pushing the blame when you are the watchdog (Gatekeeper) and you let the Great White Sharks swim into your waters. Over regulation is never a good thing, but don;t push the blame to banks.
What market bull run, every one looks for RM to buy investments, when Bear run and bankruptcy, they blame RM. Who don;t the general public blame the fund managers for not cutting losses when they ” see” it coming ? To avoid all these, the best solution will be to stop all investments sales, then there will not be any problem. Do not let old folks after the age of 55 to invest.
Just one more thing, CPF Board also needs to be blame for setting the 20k limit on 1st April. As a result of that, many naive investors put all their remaining CPF money into funds and stocks for fear that they will not be able to invest the 20k in April. Now they lost even more. Bring up those complains against Insurance Companies! Are they to blame again? No, its the authorities again.
Lets not call this a Bear Market, call this “Blame The Authorities for your Losses”.
Who are the members of Independent parties ? Doesn’t Singapore gov definition of Independent always means Government-related personal ? Is this a exception this time ?
“The chairman of FIDReC is Mr Goh Joon Seng, a retired High Court judge. ” Does he still receive pension from the government ? Is there a conflict of interest as one don’t bite the hand that feed him ?
Savvy Investor, thanks for the crash course. now we know the difference between HK and Singapore and why the HK govt was so quick to act.
I believe the HK people are more savvy and therefore knows exactly where the blame lies and demanded immediate recourse whereas in Singapore, investors who got burnt are looking to the govt for help that is not forthcoming.
There is a trend in the blame game that this regime has set,
1. When Mas Selamat escaped – it was the prison warden’s fault.
2. When the plan to build the dorm at Serangoon leaked out – it was the police officer’s fault.
3. When investors got burnt – it is the RM’s fault.
Supervisors and managers beware, you are next in line.
Back in 2002, my spouse got a structured deposit which sounded good. I looked at it and on closer examination of the document, realized that it might not be as good as it sounded. The bank staff didn’t mention the potential downside of the structured deposit at all. In fact, the document probably would have been kept away if I didn’t bother to glance through the inside pages.
I went to see a DBS Bank relationship manager at another branch just to see if I would get the same sales pitch. He too did not highlight the risks in the process of making the sale of a financial product. He painted the best-case scenario only. Said I would get back all principal in the fourth year. Made no mention whatsoever about what would happen if the stock markets didn’t perform and how that would affect the final payout in the fourth year. The brochure had words like “works like a fixed deposit.” When I asked him what would happen if the stock markets didn’t perform, he said something to the effect of “Why wouldn’t they? Markets always perform in the long term.” (mind you, that was after Enron and Worldcom saga was just beginning). I asked if I would get all my principal back on the fourth (last ) year, he said yes. He still didn’t make clear that the formula for calculating the money you get back made it such that if markets went sideways or down, you’d get back 88% of your principal in the last year. What DBS contented was if you counted the interest payouts in the first, second and third years, you’d have all your principal back–but that was a return of $20 for $100,000 principal invested.
I contacted the service quality manager of the Consumer Banking Group at that time. All that I got from her was a lesson on interpreting the formula and how the pricipal was protected–as promised, she stressed.
My point to her was that sales process and technique was very misleading because the risk was not mentioned at all! Even big investment bank equity research have a section stating the key risks of a stock.
Those were the days before “cooling off period” was started. In the end, all I got was “Please accept our apologies if our Relationship Mg did not explain to you and your wife clearly how the Growth Account works.”
At that time, I didn’t accuse them of misselling, but if it is misselling, then hey, misselling has been going on a long time.
just a neutral observation, I am an objective party specialized in structured product and never issued such toxic stuffs to naive investors.
what HKMA is forcing the banks to do are not necessary the best outcome.
The banks are going to call back the notes at maybe 10c or 15c to the dollar, why ? because that is the market rate of the CDO underlying. Forcing the banks to act now only make banks more conservative.
There will be a logical solution. MAS is doing their part but have to give them time. Everyone is panicking now because this is non-precedental. Screaming for action will not get back more money for the investors.
Someone shld act on finding the best optimal solution and definitely not the emotional investors.
“There will be a logical solution. MAS is doing their part but have to give them time.”
The problem is that given more bad news forthcoming , their market value will even be dropped further to almost peanut. Therefore investors think recouping ASAP is the best option. Obviously these investors are not hopeful of these coming few years and especially their trust on the government is been severely dented.
#12 Savvy Investor,
” believe the RMs came to work in a bank and was trained with ethics and professionalism during their training”
Training and practice is an entirely different mattter altogether.
“how would RMs be able to know what is risky and what is not”
That is the crux of the problem. It is their responsibility to know and provide correct factual information.
“If you asked their age and background, you would think most of these in local banks are investment savvy. They are not”
So why are they selling something they do not understand or know nothing about?
“How much commission does the RM earns, I believe is just peanuts”
You’ll be surprised how much they do earn when the client base is there.
“What market bull run, every one looks for RM to buy investments”
Again, its the just the opposite. During these times, they push even more aggresively knowing your fishes have gotten much bigger.
“the business mangers that force the RMs to get fishes to feed the shark in return for keeping their jobs”
This is choice between self and conscience. They are willing to sell something they know nothing about aren’t they?
What qualifications are required to be a RM? Nothing much. Most do not even posses a financial background or qualification. Have you seen the CFMAS that they take? I believe a statement has been made on that in another topic.
RM is just a glorified name for a sales person. To some it may be an “easier” entry to a bamk job. To others, it could be just the money they hear about.
Unlike other departments in a bank, one does not gain experience in the financial product sold. Just experience on how to sell.
Just by looking at the media, how many statements are there relating to the absence of factual information and the risks involved by these individuals?
How many accounts of misrepresentation and in some cases coercion just for them to make a customer sign of that dotted line? When all the customers wantd was to do a simple transaction at a bank.
The way these people corner you, what difference are they to the touts at Newton recently reported? They only difference is that they dress better.
Do not forget that their targets mainly fall in the retiree category. They are the most vunerable of us all and with the most cash. Note that most in this category are not as educated.
Ever wonder why you see so many retirees in the papers and news these days?
Doing what these RMs do is a matter of personal choice. With a sales target to meet every month, it should not be surprise one may have to what ever it takes.
MAS should restrict the tatics employed by the banks and RMs. Customers should not be pestered by these individuals at the bank.
Qualifications and certifications for being in financial sales has to be raised and made stricter.
True, the blame does not fall solely on these RMs, but as they are in the frontline and interacting with the people when making the sale, they must be held responsible as well.
Again, providing incorrect or incomplete factual information is a form of missrepesentation.
Fredrick,
I absolutely agree with all that you have said about the RMs and the FIs.
Nowadays, the salesmen or insurance agents have fanciful names like RMs, Personal Bankers, Life planners Senior consulatants, Eceecutive financial Consultants and below these facades is a salesman, a cheat. Why? These names don’t trully tell us who they really are and their competence. The names mis-lead, misrepresent their work and competence and they are intended to decieve and cheat the consuming public.
MAS must look into this.There must be some regulation of the titles. The titles must reflect the work, the service, the competence. It seems this title designation is left to the FIs and is up to their whims and fancies . If it is misleading it is cheating. Again the FIs abuse this self regulation.
Before another minibomb explodes MAS must quickly defuse this runaway abuse by FIs and the salespeople.