Richard Woo

Investors of financial products who are affected by the financial crisis have been told they may refer their cases to the Financial Industry Disputes Resolution Centre (Fidrec) if their investments do not exceed $50,000. However, recent news reports say that Fidrec will now consider hearing cases where the investments exceed $50,000.

Some investors of structured products may thus be thinking that they can still refer their case to Fidrec to claim for the full amount of their investment even  if it exceeds $50,000. The truth is that, regardless of what one may have gleaned from newspaper reports, Fidrec, without the concurrence of the financial institution concerned, is restricted to only claiming the maximum of $50,000 for any case brought before it. And even then, such cases are subject to certain conditions.

Excerpt from a report published in Today, Oct 16, 2008:

“..Where a consumer’s claim is above $50,000, Fidrec will only be able to handle the claim if the financial institution agrees to submit to Fidrec’s jurisdiction for the whole claim amount, or the consumer agrees to limit the claim to the maximum claim amount of $50,000.”

Two specific examples:

[a]  A recent email from Fidrec to an investor is a clear confirmation of the scope of its jurisdiction:

We will be able to handle cases beyond S$50,000 provided the consumer agrees to limit his claim to S$50,000 or the Financial Institution provides the consumer with a letter of consent to agree to submit to Adjudication for higher claim amount.

[b]  An investor has recently reported receiving a letter from a financial institution stating:

As your investment exceeds S$50,000, you can refer your case to the Financial Industry Disputes Resolution Centre Ltd (Fidrec) if:

(i) You are prepared to limit your claim amount to S$50,000 and you refer your case to FIDReC within 6 months from the date of this letter; or

(ii) You write to us to request for the case to be referred to Fidrec for the full claim amount and we agree to your request. We reserve the right to review your request at our sole and absolute discretion.

News reports misleading

Hence, all this talk in the newspapers about investors [or a certain group of investors] being able to refer to Fidrec even if their claim is in excess of $50,000 is all hogwash, for example:

[c] Mr Heng of The Monetary Authority of Singapore is reported to have said, inter alia, in a report in The Straits Times, Oct 17, 2008, captioned: Do the right thing:

As over 80 per cent 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…

[d] Extract from The Straits Times, Oct 18, 2008 under the article captioned: MAS to banks: Do the right thing:

Fidrec normally deals with claims not exceeding $50,000. But in the case of structured products, the centre has agreed to hear all “deserving cases”.

[e] Extract from Weekend Today, Oct 18-19, 2008 under the article captioned: MAS: Probes underway:

While FIDReC normally deals only with claims not exceeding $50,000 the FIs have agreed to waive the rule in relevant cases.

[f] Extract from The Straits Times, Oct 21, 2008, under the article captioned: All play part in structured product rules:

Typically, Fidrec does not handle cases exceeding $50,000 in invested funds, however, in this case, they will.

“Deserving” or “relevant” cases

MAS, please clarify as to what is meant by a “deserving” or “relevant” case. And why whether a case can be considered a deserving or relevant one is left ultimately to the judgment of the financial institution handling the case?

However, regardless of any feedback, we can at this moment, conclude that it is not open to any investor who is not deemed to be a deserving or relevant case to refer their case to Fidrec if their investment happens to exceed $50,000, unless they are willing to restrict their claim to a maximum of $50,000 only. But would an investor with an investment of $100,000 bother to refer to Fidrec, knowing that Fidrec can only claim $50,000 for him/her?

Investment in joint names

Fidrec seems to be directing its attention at symbolism rather than substance. For example, A and B each invested $50,000, separately, and therefore each of them can refer their claim to Fidrec should the need arises. But had A and B put $50,000 each in a joint investment of $100,000, Fidrec can only claim $50,000 as the maximum. This email from Fidrec smacks of bureaucratic inflexibility or irrationality:

Our jurisdiction of S$50,000 is based on per placement/ account. If the account is in joint names, it is still considered as one placement/ account. In other words, although you and your sister each came up with S$50,000, as long as the investment is done in joint names, it is considered as one claim and you will not be able to claim for anything more than S$50,000 even though the overall investment is S$100,000. However, if you invested S$50,000 in your own name only, and your sister invested S$50,000 in her own name, then you will each be able to claim S$50,000 separately.

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