Thursday, July 09, 2009

MInibonds : FIs punished by MAS but.....

MAS has banned 10 institutions from selling structured notes for periods of 6 months to 2 years[Link]. MAS investigation has found that the financial institutions failed to follow guidelines on the sale of structured products, including training financial advisers in the marketing of the notes. The ban may look harsh but the structured products market has already shrunk considerably or disappeared after the minibond saga so the impact to the bottomline is negligible.

MAS findings give investors who are unhappy with the compensation some evidence to initiate a class action lawsuit. FIs compensated between 5 to 30% of the money invested. Brokerage firms offered the least compensation. Class action lawsuits are long tough affairs in Singapore with uncertain outcomes. Take the example of Raffles Town Club members who sued for compensation after they found the club had missold "exclusive" memberships of $28K each to 19,000 people. The class action group which called itself Raffles5000 won their lawsuit was only awarded $3K per member. The club decided to compensate all 19,000 members and obtained the court's approval to make payment through cash and F&B vouchers valued at some $3,000 for each member[Link].

Unless the authorities decide to do something, the only option left is the class action lawsuit. If Hong Kong resolves this with a more favorable outcome for their investors, they will show that their system offers greater protection for investors.

23 comments:

Ghost said...

The punishment is just plain stupid. What's the use of banning the institutions from selling something that no one is buying? Does the MAS truly expect people to be happy with this?

Anonymous said...

Singapore govt has vested interests in the local banks, especially in DBS.

As such, it may not be in their best interest if DBS incurs a major loss this fiscal year due to having to compensate the mis-led investors.

What do you expect?

Anonymous said...

Just to ask people here....

Why is it DBS compensate the least amount? (I think only abt 7.6 million) but other banks compensate a lot more..... I remembered reading it somewhere...I think Hong Leong Finance compensated like 20+ million.

Anonymous said...

Some reasons why DBS and other brokerages paid out so little;

Not enough concrete evidence to nail them for mis-selling.

Confident that they have the resources to win a legal battle against people who already lost their life savings. No money is usually equivalent to no justice. When was the last time a small-timer won big against the big boys?

MAS not willing to put pressure on them to pay back. So, no need to pay back.

People will still vote for PAP. So, why bother to act like the HK govt and aggressively prosecute the banks for mis-selling?

Anonymous said...

The damage has already been done so this is the usual for gov to move on and wash their hand on ? Isn't MAS the main culprit who didn't the good job in the first place ?

1984 said...

Hey lucky,

Mercer's have just published their cost of living list by country... Congrats to singapore - made the top ten most expensive cities up from 13. Guess that's progress for you....

link: http://www.mercer.com/costoflivingpr#Top_50

Anonymous said...

you see, in singapore, money is everything. therefore the final solution for this fiasco:

(1) mas happy becos got "face" when it passes a largely inconsequential ban

(2) banks happy becos no mandatory monetary compensation

(3) investors NOT happy becos still no effective consumer protection

Anonymous said...

you see, in singapore, money is everything. therefore the final solution for this fiasco:

(1) mas happy becos got "face" when it passes a largely inconsequential ban

(2) banks happy becos no mandatory monetary compensation

(3) investors NOT happy becos still no effective consumer protection

Xtrocious said...

I guess for MAS to take sterner action, it may have to look inwards...

Anyway, Conrad Raj has a very good commentary of the issue on Today (9 Jul 2009)...

Don't think I can say it better than him :)

Anonymous said...

Whatever the gahmen do, or MAS do,
they will take into consideration that the gahmen remains strong and can still win the next election like the last.

Only then can you understand why they do things the way they did.

Singapore is unique in this sense.

Anonymous said...

You losers will still vote PAP at the end of the day! So, why should MAS, who is headed by PAP people, care about you losing your savings?

Anonymous said...

i hope those who were unfairly compensated wakes up and vote against this heartless govt.

personal money is the only issue nowadays that can stir singaporeans from their slumber.
not welfare,cost of living,fair election etc.
sad but at least its still a vote against pap.

Anonymous said...

""Also disappointing is the fact that the payouts by the financial institutions to investors 'pale in comparison to the total amount invested'.
This demonstrates that despite their misconduct, the financial institutions have got off lightly.""

Anonymous said...

"" In other jurisdictions, when misconduct by financial institutions has been shown, compensating all affected investors is the norm.
The onus is on the financial institution to demonstrate why an investor should not be compensated.
Our process of putting the onus on the investor to prove his claim puts many ordinary investors at a disadvantage."

Anonymous said...

"debate continues on whether investors have received fair compensation as the settlement amounts released by the MAS appear surprisingly low."

Anonymous said...

PAP is very practical.

As long as they are convinced you won't dare to vote against them, they will do their best to protect the business, and not the consumers.

You look at all the people who been cheated by the minibonds, time-share, MLM, etc etc. How many of them will ever get their money back, even though those business never run road?

PAP protect you, or protect them?

Anonymous said...

"SG's 20% compensation pales in comparison to the 60 per cent buyback price and additional 5 per cent after Lehman's liquidation, which was offered by Bank of China (Hong Kong) to all customers who bought the structured notes.
Even then, the Hong Kong regulator deemed the compensation amount 'unfair to investors'."

Why so unfair???

Anonymous said...

""Too much positive spin was put on the marketing of such products. In its latest report on the structured notes linked to Lehman Brothers, MAS has fallen into this 'positive spin' mode by highlighting the impressive statistics on settlement cases, while not addressing the pressing issue that most affected investors did not get any closure at all."

Anonymous said...

"Work Less earns more"
mentality at work??

Anonymous said...

It's so good to set up a business in singapore. Can blatantly mislead customers and still get away with it!

How do I go about registering my own investment company?

Anonymous said...

It's so good to set up a business in singapore. Can blatantly mislead customers and still get away with it!

How do I go about registering my own investment company?


Er . . .I think you need to look at why Hong Leong is ban for 2 years despite compensate the most than others while DBS and other foreign banks are banned for 6 months only.

Maybe if you are foreigner, you will get away with it but not as a Singaporean business like Hong Leong.

I see an interesting parallel between the punishments and relating to citizens, PRs and foreigners.

Anonymous said...

"MAS said the failings identified in its investigations "do not automatically mean that the financial institutions are liable to individual investors."

If the banks failings do not mean they are liable to compensate investors they had misled, then what does their failings mean?

Did the banks have any failings then, since in MAS opinion, they don't seem to be legally liable to repay back.

Lovely said...

Let's look at the case in HK. Some investors get 100% compensation while some get 70%. I wonder why would the banks behave so differently in these two countires?