Published September 25, 2008

MAS cracks whip to get fair deal for investors

Regulator hauls in banks and brokers, may tighten up the rules

By SIOW LI SEN
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(SINGAPORE) Financial institutions (FI) have been ordered to appoint an independent party to investigate complaints of mis-selling complex products to retail consumers amid growing unhappiness from investors who have lost money.

The Monetary Authority of Singapore (MAS) also said that it may tighten regulations on the selling of complex investment products.

The regulator yesterday hauled in banks, brokers and Hong Leong Finance to tell them to move swiftly to handle complaints from investors and to ensure fairness.

'In consultation with MAS, FIs that have sold the DBS High Notes 5, Lehman Minibonds and Merrill Lynch Jubilee Series 3 LinkEarner Notes have decided to appoint independent parties to oversee their complaints handling processes and investigations into any mis-selling of these products,' the MAS said late last night.

'The independent party is intended to assure investors that their complaints will be heard, documented and reviewed fairly and swiftly.'

Over half a billion dollars worth of these products were sold over the last two years to thousands of people.

MAS has also asked DBS Bank to appoint an independent party to review the computation of the payout to investors of the DBS High Notes 5.



DBS is the arranger, issuer, calculating agent and trustee of the notes.

Last night DBS said that it will be appointing independent external consultants to review complaint handling and the final credit event redemption amount for High Notes 5.

MAS also said that it has asked HSBC Trustee to expedite the resolution of the issues relating to the Lehman Minibonds and the Merrill Lynch Notes.

These structured products went bust following the bankruptcy filing of US-based Lehman Brothers last week.

There has been growing outrage from investors who said they were told by the sales people of FIs that the structured products were safe. Some also feel frustrated at what they perceive as the lack of action in helping them seek compensation. Others have said that they feel helpless when it comes to confronting a big bank and do not have the money to hire lawyers to fight their case.

Last night, an estimated 100 people met outside the National Library to discuss the sending of a petition to the MAS. Ninety-five of them have already signed up.

MAS spokeswoman Angelina Fernandez, when asked about the petition, said: 'We will meet with whoever wants to meet us, we will hear them out.'

Tan Kin Lian, former chief executive of NTUC Income, has said that he hopes MAS will help investors take legal action against FIs who were guilty of mis-selling. Till last night, some 350 people have signed up on Mr Tan's blog to discuss taking collective action.

MAS said that it will also fast track mediation with the industry body which handles consumer grievances.

MAS will work with Financial Industry Disputes Resolution Centre (Fidrec), the independent parties and the FIs so that documentation from the FIs' review process can be used, should investors choose to seek mediation and adjudication with Fidrec.

Essentially it means investors who lodge their complaints at the FIs can get a hearing at Fidrec without going through another round of lodging a complaint.

It is understood that the MAS is leaning on the FIs to ascertain the amount of compensation investors may get if their complaints are valid. Under the rules, the maximum amount an adjudication can award is $50,000.

The MAS has the power to punish FIs for breaching regulations but not to force them to compensate investors.

Shane Tregillis, MAS deputy managing director, Market Conduct, said, 'MAS will ensure that FIs must have a rigorous process in place for handling customers' complaints and that legitimate grievances are dealt with expeditiously. While MAS cannot order FIs to pay compensation, we are committed to ensuring a fair resolution process for all affected investors'.

MAS will use the outcome of this process to consider what FIs need to do to strengthen internal processes and controls, and if a review of existing regulations is required, it said.