Published October 18, 2008
Banks may compensate victims of 'mis-selling'
Focus on 'vulnerable' customers who bought Lehman-linked products
By GENEVIEVE CUA

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'VULNERABLE' customers, who were mis-sold structured products linked to Lehman Brothers, may find their cases being heard more sympathetically.

MR HENG'Several FIs have assured MAS that they will take full responsibility... They must do the right thing and ensure a quick and fair resolution.'
The Monetary Authority of Singapore is focusing on helping the elderly, the unemployed, retirees and those with little English proficiency who invested a significant portion of their savings in such products. It will also focus on cases where the products were 'clearly inappropriate for them given their circumstances'.
In a briefing yesterday, MAS managing director Heng Swee Keat said that financial institutions which distributed the products have been told 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 . . . They must do the right thing and ensure a quick and fair resolution for these customers.'
News wires reported, meanwhile, that Hong Kong banks will buy back Lehman's Minibonds from investors at market value. In Singapore, HSBC Institutional Trust Services is exploring the option of a new swap counterparty for Minibond, which is understood to be a preferred option among investors.
Yesterday, SCMP also reported that DBS Bank in Hong Kong has agreed to a partial refund for an 84 year old woman and her mentally ill son. DBS has declined to comment on individual cases. Mr Heng said the elderly may not necessarily be vulnerable. 'You may have certain individuals who are elderly but have been investing in markets for some time.'
Mr Heng said MAS will take action against institutions or individuals who breach regulations. '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.'
The banks responded positively to such measures. In a statement, DBS said that MAS' measures are consistent with its own actions to address investors' concerns. 'We are now reviewing all concerns raised on High Notes 5 in a prompt and comprehensive manner, and will not hesitate to take responsibility in instances where evidence of mis-selling is established,' it said. Hong Leong Finance also said that the company was prepared to compensate customers in cases where there had been mis-selling. Maybank added that it was prepared to deploy all necessary resources to assist affected Minibond investors.
Meanwhile, three independent persons have been appointed by the financial institutions involved to oversee the complaints handling process related to the sale of Minibond, DBS High Notes and Merrill Lynch's Jubilee Series 3 Notes. These persons are Gerard Ee, Hwang Soo Jin and Law Song Keng.
Mr Heng said that MAS normally does not comment on 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 urged individuals who have a genuine claim of mis-selling to lodge their complaint with their FI. Those who are not satisfied with the FIs' decision can turn to the Financial Industry Disputes Resolution Centre (FIDReC) which has a fast-track process in place.