Published February 19, 2009

Class action looms for financial institutions

Investors of soured investments plan to go to court in April

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(SINGAPORE) A group of 260 investors in failed investment products such as Lehman Minibonds are planning to take class action against financial institutions in April, according to Channel NewsAsia.

Of these investors, 90 per cent have not been offered any compensation by financial institutions, Leonard Loo, one of the lawyers preparing the class action, was quoted as saying.

The remaining 10 per cent of these investors are not satisfied with the partial compensation, and are against filing complaints with the Financial Industry Disputes Resolution Centre (FIDReC).

The details of the planned legal move are still being formulated.

It is also not clear whether these investors will go after individual financial institutions based on the products they bought or sue all of them together, according to Channel NewsAsia.

Some dissatisfied investors are going to the FIDReC, instead.

The financial disputes centre has received 331 complaints as at Feb 6 - 180 from those who bought Lehman Minibonds, 12 from investors of Morgan Stanley Pinnacle Series 9 and 10 Notes, 39 for Merrill Lynch Jubilee Series 3 Linkearner Notes, and 100 for DBS High Notes 5.

To ensure that all complaints are dealt with effectively, FIDReC has increased its resources and expanded its facilities.

The Monetary Authority of Singapore (MAS) announced in January that 58 per cent of complainants, or 2,974 investors, will get a full or partial refund from the financial institution which sold them the products.

Market watchdogs and industry watchers have since cautioned investors who are dissatisfied with the outcome of their complaints to consider the merits of their case before bringing it up to FIDReC or the courts.

They note that once the complaint is filed with FIDReC or the courts, the financial institution will be entitled to withdraw its offer. Should an investor not succeed in their complaint, they will not be able to approach the financial institution to reinstate its earlier settlement offer.

Moreover, the process of unwinding the failed investment product will be put on hold while the legal wrangle plays itself out, said Minibonds trustee HSBC Institutional Trust Services Singapore and the receivers, PricewaterhouseCoopers.

The Securities Investors Association of Singapore, the retail investor watchdog, has said it will open its doors to investors who need advice on their next course of action.

So far, some 200 people have signed up to attend its legal forum at the end of this month, and about half of them are investors of DBS High Notes 5, said Channel NewsAsia.