Priority to investors: MAS

Source StraitsTimes

BANKS and finance companies should make it a priority to deal with worried investors holding structured products tied to the now-bankrupt Lehman Brothers, the Monetary Authority of Singapore (MAS) said yesterday.
In its first specific comments on these precarious investments, MAS said that investors who 'consider that they were mis-sold a product or that a product was misrepresented to them' should first contact the financial institution they dealt with.

'MAS expects the financial institutions concerned to give priority in dealing with such queries and handle complaints promptly, in accordance with existing MAS requirements,' it said in a statement yesterday.

The central bank also suggested that investors with a 'legitimate cause of grievance' who are not satisfied with the response they get can approach the Financial Industry Disputes Resolution Centre (Fidrec).

As for the financial institutions concerned, MAS said it expects them to have 'proper procedures' in place to ensure that investment products are 'marketed and sold appropriately'. 'Where we have clear evidence in the current matter that a financial institution has breached our laws or regulations, we will hold the financial institution to account,' it added.

MAS' comments come amid an outpouring of grievances from fretful investors who, anxious for updates on their investments, are calling for regulators to take more pro-active action. These investors bought the Lehman-linked Minibond Series 3 and DBS Bank's High Notes 5 series.

Investors who bought the Minibonds, which were arranged by Lehman, are in a lurch since bankruptcy proceedings are such that a long line of parties will first be paid before Minibond noteholders can get anything. Investors in DBS High Notes 5, which dangled a 5 per cent annual payout, may lose a large part of their stake.

'What really frustrates me is the subdued response from MAS. As the financial watchdog, I think it has been extremely reactive and it has so far distanced itself from blame,' said Mr Peter Lim, a Minibonds investor. He wants to know how MAS evaluated the products before approving them and if it knew how they really worked.

'Has MAS obligated all banks and financial institutions to adequately train their staff and mandate them to highlight all the risk areas to potential investors? This has been a sore discussion point among retail investors here,' he added.

A High Notes 5 investor, who wanted to be known only as Ms A, said she had informed MAS of her plight but 'they do not seem to have acted at all'. 'My question for them is, should they have even allowed the product to be sold? And what are they going to do about it now?' she asked.

Mr Tan Kin Lian, former chief of insurer NTUC Income, has also urged the authorities to investigate financial companies that sold retail investors these structured products, and take them to court if necessary.

'The MAS should look into whether these bank officers gave bad advice to investors, and whether they broke the law by giving inappropriate advice,' he told The Straits Times yesterday.