S'pore: Risky products being review

Source StraitsTimes

CONFUSED by complex investment products sold at the bank? Well, help is on the way.
Singapore's financial regulator said yesterday that it will review the way that structured investment products are marketed and sold to retail investors.

The move comes in the wake of news that thousands of investors who had bought structured products linked to the now-bankrupt investment bank Lehman Brothers could now lose most of their money.

In a statement yesterday, the Monetary Authority of Singapore (MAS) said that areas under study include stronger suitability requirements for certain types of products, as well as clearer product labelling and risk rating.

And one outcome of the review could be simpler descriptions of the features and risks of products, so that they can be more easily understood.

Structured products refer to a class of investments that involve the use of complex financial derivatives to deliver a steady annual return above that of traditional fixed deposits.

Returns are also mathematically tied to the performance of certain companies and stock markets. In some structures, investors can end up losing all their money should one of these companies fail.

That is the quandary that investors in structured products such as DBS High Notes 5, Lehman Minibonds and Merrill Lynch Jubilee Series 3 LinkEarner Notes have found themselves in, following the collapse of Lehman.

While recognising the need for a review of the way these products are sold, MAS also cautioned against 'swinging to the extreme' of over-regulation.

It urged sellers of investment products to practise fair dealing and customers to consider investment decisions carefully and understand the risks.

Aljunied GRC MP Cynthia Phua, who has received complaints from her constituents, welcomed the review. But she suggested that when drawing up guidelines, MAS should also factor in considerations like an investor's educational level.

'Structured products should be graded and only offered to retail investors who can fully understand all their implications,' she said.

Separately, MAS also announced yesterday that it has identified three 'well-respected' individuals to oversee how complaints from customers stuck with Lehman-linked products are handled. The three will not be personally involved in settling individual complaints, but they will make sure the processes are independent, fair and transparent for customers.

Last night, DBS Bank, which sold the Lehman-linked High Notes 5, confirmed that it appointed Mr Gerard Ee as its independent external consultant.

Mr Law Song Keng will be appointed by ABN Amro, Hong Leong Finance and Maybank. And Mr Hwang Soo Jin will provide oversight at six local stockbrokers.

The Straits Times understands that all three men will be paid a fee by the various financial institutions for their work.

MAS added that investors who are still not satisfied with how their cases are being handled can refer their complaints to the Financial Industry Disputes Resolution Centre (Fidrec).

It also gave its assurance that it will take 'firm and appropriate regulatory action' if financial institutions or their staff have breached the law in the sale of these structured products to customers.