Singapore bars 10 firms from selling structured notes
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SINGAPORE: The Monetary Authority of Singapore (MAS) has, for the first time, imposed bans on the sale of structured notes by 10 financial institutions (FIs) which had distributed toxic structured notes linked to the collapsed US financial institution Lehman Brothers.
The bans took effect on July 1 and will remain in place until MAS is satisfied there are adequate measures to address the findings of its investigation into the sale of the failed structured products last year.
The 10 FIs are ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Philip Securities and UOB Kay Hian.
MAS revealed this as it released the findings of its investigations into the sale of the failed structured products last year.
The regulator found that the 10 FIs had policies, procedures and controls in place for the sale and marketing of the structured notes, but the extent of due diligence and level of internal controls differed among them.
As a result, MAS said there were various forms of non-compliance with its notices and guidelines on the sale and marketing of these investment products.
MAS said some of the specific failings included insufficient steps taken by some FIs to ensure that all their financial advisory representatives were properly trained before marketing and selling these products.
The regulator also noted that some FIs had assigned risk ratings to the products that were inconsistent with risk warnings stated in the prospectus and pricing statement.
According to MAS, there were also weaknesses in how some FIs ensured that their sales representatives were properly equipped with accurate and complete information about the structured notes.
As a preventive measure, the regulator said FIs must rectify all weaknesses identified in the investigations, appoint an external person identified by MAS to review action plans and report on implementation, and appoint senior management staff to oversee compliance with MAS' direction.
MAS said that until it is satisfied with the measures put in place, the FIs will not be able to distribute structured notes.
MAS also gave details about how the FIs have compensated investors who bought structured notes.
Hong Leong Finance paid S$57.6 million to 2,048 investors who bought the structured notes that it distributed. This is the highest amount of compensation paid out to retail investors. Hong Leong Finance is also barred from selling structured notes for two years.
Maybank offered S$25.3 million to 1,100 investors, while ABN Amro paid 262 investors S$14.1 million.
DBS Bank compensated 197 investors S$7.6 million.
The three banks will be banned from selling structured notes for six months.
According to MAS, the total settlements for decided cases amounted to S$105 million.
The six brokerage firms, which also sold the structured notes, paid a total of S$2.74 million to 297 investors. UOB Kay Hian and DMG & Partners will get a six-month ban, while the others will be barred from selling structured notes for a year each.
- CNA/ir -
Too little, too late.
Feedback system of the P4P. After some dramatic event has occurred, then they seek solution to curtail the problem.
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Consumer confidence in banks mixed after MAS findings
SINGAPORE: Some Singapore consumers say they still have confidence in financial institutions here.
This is despite a decision by the central bank to ban 10 institutions which had sold soured Lehman-linked structured notes from selling new structured notes.
But others are disappointed with the penalty imposed by the Monetary Authority of Singapore (MAS) on the institutions.
The 10 institutions implicated are: ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Phillip Securities and UOB Kay Hian.
MAS released findings on Tuesday showing there had been various forms of non-compliance with guidelines on the sale of structured notes linked to the failed US financial giant Lehman Brothers.
A day after the findings were announced, consumers were divided when asked if they still had faith in these institutions.
"Yes, I trust the banks," said a member of the public.
"I'll be more careful. After reading what has happened, I don't think I will take the risk," said another.
The MAS has put in place rules to prevent a repeat of the incident. But some remain unconvinced.
"Sales people are all commission motivated and when there is money involved, people have very short memory, they will forget," said an investor.
"I think with this regulation, it (the investment sale process) will be more transparent..." said another.
Many investors who suffered losses said the penalty imposed on the financial institutions is not sufficient.
These institutions have been banned from selling structured notes for between six months and two years. But consumers said that barely anyone these days are buying structured notes, hence the penalty has minimum impact on the banks.
MAS has said the ban may be extended if it is not satisfied with the measures implemented by the financial institutions.
Former NTUC Income CEO, Tan Kin Lian, said: "Many of the investors have expressed that they find this action to be rather disappointing.
"The investors, having lost so much money, were looking for some compensation if the financial institutions did actually breach the regulation. But this was not part of the recommendations, not part of the MAS findings."
6,500 investors have applied for compensation and 3,900 of them were successful.
MAS figures showed that as of May 31, three banks and one financial institution implicated have compensated 32.2 percent of the amount invested by customers who have already had their cases decided.
S$324.5 million was invested by 5,352 customers who complained, and S$104.6 million will be paid out to them.
A total of 7,190 investors had bought the soured Lehman Minibond Notes, DBS High Notes 5, and the Pinnacle Series 9 & 10 Notes from banks.
The six securities firms, on the other hand, have compensated 5.6 percent of the amount invested by this same group of customers. 889 customers complained and have already had their cases decided. Of this number, 297 people received full or partial compensation.
Some consumers are intending to file a class action suit against the financial institutions for mis-selling. Lawyers say the investigation findings by MAS are likely to bolster their case.
- CNA/ir -
Customers sue Singapore's DBS over investment loss
SINGAPORE, July 10 - More than 200 customershave sued Singapore's DBS Bank in a bid to recover investment losses arising from the collapse of U.S. investment bank Lehman Brothers <LEHMQ.PK>.
Siraj Omar, a director at Premier Law, told Reuters on Friday his firm had filed a claim on behalf of 204 investors in a Singapore court. He declined to discuss the case or reveal the size of the claim, which according to the Straits Times newspaper was around S$17 million .
The investors had purchased a callable basket of credit-linked notes, called High Notes 5, from DBS Bank, a unit of DBS Group <DBSM.SI>, Omar said.
A DBS spokeswoman confirmed receipt of the claim. She said the suit was without merit and that DBS planned to contest the suit, which is the first involving the bank's High Notes 5 product.
News of the lawsuit had almost no impact on shares of DBS Group, which were up 0.4 percent on Friday morning at S$11.58 in a generally flat stock market.
Financial institutions around the world have been hit by complaints and lawsuits arising from the sale of interest-bearing structured products linked to Lehman that paid higher interest rates than regular savings deposits.
For example, a class action suit was launched in November against UBS <UBSN.VX> in the United States that alleged the Swiss bank had sold Lehman-linked notes as suitable for investors seeking to protect their principal investment. [ID:nL7171660]
News of the suit against DBS comes three days after Singapore's central bank banned DBS and nine other firms from selling structured notes, citing various issues, such as their failure to adequately train the staff who sold such products. [ID:nSIN397515]
According to a report released by the Monetary Authority of Singapore , DBS which received the shortest ban of six months, had sold over S$100 million worth of High Notes 5 to 1,083 investors that became worthless after Lehman's collapse.
The bank has to-date paid about S$7.6 million in compensation, the central bank's report said.
MAS said the failings identified in its investigations "do not automatically mean that the financial institutions are liable to individual investors."
--Reuters