Dealing with Investor Concerns on Structured Products
The current global financial crisis led to the default or early redemption of several structured products in Singapore, such as Minibond notes, DBS High Notes 5, Jubilee Series 3 LinkEarner Notes and Pinnacle Series 9 and 10 notes. These events directly and adversely affected Singapore investors who bought these products. Since September 2008, MAS has been responding to investor concerns.
As an important first step, MAS required the relevant financial institutions who were retail distributors of these products to put in place clear service standards and appoint independent persons to oversee the complaints handling process. This is to ensure that the financial institutions deal with complaints on the affected structured products in a serious and impartial manner. In addition, MAS deployed additional resources to respond to consumers' queries on the complaints handling process of financial institutions, and to monitor the financial institutions' responses to complaints. MAS reviewed feedback from consumers, and where appropriate, advised financial institutions to fine-tune and improve their processes.
The financial institutions have since completed the review of most complaints and communicated the outcome of their reviews to affected investors. MAS also worked with the Financial Industry Dispute Resolution Centre (FIDReC) to enhance its ability to handle the surge in investor complaints.
To keep consumers apprised of relevant developments and the steps they can take to resolve disputes with financial institutions, MAS issued press statements, consumer guides and frequently-asked-questions in both English and Mandarin. At the same time, MAS completed investigations into the 10 financial institutions that distributed these structured notes. As part of the investigations into two of the distributors, MAS also investigated 10 licensed financial advisers that were appointed by these two distributors to refer clients to them. The investigations covered, among other matters, the financial institutions' due diligence on the structured notes, the procedures used at the point of sale of notes, and the training and supervision of relationship managers. MAS identified non-compliance by the financial institutions with the MAS Notices and Guidelines on the sale and marketing of structured products, and issued directions to the financial institutions to ensure that these were rectified.
MAS undertook a review of the current regulatory regime for the sale of investment products, and published the Consultation Paper on the Review of the Regulatory Regime Governing the Sale and Marketing of Unlisted Investment Products on 12 March 2009. The consultation paper set out proposals to further safeguard consumers' interests and promote higher industry standards for the sale and marketing of unlisted investment products. The proposals aim to promote more effective disclosure by improving the quality of information available to investors, strengthen fair dealing in the sale and advisory process, and enhance MAS' powers under the FAA. The consultation closed on 23 April 2009. MAS will publish our responses to feedback received and release the finalised proposals in the second half of 2009.
On 3 April 2009, MAS issued the Guidelines on Fair Dealing - Board and Senior Management Responsibilities for Delivering Fair Dealing Outcomes to Customers. The Guidelines are issued under the FAA, and apply to the selection, marketing and distribution of investment products and the provision of advice for these products. They also address issues relating to responsibilities for after-sales services and complaints handling.
MAS is also working closely with the trustee for the Minibond notes, HSBC Institutional Trust Services (Singapore) Ltd, to safeguard investors' interests, given the Chapter 11 filing of Lehman Brothers Special Financing, Inc, the swap counterparty for the Minibond notes, in the US The trustee had explored possible restructuring options for the notes and took steps to prevent further potential loss of value in the notes. The Trustee and Receivers are seeking to realise any residual value for investors from these notes. There is a range of complex legal issues involved given the scale of the global liquidation of Lehman Brothers-