Frequently Asked Questions
1 What should I do if I feel I have been mis-sold a Lehman Minibond Note, a DBS High Note 5 or a Merrill Lynch Jubilee Series 3 Linkearner Note?
MAS has set out a three-step process for the resolution of investors' legitimate concerns. The three steps are:
Step 1: Lodge your complaint directly with the financial institution (FI) that sold you the products.
Step 2: Provide full details of your case to the FI to allow the FI to make fair assessment of your case.
Step 3: Accept the decision of the FI or refer your complaint to FIDReC.
Please refer to this link for more details.
2 How will the FI resolve my complaint?
Each FI has set up an internal review panel chaired by its CEO. The panel will conduct a thorough review of your complaint and decide on a course of action.
3 What is the role of FIDReC?
FIDReC is an independent and impartial organisation that specialises in the resolution of disputes between FIs and consumers. FIDReC provides consumers with an affordable avenue to pursue their claims.
Should you decide to refer your case to FIDReC, any settlement offered by the FI may no longer be available to you. You must keep in mind that the outcome from the FIDReC process may be more or less favourable.
At FIDReC, if the matter cannot be resolved at mediation by agreement between you and the FI, it will be referred to adjudication.
The consumer pays a $50 fee while the FI pays a substantially higher amount. Among FIDReC's adjudicators are judges, senior counsel, lawyers and retired industry professionals. The adjudication outcome is binding on the FI, but not on the consumer. If you are not satisfied with the outcome, you are free to pursue other action including seeking legal recourse.
FIDReC's Adjudicators will consider all relevant evidence whether written or oral. Statements can be prepared by consumers themselves and need not be made under oath.
FIDReC normally deals with claims not exceeding S$50,000. In the case of the three structured products, however, the FIs have agreed for FIDReC to hear deserving cases with claims exceeding this amount.
4 Who are the vulnerable customers referred to in MAS' statement?
There is no fixed definition of a vulnerable customer. The indicators of a vulnerable customer include a low level of education, a lack of proficiency in English, being retired or unemployed and whether the investment amount constitutes a large part of total savings.
5 What if I don't belong to this group?
MAS has asked FIs to give priority to reviewing those cases involving vulnerable customers where the products are clearly inappropriate for them given their circumstances. Regardless of whether your case falls into this group, MAS requires FIs to have a rigorous process to look into every complaint of mis-selling and resolve them fairly. For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor's profile and circumstances, MAS has stated that the FI should take responsibility and should reach a fair settlement in full or in part. This has to be assessed on a case-by-case basis.
6 Can MAS order FIs to compensate investors?
MAS does not have the power to compel FIs to pay compensation to consumers. This is the same for regulators in several other jurisdictions. MAS has set out a three-step to ensure the fair and impartial handling of complaints by the relevant FIs.
For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor's profile and circumstances, MAS has stated that the FI should take responsibility and reach a fair settlement in full or in part. This has to be assessed on a case-by-case basis.
7 Apart from the complaints resolution process, what is being done to safeguard Lehman Minibond programme investors' interest?
HSBC Institutional Trust Services (Singapore) Ltd, the trustee, has appointed three partners from PricewaterhouseCoopers LLP Singapore (PwC) as Receivers of the collateral underpinning the defaulted Minibond Notes series (namely series 1 to 3, and 5 to 10). The receivers' role is to take control of the assets of these notes and to work closely with the trustee towards a solution which is in the best interest of noteholders.
The Receivers announced on 1 October 2009 that they have reached a settlement agreement with Lehman Brothers Special Financing Inc, the Swap Counterparty in connection with the Minibond Programme in Singapore. The agreement means that the Receivers now have control of the underlying collateral and can commence the process of realising the residual value of the notes without the risks and uncertainties of complex, costly litigation. Please refer to this link for more details.
This is an important development which resolves the legal complexities that had prevented the earlier unwinding of the notes and gives noteholders greater certainty that they will be able to receive the remaining value of their notes.
The settlement with Lehman Brothers Special Financing Inc does not affect any claims investors are making against the FIs from which they bought the notes. Investors who accepted partial settlement offers as part of the dispute resolution process by the FI or FIDReC would have retained a portion of the notes, and will get to keep the residual value arising from those notes. Investors who accepted full settlement offers would have received 100% of their principal investment amount. These investors will not receive any residual value as they would have transferred the notes to the FI.
8 Is MAS investigating?
Normally MAS does not comment on its dealing with individual institutions. However given the public interest in this matter, MAS has released a report on our investigation findings into the sale and marketing of structured notes linked to Lehman Brothers. Please refer to this link for MAS' 7 July 2009 press statement on our investigation findings.
9 What is the regulatory regime governing the sale of products like DBS High Notes 5, Lehman Minibond programme and Merrill Lynch Jubilee Series 3 notes? Will there be changes?
MAS requires the issuer to include in the prospectus all information that an investor would reasonably need to make an informed assessment of the securities being offered. Based on information provided by the issuer and its advisers, MAS checks that the prospectus discloses the risks and product features and that there are no false or misleading statements. MAS does not judge the merits of the investment.
The Financial Advisers Act requires FIs and their representatives to have a reasonable basis when recommending investments to customers, unless they choose to opt out of receiving such advice. FIs must consider the investment objectives, financial situation and needs of the investor.
The global financial crisis has led regulators to re-examine aspects of their regulatory and supervisory approach, not just in Singapore but in many other jurisdictions. Given recent developments, MAS has reviewed the framework for the marketing and sale of structured products. In this regard, MAS released a consultation paper in March 2009 on proposals to strengthen the regulation of the sale and marketing for investors when they purchase unlisted investment products. The proposals aim to promote more effective disclosure, strengthen fair dealing in the sale and advisory process, educate the investing public, and enhance MAS' powers. On 8 September 2009, MAS issued the first part of its response to feedback on the consultation paper. Please refer to this link for the 12 March 2009 press statement on the release of the consultation paper, and to this link for the 8 September 2009 press statement.
However, regulation cannot be the only solution. All stakeholders have a role to play. The Boards and senior management of FIs must embed a culture within their institutions, a culture of ensuring fair dealing for customers of their institutions. Investors too have to play their roles, to make well-informed investment decisions. This will reduce the risk of investors being sold products that do not meet their needs. MoneySENSE will be stepping up its financial education efforts to help consumers equip themselves with the relevant skills and knowledge
10 What has MAS been doing for investors?
MAS has put in place a serious and impartial resolution process to deal with investors' legitimate concerns. This is the best course of action for affected investors.
• First, MAS is making sure that the trustee for the Lehman Minibond programme carefully considers all options and acts in the interest of investors
• Second, each FI appointed an independent person to oversee its complaints handling process for the Lehman Minibond programme, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 Linkearner notes.
• Third, for any complaint not resolved by FIs, MAS has established a fast-track process to refer the case to the Financial Industry Disputes Resolution Centre (FIDReC).
For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor's profile and circumstances, MAS has stated that the FI should take responsibility and reach a fair settlement in full or in part. This has to be assessed on a case-by-case basis. In addition, MAS has asked FIs to give priority to reviewing those cases involving vulnerable customers where the products are clearly inappropriate for them given their circumstances. Regardless of whether your case falls into this group, MAS has required that FIs have a rigorous process to look into every complaint of mis-selling and resolve them fairly.
11 What is the role of the independent parties and who are they?
Each FI that sold the three structured products to retail clients had appointed an independent party to determine whether its complaints handling and resolution process is independent, fair and transparent. The independent parties appointed were Mr Gerard Ee, Mr Hwang Soo Jin and Mr Law Song Keng.
MAS and the independent parties have worked with the FIs to put in place a generally consistent assessment framework across complaints and across FIs. The independent parties have completed their work. Essentially, over a three-month period, they reviewed the FIs' complaints handling processes, provided feedback to MAS on how the FIs have applied the framework across a sample of actual complaints, and gave updates to MAS so that any FI-wide issues identified along the way were incorporated into the assessment.
12 How many investors are affected?
The total issue size of the Lehman Minibond programme was S$508 million, of which S$375 million was sold to about 8,000 retail investors through nine distributors. For the Merrill Lynch Jubilee Series 3 LinkEarner Notes, S$23 million of the total S$28 million notes issued were sold to about 350 investors through six stockbroking firms. In the case of DBS High Notes 5, over 1,400 investors bought S$103 million worth of notes.
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