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 organization that specializes 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 proposal 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 by agreement between you and the FI, it will be referred to adjudication.

The consumer pays a $50 fee while the FI pays $500. 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 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 Besides the complaints resolution process, what is being done to safeguard Lehman Minibond programme investors’ interest?

HSBC Institutional Trust Services (Singapore) Ltd, the trustee, is considering various options. If a new swap counterparty is available, investors would have the opportunity to vote on this option. MAS will appoint an independent financial adviser to assist investors to make an informed decision.

If no such option materializes, the trustee will act in the interest of investors by disposing of the underlying securities for defaulted series of the notes in an orderly fashion. After this process is completed, it will pay the proceeds, after deducting any liabilities that are payable, to investors.

7 Is MAS investigating?

Normally MAS does not comment on its dealing with individual institutions. However given the public interest in this matter, MAS has confirmed that it has been conducting formal inquiries to determine if there have been breaches of law, poor sales practices or inadequate internal controls by the FI and their representatives.  MAS will make an announcement on any actions it is taking when inquiries are completed.

8 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 other jurisdictions such as Hong Kong. MAS has however set in place processes for investors to pursue their claims against the FI.

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.

9 Should MAS order FIs to buy back the notes?

A buy-back of the notes will likely lead to the notes being liquidated. Many investors have requested that the trustee explore the option of a new swap counterparty first so that investors can vote on this option. They have asked that this be fully explored before other alternatives are considered.

10 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.

We believe the regime is fundamentally sound. But given recent developments, MAS will review the framework for the marketing and sale of structured products.  Other countries are also doing the same. 

Regulation alone is not enough.  The industry also has to do more. MAS expects the board and senior management to be responsible for ensuring that investors get a fair deal.   It is also important for consumers to make well-informed decisions.  MoneySENSE will be stepping up its financial education efforts. 

11 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 financial institution (FI) now has 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. MAS has set a clear timeline for complaints to be resolved.
• 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 requires FIs to have a rigorous process to look into every complaint of mis-selling and resolve them fairly. 

12 What is the role of the independent parties and who are they?

Each FI that sold the three structured products to retail clients has appointed an independent party to determine whether its complaints handling and resolution process is independent, fair and transparent. The independent parties are Mr Gerard Ee, Mr Hwang Soo Jin and Mr Law Song Keng.

13 Why did MAS not appoint the independent parties?

MAS has full confidence that the three independent parties will carry out their work objectively. The terms of reference for these independent parties are set out by MAS. They are required to provide MAS with regular updates on the progress of the complaints review and an overall report at the end of the review. The three parties are highly-respected individuals, whose independence should not be questioned.

14 Can I send my complaint to the independent party directly?

There is no need for you to do so. The FI is responsible for the proper handling of your complaint, and if you are not satisfied with the outcome, you may refer your complaint to FIDReC.

15 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.