Yesterday, MAS released their 99-page report on the selling of structured products by ten financial institutions.
It detailed the process by which each financial institution sold the products, a tabulation of the amount of compensation received by investors, as well as actions taken against the financial institutions.
Punishments include a ban of structured products selling for a period of 6 months to DBS Bank, ABN Amro, Maybank, DMG & Partners Securities and UOB Kay Hian; 1 year to CIMB-GK Securities, Kim Eng Securities, OCBC Securities and Phillip Securities; and 2 years to Hong Leong Finance.
This ban appears to be of limited significance as some of the financial institutions have already suspended their selling of structured products to retail investors anyway. Note this ban DOES NOT include the private banking units of DBS and ABN Amro Bank.
Among the compensation offered to investors, Hong Leong Finance gave the most. In fact, the amount of settlement that they offered exceeded the total of the 9 other financial institutions put together. Ironically, they were also the only financial institution that had the longest ban of 2 years imposed.
Reports can be downloaded below:
MAS Acts Against 10 Financial Institutions (news report by Straits Times)
For those who are taking legal actions against the financial institutions, note the following paragraphs by MAS:
38) Although section 64 of the FAA provides that the failure of any FI to comply with the Guidelines issued under the FAA may be relied upon to establish liability against the FI in any criminal or civil proceedings, any such failure does not by itself render the FI liable for criminal sanctions or civil damages to an individual investor. Section 27 of the FAA also requires that, for an investor to make out a claim for damages where a recommendation was made without a reasonable basis, the investor must show reliance on the recommendation and that it is reasonable, having regard to the recommendation and all other relevant circumstances, for that investor to have purchased the Notes in reliance on the recommendation. Similarly, a claim in tort or contract for misrepresentation has to show reliance on the misrepresentations complained of. Whether an investor bringing an action against the FA can prove that there was such reliance, whether such reliance was reasonable, and to what extent, if any, the recommendation could be shown to have affected the investor’s actual decision to invest is a matter that would need to be established by each investor based on the specific facts and circumstances at the time of purchase. Establishing such a case in law would depend, among other things, on the oral and documentary evidence as to what transpired between the client and the representative of his FA and what documents the client signed as part of the transaction process.
39) All clients investing in the Notes were generally provided with, or asked to acknowledge receipt of or sign, documentation containing risk warnings and disclaimers in respect of the liability of a seller of the Notes.
42) The Distributors generally take the view that the documentation signed by clients mean they do not have any legal liability to the client and, accordingly, afford them a legal basis not to offer redress in many cases. The Distributors also take the view that they were not liable for statements of opinion expressed in good faith. Additionally, the Distributors highlighted their fiduciary obligations to shareholders and other stakeholders which as a matter of law they needed to take into account in making offers of settlement.