It was reported that 35 financial advisory representatives have been given warning letters by the CPF board for churning, with seven of them suspended.
Just a warning letter?
For the uninitiated, the practice of churning actually involves the repeated buying and selling unit trusts using CPF monies with a sales charge of 3%. Part of the sales charge is then given back to the CPF member in the form of cash rebates.
You can see regular newspaper advertisements promising “quick cash” – this is one of the ways they operate.
Read one of my earlier stories on churning:
Why churning can hurt your portfolio
It seems that the worst thing that can happen to churners is just termination of service. To curb out this practice, more severe penalties should be implemented and enforced.
It’ not too difficult to seek out the offenders by responding to the newspaper advertisements. It is a question of whether the authorities want to proactively act to clean out this disease in the financial industry.