MAS to banks: Do the right thing

MAS to banks: Do the right thing

Lowly-educated retirees who lost money to be given top priority

By Ignatius Low & Francis Chan

GEARING UP FOR TOUGH TIMES: Kuah Leng Cher and Jacqueline Lee are doing their best to keep the gloomy news about the economy from spoiling their wedding plans. Their big dinner’s booked for January and they’re going ahead, but the financial crisis has made them scale down their plans.

LOWLY-EDUCATED retiree investors who put their savings in structured products linked to the collapsed Lehman Brothers have been singled out by the Government for special attention.
The Monetary Authority of Singapore (MAS) wants banks and financial institutions to give this group top priority when investigating complaints of mis-selling.

Singapore decides not to follow HK’s buy-back approach

It also added that banks should not take an ‘overly legalistic’ approach in dealing with such cases.

And in situations where the product was mis-sold or was clearly inappropriate given the investor’s profile and circumstances, MAS wants the financial institutions to take full responsibility.

‘We expect them to do the right thing,’ declared MAS managing director Heng Swee Keat at a press conference yesterday.

Asked what he means by this, Mr Heng later told The Straits Times in an e-mail reply that ‘the financial institution should reach a fair settlement in full or in part’.

‘This has to be assessed on a case-by-case basis,’ he added.

Calling them ‘vulnerable customers’, Mr Heng said at the press conference that this group of retirees would be typically be above 55 years of age and have minimal education.

They may also be blue-collar workers or unemployed. Some may not be proficient in English and may be unable to read the structured product’s prospectus, where the risks and mechanics of the investment are spelt out.

But he also added that not all investors fitting this profile would necessarily be inexperienced.

‘We are focusing on cases of mis-selling to vulnerable customers and on cases where the products were clearly inappropriate for them given the circumstances,’ said Mr Heng.

According to MAS, about 10,000 retail investors had pumped over $500 million into structured products linked to the US investment bank Lehman Brothers.

Lehman’s bankruptcy last month has meant that investors holding products such as Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 Linkearner Notes could lose most of their money.

On Wednesday, The Straits Times highlighted the plight of retiree investors who have stopped work and therefore have little hope of recouping their nest-eggs in their lifetime.

Yesterday, MAS reiterated that it will come down hard on anyone who has been found to have mis-sold these products to them. Many retirees say they did not fully understand the products and claim to have been wrongly assured that they would not lose their principal sums.

‘MAS confirms that we have been conducting formal inquiries into allegation of breaches of the law, inadequate internal controls by the financial institutions, or poor sales practices by their representatives,’ said Mr Heng.

‘We will make an announcement on any actions we are taking when our inquiries are completed.’

MAS also said that a ‘number of possible cases’ have already been found by independent parties overseeing the complaints process at each of the financial institutions that had sold the Lehman-linked products.

It added that it is following up on these cases, but gave no further details.

In the meantime, it is urging those affected who have a genuine claim that they were mis-sold their investments, to lodge their complaints with the financial institution they dealt with.

MAS said that it has asked the chief executive officers of these institutions to personally chair internal review panels to look into these complaints.

In each case, MAS wants the panel to decide what to do within four weeks and communicate its decision to the customer.

If investors are still not satisfied with the decision, they can take their case to the Financial Industry Disputes Resolution Centre (Fidrec).

Mr Heng emphasised that the Fidrec mediation process is free of charge and if the case goes to arbitration, the cost to the customer is just $50.

Fidrec normally deals with claims not exceeding $50,000. But in the case of structured products, the centre has agreed to hear all ‘deserving cases’.

Responding to the MAS’ statements yesterday, DBS Bank said it is ‘now reviewing all concerns raised on High Notes 5 in a prompt and comprehensive manner, and will not hesitate to take responsibility in instances where evidence of mis-selling is established’. The Straits Times understands that the bank has already given special attention to retirees.

Hong Leong Finance, which distributed Lehman Minibonds, said it ‘will focus special attention on those above 55 years old, less educated and first time investors in structured products’.

Maybank said that it has to date, contacted 50 per cent of customers with complaints to schedule interviews. It told The Straits Times that it is also dealing with ‘vulnerable customers’ first.

Investors and investor advocates applauded the MAS move, with Mr Leong Sze Hian, president of the Society of Financial Service Professionals, saying that it is ‘obvious that this group needs more help’.

But Aljunied GRC MP Cynthia Phua also added that while it is a ‘good step forward’, MAS still needs to address deficiencies at the bank level in selling these products.

Singapore decides not to follow HK’s buy-back approach

THE Monetary Authority of Singapore (MAS) has decided against following Hong Kong’s lead in requiring banks to buy back Lehman Brothers-linked Minibonds at market price from investors.

MAS managing director, Mr Heng Swee Keat, told reporters at a media conference yesterday that one of its key priorities now was to ensure that HSBC Trustee, the trustee for the Minibond programme, carefully considers all options and acts in the interests of investors.

He said that the trustee, which is now working on finding a new swap counterparty to replace collapsed Lehman in the programme, was already acting on the requests of investors who had submitted a petition to the MAS on Sept 24.

If a new swap counterparty is found, investors will be given the opportunity to vote on this option, he said.

Such an option raises the possibility that investors might eventually get some of their money back.

In the meantime, the MAS will also appoint an independent financial adviser to assist investors in making an ‘informed decision’.

‘Many individuals who purchased structured products linked to Lehman Brothers are worried about their investments,’ said Mr Heng.

‘MAS has been actively working to ensure a fair resolution for these investors…Our first priority has always been to help affected investors.’

Last week MAS disclosed that 8,000 retail investors had spent a total of $375 million on the Minibond programme.

Yesterday, Hong Kong Association of Banks chairman He Guangbei said that banks said they will buy back Minibonds from investors in the territory at ‘market value’ as proposed by the Hong Kong government.

An independent financial adviser was also appointed to handle the buyback process, including the valuation of toxic structured products that have been the bane of many disgruntled retail investors both in Hong Kong and Singapore where nine banks and financial institutions had distributed Minibonds.

Investors in the product in both markets have protested in recent weeks demanding compensation.

Many claimed they were told that Minibonds were a low-risk product when they were in fact complex derivatives which many did not fully understand.

Last week, the MAS had also announced that HSBC Trustee had informed the central bank that that ‘a few financial institutions are currently considering taking on (the) role’ of the swap counterparty and should there be a firm offer from an appropriate party, the trustee would seek the necessary approval from investors.

Mr Heng said the MAS expects the trustee to know whether options will be available to Minibond investors by the end of next week.

WHAT IS EXPECTED OF BANKS

‘Where a customer has been mis-sold the product or where the product was clearly inappropriate to his circumstances, the financial institution should reach a fair settlement in full or in part. This has to be assessed on a case-by-case basis.’

MAS managing director Heng Swee Keat in an e-mail reply to The Straits Times

A GOOD MOVE, BUT WILL IT BE ENOUGH?

‘This group obviously needs more help…as far as I know, during last Saturday’s rally, this was the group of people that came shouting or crying. I do not think it’s the right approach to deal with this on a case-by-case basis… But I like what MAS is saying that they are asking the banks and FIs to do the right thing.’

Mr Leong Sze Hian, president of the Society of Financial Service Professionals

‘I think it is a good sign that the MAS is finally putting more emphasis on this particular group of investors, but I am 54 now and still working - so it is a grey area for me. Let’s hope they will examine each case by its merit.’

Mr L. Tan a DBS High Notes 5 investor. Yesterday, he lodged a case of mis-selling to DBS Bank

‘If you look at the words ?do the right thing’, I actually put in my blog to appeal to the MAS to do exactly that. Now that we all know that this issue is so serious - something we didn’t know before - we should now come in and say: ?Hey, we made a mistake, let’s all come together to solve this.’…I think this is a good step and of course we should help the vulnerable [investors] first. But the other people are also equally misled… although they too should have been more careful - so it’s a matter of the extent of compensation.’

Mr Tan Kin Lian, 60, the former chief executive officer of insurer NTUC Income

Source : Business Times - 18 Oct 2008

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Mindy Yong

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15 firms get $12m for digital media projects

15 firms get $12m for digital media projects

Funding by R&D office expected to yield $37m in business spending and 240 new jobs
By AMIT ROY CHOUDHURY

THE Media Development Authority (MDA) yesterday announced funding for 15 companies by the multi-agency Interactive Digital Media Research and Development Programme Office (IDMPO).
 
MR YAP
‘Our aim would be to nurture an environment to support the thousands of companies, students and researchers under our programme.’
The $12 million funding for these companies is expected to achieve for Singapore an increase of some $37 million in total business spending, 240 new jobs, and create platforms and services that will support some 1,300 third-party applications.

Hands-on training and development will also be provided for some 5,600 students and professionals. The projects have also secured as early adopters 20 public agencies such as National Library Board, National Heritage Board, and Singapore Health Services.

The companies were selected from the inaugural Co-Space (industry) Call for Proposals which attracted 55 proposals involving some 200 companies from the Broadcasting, Real Estate, Healthcare, Defence, Sports, Gaming, Virtual Worlds, Telecommunications, Education and 3D sub-sectors. The Call closed in June this year.

The Call is part of the IDMPO’s efforts to build the interactive digital media (IDM) industry in Singapore, whose strategic programme on behalf of the National Research Foundation has seeded innovation among local academic institutions, industry and start-ups across the island.

The 15 projects were selected after rigorous evaluation by a 16-agency evaluation panel. Collectively, they offer unprecedented opportunities for innovation through a combination of both physical and virtual world offerings, and create an environment for building yet unknown services that tap the promise of digital ubiquity.

The focus of the R&D extends beyond technology development, to also encouraging stakeholders to experiment with new services, business models, and the translation of IDM into the domains of various economic sectors, Michael Yap, MDA’s deputy chief executive, said.

‘Under the Call, exciting innovations in 3D realism and immersive media will soon result in technologies which will capture and render Singapore in rich 3D detail. These projects, when implemented over the next two to three years, will mirror Singapore in virtual 3D; including street objects, the surrounding maritime areas, and the interiors of buildings,’ Mr Yap, who is also the IDMPO executive director, said.

He noted that Co-Space has spurred innovation and breakthrough thinking in the future of digital physical environments.

‘The call has attracted participation from all levels of the industry including start-ups, local small and medium-sized businesses, and multinationals who have pitched in with us to inspire a new generation of applications.’

He added that Co-Space has jump-started cutting-edge thinking and innovation in IDM.

‘Our aim moving forward would be to nurture an environment to support the thousands of companies, students and researchers under our programme in order to position Singapore at the forefront of this next-generation Web,’ Mr Yap said.

 
Source : Business Times - 18 Oct 2008

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Mindy Yong

(+65)91002985

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Slippery side-bets that hurt casinos

Slippery side-bets that hurt casinos

By LEE U-WEN

IT is not just the shadow of a downturn that the casinos have to ward off. It is also the spectre of side-betting. This practice is rampant in Macau, often carried out right under the nose of the casinos, and yet they are helpless to staunch the massive revenue haemorrhage.
Industry estimates have suggested that side-betting - more commonly known as under-the-table betting or parallel betting - has cost Macau casinos over HK$100 billion (S$19.1 billion) in winnings and HK$40 billion in tax revenue over the past five years.

How it works is simple, yet devious. The most common forms of side-betting are when junket operators - middle-men who bring high-rollers to casino VIP rooms and give them credit to play with - quietly bet with these gamblers on the side, based on what happens on the actual casino tables.

So a gambler may bet, say, HK$10,000 in chips with the casino. But he might have a ’side-bet’ with the junket operator for US$10,000. This means that while the casino sees just HK$10,000 change hands, the gambler is, in fact, betting to the tune of HK$88,000 - the bulk of it with the junket operator - while using the facilities of the casino.

In some cases, the junket operator is even sitting at the same table as the gambler, and taking note of each game played and the bet in each round. The two parties will then settle the outstanding amounts owed to each other when they get back to the mainland.

 
 
The benefits to the gambler are two-fold. He typically gets better odds for his side-bet with the operator - who has no overhead expenses, unlike the casino - giving him higher returns than if he were to bet the entire sum with the casino. Also, the gambler gets to enjoy the perks of being a high-roller, such as free food and alcohol, expensive cigars, transport to the casino, free stays at the hotel’s suites, and so on.

Why Macau’s casinos are so keen to clamp down on side-betting is that it removes their take from the total bet amount, as well as the 40 per cent government tax, leaving all the revenue in the hands of the players and operators.

The director of the Macau Gaming Inspection and Co-ordination Bureau, Manuel Joaquim das Neves, told the Macau Daily Times earlier this year that it is impossible to prove when side-betting is going on. ‘We take some measures with the Judiciary Police, but nobody tells if they are taking side-betting, so it’s impossible to prove it. If I go with you to a casino and bet with you according to the result of the table, nobody knows if you don’t tell,’ he pointed out.

Could side-betting find its way into Singapore’s IRs when they eventually open? It may be too early to tell, but it’s perhaps a given that the managements of both resorts will be keeping a close watch on junket operators and doing all they can to minimise this revenue leakage.

Source : Business Times - 18 Oct 2008

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Mindy Yong

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Banks may compensate victims of ‘mis-selling’

Banks may compensate victims of ‘mis-selling’

Focus on ‘vulnerable’ customers who bought Lehman-linked products
By GENEVIEVE CUA
‘VULNERABLE’ customers, who were mis-sold structured products linked to Lehman Brothers, may find their cases being heard more sympathetically.
 
MR HENG
‘Several FIs have assured MAS that they will take full responsibility… They must do the right thing and ensure a quick and fair resolution.’
The Monetary Authority of Singapore is focusing on helping the elderly, the unemployed, retirees and those with little English proficiency who invested a significant portion of their savings in such products. It will also focus on cases where the products were ‘clearly inappropriate for them given their circumstances’.

In a briefing yesterday, MAS managing director Heng Swee Keat said that financial institutions which distributed the products have been told to give priority to these cases. ‘They should not take an overly legalistic approach to mis-selling in dealing with these cases.’

‘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, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility . . . They must do the right thing and ensure a quick and fair resolution for these customers.’

News wires reported, meanwhile, that Hong Kong banks will buy back Lehman’s Minibonds from investors at market value. In Singapore, HSBC Institutional Trust Services is exploring the option of a new swap counterparty for Minibond, which is understood to be a preferred option among investors.

Yesterday, SCMP also reported that DBS Bank in Hong Kong has agreed to a partial refund for an 84 year old woman and her mentally ill son. DBS has declined to comment on individual cases. Mr Heng said the elderly may not necessarily be vulnerable. ‘You may have certain individuals who are elderly but have been investing in markets for some time.’

Mr Heng said MAS will take action against institutions or individuals who breach regulations. ‘MAS has required the independent parties to highlight these breaches and potential cases of mis-selling to MAS. They have already brought a number of possible cases to our attention and we are following up on them.’

The banks responded positively to such measures. In a statement, DBS said that MAS’ measures are consistent with its own actions to address investors’ concerns. ‘We are now reviewing all concerns raised on High Notes 5 in a prompt and comprehensive manner, and will not hesitate to take responsibility in instances where evidence of mis-selling is established,’ it said. Hong Leong Finance also said that the company was prepared to compensate customers in cases where there had been mis-selling. Maybank added that it was prepared to deploy all necessary resources to assist affected Minibond investors.

Meanwhile, three independent persons have been appointed by the financial institutions involved to oversee the complaints handling process related to the sale of Minibond, DBS High Notes and Merrill Lynch’s Jubilee Series 3 Notes. These persons are Gerard Ee, Hwang Soo Jin and Law Song Keng.

Mr Heng said that MAS normally does not comment on dealings with individual institutions. ‘However, given public interest in this matter, MAS confirms that we have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the FIs or poor sales practices by their representatives. We will make an announcement on any actions we are taking when our inquiries are completed.’

MAS urged individuals who have a genuine claim of mis-selling to lodge their complaint with their FI. Those who are not satisfied with the FIs’ decision can turn to the Financial Industry Disputes Resolution Centre (FIDReC) which has a fast-track process in place.

Source : Business Times - 18 Oct 2008

Singapore Property - Buy, Sell, Rent, Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com ( email me )