Breach of the law - arguments

983 investors signed a Petition to the Government to carry out a full and independent investigation into whether there was any wrong doing involved in the creation and marketing of the credit linked securities, such as the mini bond, high notes, jubilee notes and pinnacle notes.

In an accompanying letter sent to the Monetary Authority of Singapore, I identified three laws that could have been breached:
1) Securities and Futures Act (section 199)
2) Financial Adviser’s Act (section 27)
3) Trustees Act

Let me explain these points.

Securities and Futures Act
This law requires the seller of a security to provide truthful and reliable information to the buyer. The seller cannot give false or misleading information and cannot withhold any relevant information. Any breach of this law is an offence that can lead to civil or criminal action.

I like to ask MAS to see if the actual nature and risk of the credit linked security has been properly disclosed in the advertisement, sales material or the prospectus.

Are they disclosed in a transparent and clear manner? If not, was the disclosure done in a manner that can be considered to be misleading?

Many investors said that they were misled into thinking that they had invested in the bonds issued by the six or eight reference entities and that all of these entities had to fail before they lose their entire capital

How did this mistaken belief came about?

Financial Advisers Act
This law requires the financial adviser or the representative to understand the needs, risk profile and preference of the investor and to recommend the appropriate products.

Many of the investors wanted to have a safe investment. They are risk adverse.

Did the representative carry out their responsibility properly? Why did they recommend a product that has turned out to be so risky? Did the representative understand the nature and risk of the product?


Trustee Act
This law requires people in a position of trust to look after the best interest of their client. Does this law apply to the trustee and the arranger of the securities?

Did they discharge their duty according to the law? Were the payments made out of the fund in accordance with what has been authorised in the prospectus? Were the dealings made at the correct prices and are fair to the investors? How are conflict of interest resolved?

Should the trustee have to render a full statement of account to the investors?


I hope that the Government looks into these areas, to see if there were any wrong doing that led to such large losses among the investing public.

If there were wrong doing, the Government can take the appropriate action to bring the offenders to Court and to seek suitable compensation for the losses suffered by the investors.

I hope that the Government can play an active role to minimize the losses of the investors and ensure that the underlying securities are NOT un-wound at fire sale prices.