Where does the BUCK STOP?

Posted in an online forum

It is now established that X is a high risk complex derivative which exposed the investor to risk of losing the capital invested for 5.5 year. This X is not a suitable investment product for retail investor, especially those who are looking just to grow the life savings for retirement.

Knowing that X is NOT suitable for retail investors and yet inappropriately recommend such a product to retail investors, the relation managers (RMs) were mis-selling.

X was marketed by RMs as a safe and low risk investment to retail investors and assurance were given that so long as investors can hold till maturity, the capital will be fully repaid. This was misrepresentation.

The bank’s claim that that there is no misrepresentation on the part of their RMs. Their argument is that since the details of the product and the risks are spelt out in the prospectus they have no responsibility. This is irresponsible as it is the responsibility of the RM to explain in detail not only the advantages but also the risks of the investment.

Someting is wrong here:

“Caveat emptor” is fair if the playing field is level but in a Bank and customer relationship it is NOT. The bank knows the complexity of the X and the high risk involved but the buyer don’t and they are not forewarned. Customers trusted the RMs because of the bank's name and the authority that regulates it. They were misled into investing in a high risk product the resulted in a loss of their life savings. The bank now pleads “caveat emptor”. It now hides behind legalistic protections in documents and shirks from their responsibility.

For now, the authorities are taking, what appears to be, a wait and see approach, as far as blame goes. However, all victims of misrepresentation suffered the same pain and loss. Why should they advocate categorizing the investor for consideration of compensation if they are completely unbiased? Are they saying that the educated young deserve to be cheated?

Investors who intended to go to the bank as a group to ask for early resolution were allegedly, according to press reports, “warned and threatened with arrest”. Are investors being bullied here? Investor groups are now feeling stifled and frustrated.

Group petitions and complaints for redress to the authorities have not yet yielded any resolution and investors were simply advised to file individual claim with the bank that sold them the investment. The insistence of a case-by case investigation by the bank appears to prevent collective action and disadvantage the individual investors.

Is this what one expects from a fair and equal society? I sincerely hope that the authorities are doing the right thing to ensure that justice is done.