Compensation should not solely be based on vulnerability

Dear Mr Tan:

1 I fully agree with you that compensation for loss in relation to the defaulted high risk structured product to retail investors should not be solely based on consideration on "vulnerability", standard of education, age or other factors at the expense of the principle of fairness and justice.

2 In their 3-steps guide for investors, MAS clearly state that FIs should take responsibility for cases where (a) there are sufficient indications that the product was mis-sold, or (b) it was clearly inappropriate given the investor's profile and circumstances. It is clear that investor's profile and circumstances (i.e. vulnerability, standard of education, age or other factors) should be taken into consideration only for cases where there is no clear evidence of mis-selling. This is to help the vulnerable and needy group of customers and should be given the priority.

3 The approach adopted by the FIs on consideration merely based on investor's profile and circumstances is against and not abiding by the MAS's guiding principles. Instead, we can see how smart the FIs are in turning these guiding principles into their favor. These principles were actually meant for fairness and justice to be given to all retail investors but utilized by the FIs to reject complaints from probably all the non-vulnerable group of customers, and this non-vulnerable group of investors have the major portion of the total investment

4 The existing Financial Adviser Act (FAA), though incomplete, are rather stringent for the sale of financial products to customers. Section 27 of the FAA requires FIs to pay damage or loss for inappropriate sale of high risk financial product to vulnerable customers. Under Section 25 of the FAA, it is an offence for not disclosing the complete product material information to customer during the process of sale and the contravener is liable to a fine and imprisonment. We all know that the true nature and risks of the product were not or fully disclosed to retail investors. As such, ones can see that mis-selling of financial product mainly occurred as a result of breach of laws by the FIs. The mis-selling of financial products here is not much different from that in Hong Kong but the Hong Kong SFC has taken the pro-active approach in the administration of fairness and justice to be given to their citizens and this has been seen by majority of the Hong Kong people and our Singaporeans as well.

5 It is timely that you have called upon MAS, who is the regulator, to exercise their authority to maintain the principle of fairness and justice in the spirit of law. MAS has the responsibility to ensure that laws are adhered to by the FIs. MAS play a decisive role on this matter.

RK