SINGAPORE: The Monetary Authority of Singapore (MAS) will
lift the ban on the sale of structured notes for three financial
institutions with effect from Friday.
They are DBS Bank, Maybank and the Royal Bank of Scotland
(RBS), which were banned from selling structured notes for six
months from last July in the wake of the Lehman Brothers Minibond
scandal.
They, along with several other financial institutions (FIs), were
rapped for lapses in the sale of the structured products linked to
failed investment bank Lehman Brothers.
Some had misclassified the notes as low to medium risk when they
were products carrying high risk.
MAS had directed the FIs to rectify all the weaknesses uncovered by
their investigations. They were also required to appoint an
external party approved by the MAS to review their action plan and
report on its implementation.
"The three financial institutions (DBS Bank, Maybank, RBS) have
publicly pledged their commitment to effectively implement various
measures on an ongoing basis in order to deliver fair dealing
outcomes to their customers," MAS said in a statement on
Thursday.
These include a review of their remuneration framework and
enhancements to the sales and advisory process. The Board and
senior management of the FIs will be held accountable for meeting
this commitment.
Tan Kin Lian, president of the Financial Services Consumers
Association, said this concept is good as it means that FIs should
be responsible for ensuring fair dealing outcomes.
"But we need to have some clarity what would constitute fair, and
what would constitute unfair. I would prefer that this should be
made clearer, for example, very risky products should not be
allowed to be sold," he said.
But it seems like it's a case of once bitten, twice shy for some
who got their fingers burnt by the Minibonds fiasco.
"It's not easy. We don't understand (the product), unless you
bother to read the whole book (prospectus). Unless MAS guarantees
that if anything goes wrong, they pay, because it's a product they
approved," said a former investor.
As for the other FIs affected by the ban, MAS said DMG and Partners
as well as UOB-Kay Hian have asked for additional time to work with
their external parties to ensure that the enhanced measures put in
place are sufficiently robust and in line with MAS
requirements.
Four other FIs - CIMB-GK Securities, Kim Eng Securities, OCBC
Securities and Phillip Securities - are still serving out their ban
period of one year.
MAS said it will only lift the ban when it is satisfied with the
measures they have put in place.
Hong Leong Finance, which was slapped with a two-year ban, has
since voluntarily stopped providing new financial advisory services
including the sale of structured notes.
- CNA/ir