SINGAPORE'S central bank will give priority to cases involving 'vulnerable investors' in its probe into allegations of mis-selling of Lehman-linked structured products by financial institutions here.

The Monetary Authority of Singapore (MAS) on Friday said it will focus on customers who are elderly and blue-collar workers, and those who are not well-educated and unable to understand English, said its managing director Heng Swee Keat at a news conference on Friday.

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It also urged banks and FIs to 'do the right thing' and not take an 'overly legalistic approach to mis-selling' in dealing with this group of investors.

In cases where there is sufficient evidence that the product was mis-sold, the financial institution should take responsibility, said Mr Heng.

MAS said about 10,000 people in Singapore bought products linked to collapsed US bank Lehmain Brothers and other institutions hit by the US financial crisis.

These investors stand to lose over S$500 million in total, according to data provided by the MAS, which said it will make an announcement on action when its investigation is complete.

Many of the Singapore investors, among them retirees who risk losing their life savings, have said they were told they were buying into a product with low risk.

'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,' said Mr Heng.

Urging affected investors who have genuine claims that they were mis-sold the product to lodge complaints with their financial institutions, he assured them that every complaint would be looked into rigorously and resolved fairly.

'Clearly, there is a range of investors who bought these products. Some are well-educated professionals. Others are sophisticated investors. The group we are most concerned with are the vulnerable customers,' he said.

'We are focusing on cases of mis-selling to vulnerable customers and on cases where the products were clearly inappropriate for them given their circumstances.

'We have required the FIs 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.'

Mr Heng said several FIs have assured the MAS that they would take full responsibility in such cases.

'We welcome this commitment and expect all FIs that have sold these products to take the same approach. They must do the right thing and ensure a quick and fair resolution for these customers. We have communicated this to their CEOs.'

On the urging of the MAS, each FI has set up independent parties to oversee the complaints handling process relating to the sale of the Lehman Mini-bond programme, DBS High Notes and Merrill Lynch Jubilee Series 3 Linkearner Notes.

They include insurance veteran Hwang Soo Jin, former insurance commissioner Law Song Keng and accountant Gerard Ee.

'The independent parties will ensure that customers get a fair hearing. We have set a very clear timeline for complaints to be resolved,' said Mr Heng.

'All the FIs have also set up internal review panels which are chaired by their CEOs. The panel is expected to conduct a thorough review of each complaint and decide on a course of action within four weeks. The decision will then be communicated to the customer.'

Financial institutions that sold the Lehman-linked structured investments include DBS Group, Hong Leong Finance, UOB Kay Kian, OCBC Securities and ABN AMRO, now part of Royal Bank of Scotland.

Financial institutions have all set up internal review panels which are checked by their CEOs, added Mr Heng.

For affected investors who are not satisfied with the FIs decision on the matter, MAS has established a fast-track process to refer the case to the Financial Industry Disputes Resolution Centre (FIDReC), chaired by Mr GohJoon Seng, a retired High Court judge.

'As over 80 per cent of customers invested S$50,000 and below, FIDReC is the right avenue for them to pursue their claims. FIDReC normally deals with claims not exceeding S$50,000. In the case of the structured products, however, the FIs have agreed for FIDReC to hear deserving cases,' said Mr Heng.

MAS also won't rule out the option of 'liquidating' the bonds if earlier measures fail to satisfy investors, he added.

The move by MAS follows a deal reached in Hong Kong earlier on Friday whereby the territory's banks will buy back Lehman-linked structured products from holders at market value, which was pushed for by the government there.