The MAS investigated after affected customers complained that they had lost their savings because they had been mis-sold the Lehman-linked products. -- PHOTO: AFP
TEN financial institutions that sold their customers complicated investments which turned bad after the Lehman Brothers investment bank collapsed last year have been banned from selling similar products.
The dramatic, unprecedented action by the Monetary Authority of Singapore (MAS) stunned industry watchers on Wednesday and drew praise from some consumer bodies.
It followed seven months of investigations after about 9,900 people lost most or all of their investments totalling about $520 million in structured notes such as Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes.
Hong Leong Finance, which dealt with 2,145 disgruntled customers who bought $86.1 million worth of these structured notes, was given the harshest penalty by MAS: It cannot sell or advise customers on new structured notes for at least two years.
One-year bans were handed out to brokerages CIMB-GK Securities, Kim Eng Securities, OCBC Securities and Phillip Securities.
OCBC Securities was also ordered to stop using introducers such as independent financial advisers to provide advice on new structured notes.
A six-month ban was given to DBS Bank, ABN Amro, Maybank, DMG & Partners Securities and UOB Kay Hian. The bans took effect on July 1 and punish the institutions for their poor sales processes when flogging the complicated notes to customers.
They will not be allowed to resume selling such products until the MAS is satisfied that they have fixed all faults identified by its review and strengthened their internal processes for providing advisory services for investment products.
Each must appoint an external party, approved by the MAS, to review its action plan and report on its implementation.
The MAS investigated after affected customers complained that they had lost their savings because they had been mis-sold the Lehman-linked products. They described being sold products that were too risky for their comfort level or were advised by sales representatives who did not know the products well.
Read the full story in Wednesday's edition of The Straits Times.
