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The Monetary Authority of Singapore (MAS) wants banks and financial institutions to give this group top priority when investigating complaints of mis-selling.
It also added that banks should not take an 'overly legalistic' approach in dealing with such cases.
And in situations where the product was mis-sold or was clearly inappropriate given the investor's profile and circumstances, MAS wants the financial institutions to take full responsibility.
'We expect them to do the right thing,' declared MAS managing director Heng Swee Keat at a press conference yesterday.
Asked what he means by this, Mr Heng later told The Straits Times in an e-mail reply that 'the financial institution should reach a fair settlement in full or in part'.
'This has to be assessed on a case-by-case basis,' he added.
Calling them 'vulnerable customers', Mr Heng said at the press conference that this group of retirees would be typically be above 55 years of age and have minimal education.
They may also be blue-collar workers or unemployed. Some may not be proficient in English and may be unable to read the structured product's prospectus, where the risks and mechanics of the investment are spelt out.
But he also added that not all investors fitting this profile would necessarily be inexperienced.
'We are focusing on cases of mis-selling to vulnerable customers and on cases where the products were clearly inappropriate for them given the circumstances,' said Mr Heng.
According to MAS, about 10,000 retail investors had pumped over $500 million into structured products linked to the US investment bank Lehman Brothers.
Lehman's bankruptcy last month has meant that investors holding products such as Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 Linkearner Notes could lose most of their money.
On Wednesday, The Straits Times highlighted the plight of retiree investors who have stopped work and therefore have little hope of recouping their nest-eggs in their lifetime.
Yesterday, MAS reiterated that it will come down hard on anyone who has been found to have mis-sold these products to them. Many retirees say they did not fully understand the products and claim to have been wrongly assured that they would not lose their principal sums.
'MAS confirms that we have been conducting formal inquiries into allegation of breaches of the law, inadequate internal controls by the financial institutions, or poor sales practices by their representatives,' said Mr Heng.
'We will make an announcement on any actions we are taking when our inquiries are completed.'
MAS also said that a 'number of possible cases' have already been found by independent parties overseeing the complaints process at each of the financial institutions that had sold the Lehman-linked products.
It added that it is following up on these cases, but gave no further details.
In the meantime, it is urging those affected who have a genuine claim that they were mis-sold their investments, to lodge their complaints with the financial institution they dealt with.
MAS said that it has asked the chief executive officers of these institutions to personally chair internal review panels to look into these complaints.
In each case, MAS wants the panel to decide what to do within four weeks and communicate its decision to the customer.
If investors are still not satisfied with the decision, they can take their case to the Financial Industry Disputes Resolution Centre (Fidrec).
Mr Heng emphasised that the Fidrec mediation process is free of charge and if the case goes to arbitration, the cost to the customer is just $50.
Fidrec normally deals with claims not exceeding $50,000. But in the case of structured products, the centre has agreed to hear all 'deserving cases'.
Responding to the MAS' statements yesterday, DBS Bank said it is 'now reviewing all concerns raised on High Notes 5 in a prompt and comprehensive manner, and will not hesitate to take responsibility in instances where evidence of mis-selling is established'. The Straits Times understands that the bank has already given special attention to retirees.
Hong Leong Finance, which distributed Lehman Minibonds, said it 'will focus special attention on those above 55 years old, less educated and first time investors in structured products'.
Maybank said that it has to date, contacted 50 per cent of customers with complaints to schedule interviews. It told The Straits Times that it is also dealing with 'vulnerable customers' first.
Investors and investor advocates applauded the MAS move, with Mr Leong Sze Hian, president of the Society of Financial Service Professionals, saying that it is 'obvious that this group needs more help'.
But Aljunied GRC MP Cynthia Phua also added that while it is a 'good step forward', MAS still needs to address deficiencies at the bank level in selling these products.
Today's Saturday Special Report looks at how people have begun preparing to weather the storm. See Prime and Money for other reports on the financial crisis.
