Beware of investing in hard-to-understand products

In July last year, I invested $200,000 in a 15-Month Structured Note, issued by a Swiss bank and sold by a local bank.

To begin with, the term sheet for the Note was very complicated, which even an investor fluent in English will find a challenge to comprehend.

I therefore relied on and trusted the relationship manager of the local bank to explain the intricacies, believing that he would have been sufficiently trained and was conversant with the product.

When the Note matured at the end of the 15-month tenure, I was shocked to discover that the relationship manager was incorrect in saying that I would receive a bonus coupon payment. I received nothing.

To me, this constituted a case of either misrepresentation or mis-selling.

Naturally, I complained to the local bank, which denied any liability, claiming that the relationship manager was trained to sell the product and that he denied telling me that there was a guaranteed coupon payment on maturity.

It also said that since I signed the necessary forms, I was fully liable.

I took the case to the Financial Industry Disputes Resolution Centre, but the bank still declined to accept any liability.

I then sought adjudication but the adjudicator used the reason of "caveat emptor", that is, buyer beware, to rule in favour of the bank.

Based on this experience, it would be useful if the Monetary Authority of Singapore could consider the following issues:

First, whether financial institutions should issue such complicated products, resulting in investors being at the mercy of relationship managers who may be inadequately trained or who intentionally misrepresent or mis-sell. They may do so knowing that investors are ultimately liable, given that they have signed the necessary forms.

Second, if such products are allowed to be sold, the term sheet should be simplified, so as to lend itself to easy comprehension.

Third, is it fair to always resort to employing the concept of "caveat emptor" to put the blame entirely on the investor? Isn't there room to consider the circumstances of each case?

Finally, my advice to would-be investors is that if they find the term sheet of a product complicated, refrain from investing in it and consider other less convoluted investment products.

Lawrence Loh Kiah Muan

A version of this article appeared in the print edition of The Straits Times on November 28, 2015, with the headline 'Beware of investing in hard-to-understand products'. Print Edition | Subscribe