These are retirees who bought failed structured products, but not directly from banks.
Elysa Chen 2 February 2009
A cushion was given to ‘vulnerable’ investors floored by toxic financial products.
Of those who complained of mis-selling, almost all the elderly investors with little income, formal education or investment experience will be fully or partially compensated.
But one group of arguably ‘vulnerable’ investors have nothing to help pick themselves up.
These are retirees who bought failed structured products, but not directly from banks.
One elderly Singapore couple were told they could lose their entire life savings as they had placed their investment with a securities firm through their financial adviser.
Their daughter Janet (not her real name) was hopeful that her family could recover some, if not all, of their $250,000 invested in Merrill Lynch Jubilee Series 3 Notes.
A silver lining appeared when news broke two weeks ago that some 3,000 investors who bought failed investment products from banks would get full or partial settlements.
After all, the retirees in their 60s are not sophisticated investors. Janet’s father’s highest education level is secondary school while her mother had only finished primary school.
But their hopes were dashed when they found out that most of those who could receive full or partial refunds had bought the products directly from the banks.
For instance, 75 per cent of Lehman Minibond investors who bought from banks received a full or partial settlement, compared with only 13 per cent who bought from stockbroking firms.
The New Paper understands that even this small group who bought from stockbroking firms got payouts only on compassionate grounds - decided on the merits of each case.
Janet feels her parents were not paid because they had bought the risky financial products through an independent financial adviser instead of going to a bank.
Last week they received a letter from the brokerage firm informing them that they would not be receiving any refund.
No explanation
Janet, who is in her 30s, said: ‘I’m distraught. The brokerage did not give us a reason for the rejection, and they did not even address the points I raised with them. There was only a standard line: ‘We found no grounds to accede to your complaint’.
‘If my parents had bought the products from a bank, I am quite sure they would have received a fair compensation. Now, we have no coverage at all.’
They are unable to claim compensation from the brokerage because it says it is only acting as ‘order-executors’.
Order-executors merely carry out the instructions of clients (in this case handled by the private financial adviser), and are thus not liable for any losses they might suffer.
As the spokesman for a securities firm said: ‘Securities brokerage business is very different from that of banks’ wealth management activities. Generally, brokerage clients tend to buy and sell a fair bit and are usually accustomed to gains and losses in their investment portfolios.
‘Hence, these investors have a set of different characteristics as compared to that of a typical bank depositor.’
In this case, the family can only look to the firm of financial advisers who had introduced the product to them. They had bought the product from a former colleague of Janet, whom she had known for a few years.
The family said they had learnt about the high-risk investment products from this person. Information on the products had been sent by e-mail to Janet.
But Janet said the company has ‘washed their hands off’ the problem by claiming that they acted only as ‘introducers’ and had not provided advice on the product. They were thus not liable for their losses, they claimed.
Janet said: ‘But how do you draw the line between introducing us to the product and providing us advice on it?
‘What’s worse, they said they had no obligation to give us the prospectus or even the pricing statements. Bank relationship managers who had given the prospectus to their clients can be found guilty of mis-selling, but not these financial advisers.’
Janet said her parents had trusted the financial adviser like other customers had trusted their bank relationship managers.
But unknown to them, there was an arrangement between the brokerage firm and the financial advisory firm.
She said: ‘The financial advisers did not reveal they were acting in limited capacity.
‘Now as it turns out, they are calling themselves ‘introducers’ and saying they did not provide any advice. This is grossly unjust.’
While The New Paper understands that some financial advisers ask their clients to sign a form stating that they are only acting as introducers, Janet said her parents never signed such a form.
It was only after the losses were announced that they found out that their financial adviser had not even attended any formal training on the products.
She said: ‘Is it right to even let them sell something that they say they do not know about, and later let them be absolved from all blame when things go wrong?’
When asked why her parents had gone to a little-known financial advisory firm instead of a bank to make the investment, she said: ‘The financial adviser was a trusted friend, which is why my parents bought the products from her in the first place.’
When contacted, a spokesman for the Monetary Authority of Singapore (MAS) noted that all complaints had to be decided on their own merit, as the facts and circumstances of each case would vary.
But she added: ‘If an independent financial adviser recommended an investment product to an investor, then the person is no longer acting merely as an introducer but is providing financial advice. In this instance, the relevant provisions of the Financial Advisers Act would apply.’
Under the Act, financial advisers are obliged to disclose information such as the benefits and risks of the investment product.
The law also states that financial advisers are not supposed to make recommendations to their clients unless they have conducted investigation on the suitability of the product to their clients’ investment objectives.
If they do not do so, and their clients suffer loss or damage, the licensee ‘is liable to pay damages to that person’.
However, when contacted, the chief executive officer of the couple’s financial advisory firm said: ‘We are not trained, so we will only refer clients to the securities firm.’
He also denied that the financial adviser was the one who had approached Janet’s family by sending them e-mails about the products.
He said: ‘Our clients are not solicited, they come to us after seeing advertisements about the products.
‘The advisers just convey information from the brochure, then refer their clients to the firm (the brokerage).’
Janet’s question is: Is that fair for investors like her parents?
She said: ‘I understand that there are some savvy investors who have existing accounts with these brokerages who may have suffered losses. But my parents are not sophisticated investors.’
Additional reporting by Han Su-Ying, newsroom intern
1 comment:
No refund for $250k investment
These are retirees who bought failed structured products, but not directly from banks.
Elysa Chen
2 February 2009
A cushion was given to ‘vulnerable’ investors floored by toxic financial products.
Of those who complained of mis-selling, almost all the elderly investors with little income, formal education or investment experience will be fully or partially compensated.
But one group of arguably ‘vulnerable’ investors have nothing to help pick themselves up.
These are retirees who bought failed structured products, but not directly from banks.
One elderly Singapore couple were told they could lose their entire life savings as they had placed their investment with a securities firm through their financial adviser.
Their daughter Janet (not her real name) was hopeful that her family could recover some, if not all, of their $250,000 invested in Merrill Lynch Jubilee Series 3 Notes.
A silver lining appeared when news broke two weeks ago that some 3,000 investors who bought failed investment products from banks would get full or partial settlements.
After all, the retirees in their 60s are not sophisticated investors. Janet’s father’s highest education level is secondary school while her mother had only finished primary school.
But their hopes were dashed when they found out that most of those who could receive full or partial refunds had bought the products directly from the banks.
For instance, 75 per cent of Lehman Minibond investors who bought from banks received a full or partial settlement, compared with only 13 per cent who bought from stockbroking firms.
The New Paper understands that even this small group who bought from stockbroking firms got payouts only on compassionate grounds - decided on the merits of each case.
Janet feels her parents were not paid because they had bought the risky financial products through an independent financial adviser instead of going to a bank.
Last week they received a letter from the brokerage firm informing them that they would not be receiving any refund.
No explanation
Janet, who is in her 30s, said: ‘I’m distraught. The brokerage did not give us a reason for the rejection, and they did not even address the points I raised with them. There was only a standard line: ‘We found no grounds to accede to your complaint’.
‘If my parents had bought the products from a bank, I am quite sure they would have received a fair compensation. Now, we have no coverage at all.’
They are unable to claim compensation from the brokerage because it says it is only acting as ‘order-executors’.
Order-executors merely carry out the instructions of clients (in this case handled by the private financial adviser), and are thus not liable for any losses they might suffer.
As the spokesman for a securities firm said: ‘Securities brokerage business is very different from that of banks’ wealth management activities. Generally, brokerage clients tend to buy and sell a fair bit and are usually accustomed to gains and losses in their investment portfolios.
‘Hence, these investors have a set of different characteristics as compared to that of a typical bank depositor.’
In this case, the family can only look to the firm of financial advisers who had introduced the product to them. They had bought the product from a former colleague of Janet, whom she had known for a few years.
The family said they had learnt about the high-risk investment products from this person. Information on the products had been sent by e-mail to Janet.
But Janet said the company has ‘washed their hands off’ the problem by claiming that they acted only as ‘introducers’ and had not provided advice on the product. They were thus not liable for their losses, they claimed.
Janet said: ‘But how do you draw the line between introducing us to the product and providing us advice on it?
‘What’s worse, they said they had no obligation to give us the prospectus or even the pricing statements. Bank relationship managers who had given the prospectus to their clients can be found guilty of mis-selling, but not these financial advisers.’
Janet said her parents had trusted the financial adviser like other customers had trusted their bank relationship managers.
But unknown to them, there was an arrangement between the brokerage firm and the financial advisory firm.
She said: ‘The financial advisers did not reveal they were acting in limited capacity.
‘Now as it turns out, they are calling themselves ‘introducers’ and saying they did not provide any advice. This is grossly unjust.’
While The New Paper understands that some financial advisers ask their clients to sign a form stating that they are only acting as introducers, Janet said her parents never signed such a form.
It was only after the losses were announced that they found out that their financial adviser had not even attended any formal training on the products.
She said: ‘Is it right to even let them sell something that they say they do not know about, and later let them be absolved from all blame when things go wrong?’
When asked why her parents had gone to a little-known financial advisory firm instead of a bank to make the investment, she said: ‘The financial adviser was a trusted friend, which is why my parents bought the products from her in the first place.’
When contacted, a spokesman for the Monetary Authority of Singapore (MAS) noted that all complaints had to be decided on their own merit, as the facts and circumstances of each case would vary.
But she added: ‘If an independent financial adviser recommended an investment product to an investor, then the person is no longer acting merely as an introducer but is providing financial advice. In this instance, the relevant provisions of the Financial Advisers Act would apply.’
Under the Act, financial advisers are obliged to disclose information such as the benefits and risks of the investment product.
The law also states that financial advisers are not supposed to make recommendations to their clients unless they have conducted investigation on the suitability of the product to their clients’ investment objectives.
If they do not do so, and their clients suffer loss or damage, the licensee ‘is liable to pay damages to that person’.
However, when contacted, the chief executive officer of the couple’s financial advisory firm said: ‘We are not trained, so we will only refer clients to the securities firm.’
He also denied that the financial adviser was the one who had approached Janet’s family by sending them e-mails about the products.
He said: ‘Our clients are not solicited, they come to us after seeing advertisements about the products.
‘The advisers just convey information from the brochure, then refer their clients to the firm (the brokerage).’
Janet’s question is: Is that fair for investors like her parents?
She said: ‘I understand that there are some savvy investors who have existing accounts with these brokerages who may have suffered losses. But my parents are not sophisticated investors.’
Additional reporting by Han Su-Ying, newsroom intern
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