In his office: David Gerald, president & CEO, SIAS. Photo by Leong Chan Teik
THE Securities Investors Association of Singapore (SIAS) has reviewed the recently-released Monetary Authority of Singapore’s (MAS) 99-page investigation report into the sale and marketing of structured products linked to Lehman Brothers.
SIAS recognizes that retail investors who had purchased Lehman Minibond notes, DBS High Notes 5, Merrill Lynch Jubilee Series 3 LinkEarner notes and Morgan Stanley Pinnacle Series 9 and 10 notes will have questions on how the MAS’ report could affect them.
Should they accept pending settlement offers from financial institutions (FIs)? Or should they accept the orders for awards made at FIDReC?
To provide guidance to investors who have as yet not resolved their complaints in relation to the said notes, SIAS has put together a comprehensive and useful Q&A guide.
There is a sizeable number of people affected.
According to the MAS report, the total issue size of the Minibond Notes programme was $508 million, of which $373 million was sold to about 7,800 retail investors.
Over 1,000 retail investors bought $104 million worth of High Notes 5 from DBS.
For the Jubilee Notes, $18 million of the total $28 million notes issued were sold to about 350 retail investors.
The total issue size of the Pinnacle Notes was $25 million, sold to about 650 retail investors.
The bankruptcy filing of Lehman Brothers Holdings Inc. and Lehman Brothers Special Financing, Inc. resulted in the default or early redemption of the credit-linked structured notes.
Here are two of the Q&As from the SIAS guide:
Q1: Given that MAS’ investigation report found non-compliance by the various FIs, why is it that not all investors are compensated in full, and some even received nothing?
MAS’ report addresses the FIs’ regulatory non-compliances with MAS Notices and Guidelines.
However, this does not automatically and by itself enable investors to obtain settlement. Investors must able to demonstrate that they had relied on the recommendation or representation complained of, and this would depend on the facts and circumstances of each case. This will include taking into account the documents signed at the point of sale.
For instance, you will need to show that you had relied on the advice or representation given by the FI when deciding whether to buy the product.
Even if you can prove that there was reliance, there is a need to look at the extent of the reliance, and the documentation that was signed that could have contained risk warnings or disclaimers of liability of the FI. It is therefore possible that liability could be apportioned between the FI and the investor.
Q2: Since MAS’ investigation report refers to various forms of non-compliance by the various FIs, will this assist investors in starting a class action suit against these FIs?
In Singapore, it is possible for multiple parties to come together to file legal action in court – these are referred to as a “representative action”. Representative actions are appropriate only if all the claims are based on similar facts.
For the full Q&A guide, go to SIAS’ website www.sias.org.sg
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