SALE OF STRUCTURED PRODUCTS

SALE OF STRUCTURED PRODUCTS:

(Update on investigations by MAS): 9.

Mr Siew Kum Hong asked the Senior Minister (a) if he will provide an update on the MAS investigations into alleged mis-selling of structured products by financial institutions (FIs); and (b) since January 2009 (i) how many new complaints of mis-selling have been filed against FIs and in respect of what products; (ii) how many settlement offers by FIs have been accepted and rejected; and (iii) how many complaints have been filed with the Financial Industry Disputes Resolution Centre and how many of these complaints have been resolved.

The Minister for Trade and Industry (Mr Lim Hng Kiang) (for the Senior Minister): Mr Speaker, Sir, Mr Siew Kum Hong has asked for an update on investigations by MAS, the number of new complaints filed with Financial Institutions since January 2009, an update on the settlement offers made to investors, and the number of claims lodged with the Financial Industry Disputes Resolution Centre (FIDReC).

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First, on the update of MAS' investigations. MAS has completed its investigations. In accordance with its normal practice, there is a due process to be followed, including giving the Financial Institutions a reasonable opportunity to respond to the preliminary findings, before MAS makes and announces its final decision. Until MAS' findings are finalised, it is not appropriate for either MAS or the parties involved to comment further on the matters under investigation as it could be prejudicial to the investigation and the parties involved.

Second, on the complaints to the Financial Institutions and the Settlement Offers. Regarding complaints filed with the 10 Financial Institutions that sold DBS High Notes 5, Lehman Minibond programme notes and Merrill Lynch Jubilee Series 3 LinkEarner Notes,

since my last update to Parliament in January, these institutions have received another 367 complaints. This number is accurate as of 15th March 2009. As for the settlement offers that have been made by these financial institutions, as at 15th March 2009, 79% of investors who received settlement offers have accepted them, 1.5% have rejected the offer and the rest have yet to decide. For Pinnacle Notes Series 9 and 10, I have been told that the five financial institutions that sold these products have, since my last update to Parliament in January, received another 31 complaints. Again, this number is accurate as of 15th March 2009.

Finally, on the update on complaints filed with FIDReC. MAS has been informed by FIDReC that as of 15th March 2009, there have been a total of 561 formal claims lodged with FIDReC. 336 of these claims are for Lehman Minibond programme notes, 161 for DBS High Notes 5, 44 for Merrill Lynch Jubilee Series 3 LinkEarner Notes, and 20 for Morgan Stanley Pinnacle Series 9 and 10 Notes. 485 claims are pending mediation

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and 42 claims have been referred to adjudication. 34 claims so far have been resolved at the mediation stage. In 32 of these 34 cases, the parties entered into some form of settlement, and in the remaining two cases, they have decided not to pursue the matter further. As I had previously indicated, the time taken to resolve a particular complaint would really depend on factors such as the complexity of the dispute and when the parties involved are available for the meetings or the hearings.

Mr Siew Kum Hong: Mr Speaker, Sir, I have two supplementary questions. My first question is to ask the Minister what is the expected date of announcement of the final decision by MAS in its investigations given that now the preliminary findings have been made and there is a due process going on. My second question, Sir, is with regard to the recently-announced consultation paper by MAS on changes in regulation. My question is whether the proposed changes as set out in the consultation paper implied that MAS was lax in any way in regulating these products. If MAS was not lax and financial institutions (FIs) did, in fact, breach the then prevailing regulations, and these proposed changes are merely to tighten them further, then what will MAS do to ensure that FIs do not, in any legal proceedings, make the unmeritorious argument that the fact that MAS is proposing new regulatory changes, means that MAS was lax and that what they had done was not prevented by then-existing regulations?

Mr Lim Hng Kiang: Sir, as I mentioned in my reply, there is a due process and MAS is giving the financial institutions a chance to respond to its investigations. The final investigations should be completed soon. MAS will make a press release as necessary. On the consultation paper, as I mentioned in my earlier clarifications to Parliament, our approach to regulation of financial products remains

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the same. I think we want to be able to give Singaporean investors the choice that is available because there is a wide range of investors. It is not possible for us to be overly prescriptive, so we need to strike a balance. Overall, regulatory authorities all over the world have looked at what is happening and they have made changes to their regulations. MAS, being a responsible regulator, has also done so. It has collected views from all the stakeholders, put up the paper for consultation and we are now in the process of receiving feedback. This does not mean that MAS has been lax in its regulations. We do recognise that structured products have become more complex, the environment has changed, and, therefore, as a responsible regulator, MAS also has to make the adjustments.