A SMS message from a good friend (my best man and my proposer for NMP, actually) this past Friday reminded me that that was officially the last day of my NMP term. Well, as I've been telling people -- life goes on lah.
And so will this blog. In the past, I've refrained from posting my quick thoughts here, because I preferred to articulate them in Parliament. Well, since that is no longer a consideration, I hope to post my thoughts more frequently.
When MAS announced the outcome of its probe into the misselling of financial institutions and the consequent bans on FIs selling structured products, I felt so disappointed. For the past few months, MAS had been taking its time to complete its probe, while facilitating or even encouraging investors to go through its 3-step dispute resolution process to claim compensation.
But it seems quite probable that MAS would have, at an early stage of its investigation, already come across evidence of breaches by the FIs leading to institutionalised misselling. That being so, should not MAS have suspended its 3-step process pending the conclusion of its probe, so that all investors would have the full facts before them before being asked to agree to the FIs' offers of compensation? Has MAS spared a thought for those investors who were offered partial compensation and decided to cut their losses and accept the offers out of exhaustion or desperation? Who should compensate them now? Do they have any recourse for MAS' delay and failure to act?
More importantly, MAS' response to the misselling was to slap bans on the FIs in question. But as Leong Sze Hian has pointed out, they are now being prevented from selling products that nobody really wants to buy anyway. They have made their money, their employees have pocketed their bonuses from selling these high-risk products to low-risk-appetite consumers, and now many of their customers are stuck between the rock of partial or no compensation and the hard place of litigation. Once again, consumers end up holding the baby.
Surely the better and more responsible solution would have been for MAS to order the FIs to compensate -- in full -- those customers who had purchased structured products from them, in those cases where the FIs had been in breach of the rules. MAS does have the power to do so, under Section 58 of the Financial Advisers Act. That would be the just and equitable thing to do.
It would have provided real deterrence to FIs. A comparison with the punishments meted out by the UK's Financial Services Authority in cases of misselling shows very clearly just how inadequate the punishments imposed by MAS are. So much for a world-class supervisory and regulatory regime.