More regulations to come
The financial authority here in Singapore certainty has its work cut out in the recent chain of financial events that has griped investors and distributors alike. Right before the recent collapse of Lehman Brothers, there was the tighten and introduction of more checks in regards to the churning problem. Not long after that came the worry over AIA’s solvency in the wake of AIG’s problems in US. Then came the ‘Minibomb’ problem due to the filing of chapter 11 by Lehman Brothers. Similarly affected are the DBS High Notes and Merrill Lynch Jubilee Notes. Following this was the rumour surrounding Bank of East Asia (BEA).
Of these recent issues, the problem of the structured notes is the most sticky. These notes were sold to thousands of retail investors as a low risk investment and lead to numerous complains about the financial institutions mis-selling the products. Hong Kong’s financial authority has taken a proactive attitude in addressing the same issue there.
With the proliferation of online resources, mostly through user generated content such as blogs, a sizeable number of investors in Singapore affected by the structured notes have band together to give a collective voice. This self initiated movement, which is almost unheard of as people here are used to being told what to do and what not to do, is ironically a result of the perceived lack of action from the authorities.
What I can sense in the aftermath of this messy affair is the introduction of even more regulation. Official regulation is often the legislation of the most basic of morals and ethics. The addition of regulation signals the common lack of a higher moral ground. This is still THE ugly side of the industry.
This episode may also become the catalyst in the evolution of the compensation model to fee-based advise as more people realise the potential side-effects of facing advisers with sales targets to hit or high commission to grab. This development will raise the bar and force advisers to upgrade or face the prospect of being ousted from the industry. It will not be an overnight affair but the pace of change will certainly be raised.
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Tags: Mis-selling
