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Central bank cannot force banks to compensate investors

 


October 3, 2008

Singapore: Central bank cannot force banks to compensate investors

Singapore's central bank said on Thursday that it did not have the power to force banks to compensate retail investors who bought structured products linked to failed U.S. investment bank Lehman Brothers, reported Reuters.

The Monetary Authority of Singapore (MAS) said, however, that it has appointed three "well-respected individuals" to oversee the banks' complaints handling and resolution processes. Action would be taken if the banks were found to have breached guidelines related to the selling of investment products.

"Regulatory action could include fines and public reprimands but cannot include requiring FIs (financial institutions) to pay compensation to affected investors," MAS said in a statement.

MAS added that investors who were unhappy with the banks' decision could appeal to the Financial Industry Disputes Resolution Centre, which had the power to order banks to pay compensation of up to S$50,000 ($34,720).

Investors in Hong Kong, Singapore and Indonesia have in the past two week expressed outrage that the bond-like products they purchased were actually complex derivatives and they stood to lose most or all of what they had invested.

The products include Lehman-linked mini-bonds sold in Hong Kong and Singapore, many of which offered modest returns of between 4 and 6 percent, and DBS Group's High Notes 5 series, which offered around 5 percent and were linked to eight securities including Lehman bonds.

In Singapore, hundreds of investors have signed petitions calling on MAS to help them recover their money.

In its statement on Thursday, the Singapore central bank said its priority is to ensure that investors' complaints are heard, reviewed and resolved quickly.

"MAS understands the current anxiety of many investors who have purchased DBS High Notes 5, Lehman Minibonds and Merrill Lynch Jubilee Series 3 LinkEarner Notes."

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