LET'S NOT FORGET ABOUT PERSONAL RESPONSIBILITY'

Christie Loh, Today paper

WHILE much public focus has been on the calls for compensation from distributors of Lehman Brothers-linked structured products, observers of the financial scene say that — while sales staff must act responsibly — investors should not forget their personal responsibilities.

The point was recently made by Prime Minister Lee Hsien Loong. "Ultimately, each person has to take responsibility for his or her own financial decisions," said Mr Lee last week during a media interview, where he set the controversy within the larger context of Singapore as a financial centre, and examined the Government's role.

The implications may be hard for the 10,000 people in Singapore whose investments plunged in value overnight when United States investment bank Lehman filed for bankruptcy last month.

Many investors, some of whom are elderly and fearful of losing their retirement savings, have accused the distributors of failing to reveal the riskiness of products, including Lehman Mini-Bonds and DBS High Notes.

Analysts, however, say the individual is not fault-free, especially not in a market that runs on theprinciple of caveat emptor, meaning buyer beware.

"When people make money, nobody complains," Associate Professor Lan Luh Luh of the National University of Singapore's department of business policy told Today.

Having read a flyer promoting one of the affected products, Assoc Prof Lan said the potential double-digit investment return advertised certainly looked attractive. But the academic has thus far avoided buying structured products because "I invest only in the things I understand".

She said: "If you want your money to work for you, you have to work hard for it, too. There's no free lunch in this world."

There was a similar message from Securities Investors Association of Singapore (Sias) chief executive David Gerald, who feels people should ask some basic questions before ploughing hard-earned savings into complex products. The controversy over structured products has led Sias to work on producing an investment handbook, which is slated to be out within six months.

"Don't get excited only by the upside. You need to also ask about the downside," said Mr Gerald, citing a check-list including questions like whether the product is suitable for you and whether you have the "stamina" to withstand losses until you recoup them.

It is this financial system of free will and flexibility that PM Lee espouses, instead of a paternalistic one where the government decides for the consumer what's risky and what's not, Mr Gerald indicated.

"I think this is the better approach. Let people make their own choices and decisions, but within a proper system, and with appropriate safeguards. We have progressively shifted towards this over the last decade," Mr Lee had said. "It cannot be that if I invested and it turned out well, then I am happy, but if I invested and it turned out badly, then I am entitled to compensation."

The Prime Minister added it would be a "moral hazard" for the Government to intervene due to political pressure in a situation where the banks had acted within the rules. In a major financial centre like Singapore, Mr Lee said, regulations must be "fair, consistent and transparent", not arbitrary.

Prof Lan said: "The Government's role is to make sure there's as much disclosure as possible. No company or institution should block any information."

There's a second thing that pundits feel the authorities must do: Punish those who breached the rules on financial selling.

An independent check into the internal processes of product distributors would settle the question of whether there was indeed mis-selling, said one industry observer familiar with the ongoing mediation process.

Echoing the view, Mr Gerald said that while he agreed the Government would be setting a bad precedent if it bailed-out troubled investors, he added the authorities must ensure that the financial institutions have been "doing the right thing".

Said the small-investor champion: "I expect the financial institutions to be fair to investors because they're going to them with trust. The way we have been doing business for a long time now is based on trust."