Many investors of the credit linked notes (i.e. Minibonds, High Notes, Pinnacle Notes, Jubilee Notes) had, as a last resort, sought to take a class action against the issuers and/or distributors of these financial products. However, they are daunted by the huge legal cost of a class action.
Many lawyers are not willing to take up the class action as they have existing relationships with the financial institutions and they do not wish to jeopardise their future dealings.
A few lawyers who are willing to act for the investors required a large sum of money to be collected to pay for their case preparation and for their fees and expenses to represent the investors in court. Most of these lawyers are not even prepared to write down their legal arguments and give any assessment of the chance of winning the case, prior to their formal appointment.
Many investors were reluctant to join the class action as they were not sufficiently assured about the credibility of the lawyers or the strength of their case. Some said, “We have been cheated by the banks. We do not now wish to be cheated by the lawyers. We do not want to pay large legal fees, when the chance of winning is unclear or quite remote.”
It is useful for a contingency fee system to be introduced in Singapore for such cases. The lawyers are in the best position to assess the strength of the case, and to take the commercial risk of the litigation. They cannot expect the ordinary folks to make this assessment, especially as the decision has to be taken by many investors with different financial circumstances and understanding of the law.
There are some possible abuses of a contingency fee system, but these abuses can be mitigated. This system provides the positive benefit of allowing ordinary people to seek redress against abuses by large companies.
Tan Kin Lian
Saturday, July 4, 2009
Gathering in Speaker's Corner in August (4)
29 people have replied to the survey mentioned in this blog. Each person indicated that they will ask a small number of people to attend. Only 1 person is willing to speak. Four are willing to share their story (with particulars removed to protect their confidentiality) for another speaker to use.
I need more speakers. If you wish to share your story, I can get someone to speak on your behalf. If you like the gathering to be organised, please give your reply here.
I need more speakers. If you wish to share your story, I can get someone to speak on your behalf. If you like the gathering to be organised, please give your reply here.
Mis-representation on Credit Linked Notes
A senior lawyer told me that the law is to be seen in this context:
"The law works on the basis of freedom of contract and caveat emptor, so, in these cases, unless there has been misrepresentation or unless it can be shown that the banks have taken on a special duty of care because of a fiduciary relationship (which most bank documents expressly exclude) the buyer is supposed to know what he is buying and the risks thereof."
MY VIEW:
Clearly, the relationship manager did mis-represent the product that they sold to the investors, who were generally risk averse. The question is, "did the RM understand the product?" Most likely, they did not. If this were the case, surely, they must have mis-represented the product?
The strategy for the investor is to provide clear proof that there was mis-representation. This can be in a sworn statement. Better still, it should be supported by an impartial witness or written documentation.
"The law works on the basis of freedom of contract and caveat emptor, so, in these cases, unless there has been misrepresentation or unless it can be shown that the banks have taken on a special duty of care because of a fiduciary relationship (which most bank documents expressly exclude) the buyer is supposed to know what he is buying and the risks thereof."
MY VIEW:
Clearly, the relationship manager did mis-represent the product that they sold to the investors, who were generally risk averse. The question is, "did the RM understand the product?" Most likely, they did not. If this were the case, surely, they must have mis-represented the product?
The strategy for the investor is to provide clear proof that there was mis-representation. This can be in a sworn statement. Better still, it should be supported by an impartial witness or written documentation.
Can you solve these 4 shapes?
DownloAD this PDF. Cut the 4 pieces. Solve the 4 shapes. You can cut the shapes from cardboard to be more durable.
ATE (After The Event) Insurance
The ATE insurance covers the litigation cost and is now available through an insurance broker operating in Singapore.
I have written a paper to brief the insurance broker about the legal position on the credit-linked note and ask them to see if insurance is available for the investors to take legal action against the distributors.
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