South China Morning Post (Hong Kong) - October 7, 2008
Financial advisers can be held liable for negligent investment recommendations to clients, a local court ruling in 2003 has established.
In the Field vs Barber Asia Limited (HCA7119/2000) case, plaintiff Susan Field was awarded compensation of GBP219,890 (HK$2.84 million) plus interest and costs that she had lost as a result of changing an investment portfolio on the recommendation of the defendant.
Ms Field had asked for a conservative investment portfolio. It initially made a British sterling-dominated portfolio for her, but later advised her to gear up her portfolio with a Japanese yen loan. A subsequent appreciation of the yen forced her to provide additional cash for the loan, eventually losing the whole investment.
The Court of First Instance ruled that the financial adviser was expected to warn Ms Field of the risks. The ruling was upheld by the Court of Appeal when the defendant appealed.
Citing this case yesterday, Civic Party leader Audrey Eu Yuet-mee said minibond holders were in an even stronger position than Ms Field to claim compensation, as they had signed contracts with the distributors. She has asked the Consumer Council to refer to the case and consider using its consumer legal action fund to help holders claim compensation.
Ms Eu said individual investors might not be willing to launch costly lawsuits.
Fanny W.Y. Fung
Tuesday, October 7, 2008
Poor payout on Anticipated Endowment policy
Dear Mr Tan,
My dad has bought a 20 Year Modified Anticipated Endowment Policy in 1988 and his policy matured in August 2008.
After calculating the total amount of 5 yearly and maturity payout by the insurance company, we realize that the total payout of $11,000 is less than the total premium of $15,000 paid over 20 years.
He recalled in the 20 years, he has received payout of bonus every 5 years and the total bonus received is around $11,000 but he has already paid about $15,000 in premium for his endowment policy.
We cannot understand why he is making a loss with this endowment policy. I have writtent to the insurance company to ask for an explanation and have not heard from then yet.
As a layman, we do not understand how it works and I thought with your wealth of knowledge on insurance, you may be able to explain to us why my dad made a loss with this Anticipated Endowment policy. I sincerely hope you can also advise me on the next course of action.
REPLY
You can lodge a compliant with the CEO of the insurance company. In my view, the total payout should be more than the total premiums.
If they do not give you a satisfactory answer, you can file a complaint with FiDREC, www.fidrec.com.sg.
My dad has bought a 20 Year Modified Anticipated Endowment Policy in 1988 and his policy matured in August 2008.
After calculating the total amount of 5 yearly and maturity payout by the insurance company, we realize that the total payout of $11,000 is less than the total premium of $15,000 paid over 20 years.
He recalled in the 20 years, he has received payout of bonus every 5 years and the total bonus received is around $11,000 but he has already paid about $15,000 in premium for his endowment policy.
We cannot understand why he is making a loss with this endowment policy. I have writtent to the insurance company to ask for an explanation and have not heard from then yet.
As a layman, we do not understand how it works and I thought with your wealth of knowledge on insurance, you may be able to explain to us why my dad made a loss with this Anticipated Endowment policy. I sincerely hope you can also advise me on the next course of action.
REPLY
You can lodge a compliant with the CEO of the insurance company. In my view, the total payout should be more than the total premiums.
If they do not give you a satisfactory answer, you can file a complaint with FiDREC, www.fidrec.com.sg.
Is bond fund risky?
Hi Mr. Tan,
How about Bond Funds ? Is it safe ? Its unit price keeps dropping.
I have brought S$x of Bond Fund from Maybank at S$0.99 per unit and it was at S$0.86 now. It dropped by $0.13 dropped within 6 months time.
What shall I do now ? Cut lose or hold ? I was also told by the bank staff it was safe since it was a bond and having very little risk ...
Thanks you in advance for your advice please. I know you are very busy .. a lot of people seeking advice from you ...
REPLY
I am not familiar with this bond. It is all right to keep the investment.
It is also all right to sell the investment, as you are getting the actual value of the underlying bonds. Some of the bonds may have dropped in value due to the credit crisis.
How about Bond Funds ? Is it safe ? Its unit price keeps dropping.
I have brought S$x of Bond Fund from Maybank at S$0.99 per unit and it was at S$0.86 now. It dropped by $0.13 dropped within 6 months time.
What shall I do now ? Cut lose or hold ? I was also told by the bank staff it was safe since it was a bond and having very little risk ...
Thanks you in advance for your advice please. I know you are very busy .. a lot of people seeking advice from you ...
REPLY
I am not familiar with this bond. It is all right to keep the investment.
It is also all right to sell the investment, as you are getting the actual value of the underlying bonds. Some of the bonds may have dropped in value due to the credit crisis.
Legal fees - action against distributor
I have approached a well known lawyer. He told me that the legal fees to take a case to the High Court is likely to be $100,000 or more. If this is shared by 100 investors, the cost per investor is $1,000. If there are 200 investors, the cost is $500 per investor.
If investors wish to contemplate taking legal action, you have to be prepared to spend $500 to $1,000. As the amount invested in most cases is quite large, averaging about $50,000, it may be necessary to spend 1% or 2% to seek compensation.
I shall be putting up another "petition" to gauge the interest in taking collective action to engage the service of the lawyer. I will arrange for the investors to meet the lawyer before you take the final decision.
It may be necessary for the lawyer to take separate cases against separate distributors. This is complicated and may add to the cost. I will let the lawyer explain how to handle this matter at a future time.
What are your views? You can post your comments in this blog.
If investors wish to contemplate taking legal action, you have to be prepared to spend $500 to $1,000. As the amount invested in most cases is quite large, averaging about $50,000, it may be necessary to spend 1% or 2% to seek compensation.
I shall be putting up another "petition" to gauge the interest in taking collective action to engage the service of the lawyer. I will arrange for the investors to meet the lawyer before you take the final decision.
It may be necessary for the lawyer to take separate cases against separate distributors. This is complicated and may add to the cost. I will let the lawyer explain how to handle this matter at a future time.
What are your views? You can post your comments in this blog.
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