I believe that the issuer or trustee of a structured product has a fiduciary duty towards the investors. A break of fiduciary duty is a criminal offence. I searched for an explanation of fiduciary duty and found the following:
Source: Wikipedia
The fiduciary duty is a legal relationship of confidence or trust between two or more parties, most commonly a fiduciary or trustee and a principal or beneficiary. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relation one person justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests.
“ A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.”
A fiduciary duty is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents. The word itself comes originally from the Latin fides, meaning faith, and fiducia, trust.
In English common law the fiduciary relation is arguably the most important concept within the portion of the legal system known as equity. In the United Kingdom, the Judicature Acts merged the courts of Equity (historically based in England's Court of Chancery) with the courts of common law, and as a result the concept of fiduciary duty also became usable in common law courts.
When a fiduciary duty is imposed, equity requires a stricter standard of behavior than the comparable tortious duty of care at common law. It is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where his fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from his fiduciary position without express knowledge and consent. A fiduciary cannot have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd" and that "the distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty."
Thursday, October 9, 2008
HKMA vs MAS
Dear Mr. Tan,
Both my wife and I bought Minibond series 1, 5 & 6 from Maybank. We are near retiring age and now very 'gek sim' and dare not hope to get even portion out of our investment. The distributors (banks) must be responsible since they did not scrutinize the product packaging before selling to innocent laymen like us.
This akin to selling Slim 10 slimming pill. And as you already knew, the distributor was charged in court and made to compensate an innocent victim. Therefore as I have said, the distributors should be responsible for mis-representation of their products and to pull wool over our eyes.
It was not greed as some people have said. We are just trying to make our money work harder to increase wealth for our retirement and to beat the inflationary rate of 7%. The interest paid by the Minibond was 4 to 5% and these were unable to cover the inflation rate. We have to pursue for the return of our investment albeit a lesser amount.
Our govt. is seem to be standing with folded arms behind the scene and not being proactive to help the affected citizen and which is not the case in HK. The HK govt is taking a hard stand on the banks for the return of her citizen investment. What is our PAP govt stand on this matter...do nothing? So much for the votes on PAP!!!!
My vote goes to the opposition, come next election.
TTH
Both my wife and I bought Minibond series 1, 5 & 6 from Maybank. We are near retiring age and now very 'gek sim' and dare not hope to get even portion out of our investment. The distributors (banks) must be responsible since they did not scrutinize the product packaging before selling to innocent laymen like us.
This akin to selling Slim 10 slimming pill. And as you already knew, the distributor was charged in court and made to compensate an innocent victim. Therefore as I have said, the distributors should be responsible for mis-representation of their products and to pull wool over our eyes.
It was not greed as some people have said. We are just trying to make our money work harder to increase wealth for our retirement and to beat the inflationary rate of 7%. The interest paid by the Minibond was 4 to 5% and these were unable to cover the inflation rate. We have to pursue for the return of our investment albeit a lesser amount.
Our govt. is seem to be standing with folded arms behind the scene and not being proactive to help the affected citizen and which is not the case in HK. The HK govt is taking a hard stand on the banks for the return of her citizen investment. What is our PAP govt stand on this matter...do nothing? So much for the votes on PAP!!!!
My vote goes to the opposition, come next election.
TTH
Global Financial Crisis - subprime loans
Dear Mr Tan,
Thank you for your effort in seeking justifications for innocent investors.
While investigations do help, much could have been done to prevent this crisis from happening which started in the United States last year. At the onset, many financial institutions had been trying to cover up their losses for their exposure in the sub-prime credits and loans. The Japanese used to cover up their losses by sweeping them under the carpet. However, the Westerners cover up (or pass on) their losses (and risks) by "auditing" their books, and/or repackaged their risks and exposures into "High Yield Notes" or "Funds" to be sold to retail investors globally via local financial institutions.
Incidentally, the very people who packaged such products, so-called "investment bankers" or "funds managers" knew the risks of such products are extremely high, and also that defaults in payment by those very Sub-Prime borrowers were also high, are the same group of people who are not only "highly" educated - academically, but also people who think they are smarter than the man-in-the-street.
Long before this financial crisis erupted, as a financial trader, I had been advising people from taking risks which they are unfamiliar with. Relationship managers in banks - just how much do they know about those financial products which they had been selling to their customers? Even portfolio managers and fund managers do not know precisely how such funds are packaged! While insurance may be quite an outright product, investment-linked products and other financial investment products can never be thoroughly understood by the average fund manager or relationship manager, let alone the average investor. Such products are normally sold by relationship managers basing on their on quota(s) (not forgetting their monetary rewards) and fine tuned (in sales presentation) to suit the need of their customers.
Hence, I feel that MAS should also be fully responsible for its failure to ensure that these investment products were thoroughly "safe" enough to be marketed by financial institutions here, let alone sold by inexperience relationship managers. In addition, bankers should also be held accountable.
This is not going to be an easy crisis, but it will be one that is going to force all central bankers to clear up the whole financial system, globally. And it is going to take at least the next 5 to 10 years for it to be over. Lowering interest rates is not going to help at all since most of the financial institutions had been trying to cover up their exposures since the eruption of the Sub-Prime Crisis last August.
MT
Thank you for your effort in seeking justifications for innocent investors.
While investigations do help, much could have been done to prevent this crisis from happening which started in the United States last year. At the onset, many financial institutions had been trying to cover up their losses for their exposure in the sub-prime credits and loans. The Japanese used to cover up their losses by sweeping them under the carpet. However, the Westerners cover up (or pass on) their losses (and risks) by "auditing" their books, and/or repackaged their risks and exposures into "High Yield Notes" or "Funds" to be sold to retail investors globally via local financial institutions.
Incidentally, the very people who packaged such products, so-called "investment bankers" or "funds managers" knew the risks of such products are extremely high, and also that defaults in payment by those very Sub-Prime borrowers were also high, are the same group of people who are not only "highly" educated - academically, but also people who think they are smarter than the man-in-the-street.
Long before this financial crisis erupted, as a financial trader, I had been advising people from taking risks which they are unfamiliar with. Relationship managers in banks - just how much do they know about those financial products which they had been selling to their customers? Even portfolio managers and fund managers do not know precisely how such funds are packaged! While insurance may be quite an outright product, investment-linked products and other financial investment products can never be thoroughly understood by the average fund manager or relationship manager, let alone the average investor. Such products are normally sold by relationship managers basing on their on quota(s) (not forgetting their monetary rewards) and fine tuned (in sales presentation) to suit the need of their customers.
Hence, I feel that MAS should also be fully responsible for its failure to ensure that these investment products were thoroughly "safe" enough to be marketed by financial institutions here, let alone sold by inexperience relationship managers. In addition, bankers should also be held accountable.
This is not going to be an easy crisis, but it will be one that is going to force all central bankers to clear up the whole financial system, globally. And it is going to take at least the next 5 to 10 years for it to be over. Lowering interest rates is not going to help at all since most of the financial institutions had been trying to cover up their exposures since the eruption of the Sub-Prime Crisis last August.
MT
Get information from my blog
Dear Mr Tan
I have bought ML Jubilee Series 8 Note on Jun 2008. I heard that Jubilee Series 3 Note is almost dropped to zero value. Is it true? Could you please give me an advice how to handle Jubilee Series 8 Note.
REPLY
I suggest that you ask the trustee or the distributor bank about the value of your investment.
If you feel that you have been misled into investing in this structured product, you should lodge a complaint with the CEO of the distributor that sold the product to you. If this is not resolved, you have to lodge a complaint with FiDREC.
Please follow the guidelines in my blog. I am not able to handle individual request, as it will take a lot of my time, and I cannot afford to spend this time.
I have bought ML Jubilee Series 8 Note on Jun 2008. I heard that Jubilee Series 3 Note is almost dropped to zero value. Is it true? Could you please give me an advice how to handle Jubilee Series 8 Note.
REPLY
I suggest that you ask the trustee or the distributor bank about the value of your investment.
If you feel that you have been misled into investing in this structured product, you should lodge a complaint with the CEO of the distributor that sold the product to you. If this is not resolved, you have to lodge a complaint with FiDREC.
Please follow the guidelines in my blog. I am not able to handle individual request, as it will take a lot of my time, and I cannot afford to spend this time.
Book on financial planning
I hope to be able to find the time to start on my book, after the financial crisis is over:
http://tankinlian.blogspot.com/2008/09/book-on-financial-planning.html
http://tankinlian.blogspot.com/2008/09/book-on-financial-planning.html
Unhappy with bank's complaint handling process (2)
Dear Mr Tan,
I also attended a fact-finding session at the bank, and there were 2 bank officers present.
I was quite surprised by the way it was conducted. It felt as if the same questions were repeated over again but in different words, many times.
And each time I raised a query, the officer reacted by pointing to my signature on the back of the form, in support of the bank's position and the RM.
I also asked for a copy of the thick risk profile form with my signature on it but they refused to give me a copy for me to take home and run through. It looked totally unfamiliar to me and I wanted to see what the RM could have written about me then as I was with the RM for less than 30mins one year ago.
All the forms they had in their file were filled in by the RM, comments, ticks...etc (not my hand writing) On the main application form, there was however a slight difference on their copy compared to the one I had.
I understand from the bank officers that the independent person appointed by MAS to oversee the investigation has the authority to select case files to take a look but it does not mean that all cases will be looked into by this independent person.
MAS should assign independent assistants (not employed by the bank) to help review all cases to ensure each case is given due attention and justice, afterall our Government should try its best to help us citizens as much as possible.
REPLY
You have the right to ask for a copy of the document that you were supposed to have signed. You can challenge statements that are written by the representative, if they do not reflect the true situation, e.g. the representative write on your behalf without checking with you. Or if the representative ask you to sign first, and fill in the details later.
I also attended a fact-finding session at the bank, and there were 2 bank officers present.
I was quite surprised by the way it was conducted. It felt as if the same questions were repeated over again but in different words, many times.
And each time I raised a query, the officer reacted by pointing to my signature on the back of the form, in support of the bank's position and the RM.
I also asked for a copy of the thick risk profile form with my signature on it but they refused to give me a copy for me to take home and run through. It looked totally unfamiliar to me and I wanted to see what the RM could have written about me then as I was with the RM for less than 30mins one year ago.
All the forms they had in their file were filled in by the RM, comments, ticks...etc (not my hand writing) On the main application form, there was however a slight difference on their copy compared to the one I had.
I understand from the bank officers that the independent person appointed by MAS to oversee the investigation has the authority to select case files to take a look but it does not mean that all cases will be looked into by this independent person.
MAS should assign independent assistants (not employed by the bank) to help review all cases to ensure each case is given due attention and justice, afterall our Government should try its best to help us citizens as much as possible.
REPLY
You have the right to ask for a copy of the document that you were supposed to have signed. You can challenge statements that are written by the representative, if they do not reflect the true situation, e.g. the representative write on your behalf without checking with you. Or if the representative ask you to sign first, and fill in the details later.
Bank agree to buy back risky investments
Mr. Tan,
I came across this article and I think it will be helpful. I hope that this will convince MAS to do something to help the affected retail investor.
http://biz.yahoo.com/ap/081008/bank_of_america_settlement.html?.v=11
Bank of America Corp. has agreed to buy back up to $4.7 billion in auction-rate securities to settle charges it misled thousands of customers about the risky investments, federal and state regulators said Wednesday.
I came across this article and I think it will be helpful. I hope that this will convince MAS to do something to help the affected retail investor.
http://biz.yahoo.com/ap/081008/bank_of_america_settlement.html?.v=11
Bank of America Corp. has agreed to buy back up to $4.7 billion in auction-rate securities to settle charges it misled thousands of customers about the risky investments, federal and state regulators said Wednesday.
Subscribe to:
Posts (Atom)