10 barred from notes sale

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Definitely one of the biggest punishment for FIs in Singapore. They deserve it!

THE Monetary Authority of Singapore (MAS) has barred 10 financial institutions here which sold toxic credit notes linked to the collapsed US investment bank Lehman Brothers from selling new structured notes for between six months and a minimum of two years.

The unprecedented MAS directive followed its investigations into complaints of mis-selling of the Lehman-linked structured notes from investors in Singapore who lost money last year in the aftermath of the Lehman Brothers collapse.

The central bank probe found the 10 financial institutions had in place procedures and controls for the approval and sales of the notes.

However, the level of internal controls differed. As a result there were various forms of failings on the part of the FIs in the sale of the notes, said MAS which released the findings of its investigations on Tuesday.

Some of the failings include assigning inconsistent risk ratings to some series of the Notes that were inconsistent with risk warnings stated in the prospectus and pricing statement; insufficient steps to ensure sales staff were properly trained to sell the notes and weaknesses in how some FIs equipped staff with accurate and complete information about the products.

MAS has ordered the 10 FIs to stop selling new structured notes for periods ranging from a minimum of six months to a minimum of two yearsfrom July 1.

Note distributors like ABN Amro, DBS Bank, Maybank, DMG and UOB Kay Hian will have to stop dealing in and providing advice for new structured notes, for six months, or until they have implemented adequate measures to address their failings or whichever is later.

They also have to appoint an external party - to be approved by MAS - to review their action plan, and also appoint a member from its senior management to ensure compliance.

Similarly, CIMB, Kim Eng, OCBC Securities and Philip Securities have also been told to stop dealing in and providing advise for new structured notes, for one year from July 1.

Hong Leong Finance received the heaviest penalty - it cannot sell new structured notes for a minimum of two years.

OCBC Securities was ordered by MAS to stop using introducers to provide advice for new structured notes for good.

Ten financial institutions sold over $660 million worth of Lehman-linked investments to more than 10,000 investors, who bought Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes.

THE 10 FIs banned from selling new structured products are:

1. ABN Amro Bank Singapore Branch - Minimum 6 months

2. DBS Bank - Minimum 6 months

3. Maybank - Minimum 6 months

4. DMG & Partners Securities - Minimum 6 months

5. UOB Kay Hian - Minimum 6 months

6. CIMB-GK Securities - Minimum one year

7. Kim Eng Securities - Minimum one year

8. OCBC Securities - Minimum one year

9. Philip Securities - Minimum one year

10. Hong Leong Finance - Minimum two years


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