Yesterday, the Monetary Authority of Singapore (MAS) released a report of its findings regarding the sale and marketing of structured notes linked to Lehman Brothers. The report indicates that certain institutions selling and marketing these notes failed to comply with MAS’ notices and guidelines on the sale and marketing of investment products. Some of the specific failings include the inconsistency between assigned risk ratings to some series of structured notes and risk warnings stated in the prospectus and pricing supplement for those offerings, the insufficiency of training of the institutions’ financial advisory representatives that marketed and sold the structured notes, and weaknesses “in how some financial institutions ensured that their financial advisory representatives were properly equipped with accurate and complete information” about the structured notes.
The MAS has imposed bans on the sale of structured notes by these financial institutions for minimum periods ranging from six months to two years and issued formal directions to the institutions to rectify the weaknesses and review and strengthen internal processes and procedures for the provision of financial advisory services across all investment products. The financial institutions also will be required to appoint an external person approved by MAS to review their action plan and report on its implementation, and appoint a member of the institution’s senior management to oversee compliance with MAS’ direction. Furthermore, the financial institutions entered into various settlements on a “without admission of liability” basis.