Z
Zombie
Guest
http://business.asiaone.com/print/Business/News/My+Money/Story/A1Story20081127-103819.html
Suing banks not that easy
It's a complicated legal path if investors choose to go to court.
Fri, Nov 28, 2008
The Straits Times
By Lee Su Shyan
WHEN investors lose money after buying ill-fated investment products, they often contemplate taking the bank or perhaps a financial adviser to court.
They want redress; they want justice; most of all, they want their money back.
They may be inspired by popular television courtroom shows which often depict the victory of the small man over the big guns.
Sadly, real life is a bit different. It is more complicated, costs a lot and takes a heck of a lot more time to get a result.
Since the collapse of Lehman Brothers, reports have emerged that investors overseas are gearing up to sue the banks which sold Lehman-linked products.
So far, these cases have yet to go to court in the United States so the likelihood of success is hard to assess.
In Singapore, it is not known if any disgruntled investor has actually filed a lawsuit yet. Unhappy customers have been making a beeline for lawyer Leonard Loo, who has been holding sessions to advise investors on their legal options.
He told The Straits Times that with 'unity in numbers', legal costs are shared, and that it may be possible to identify a certain pattern of selling behaviour among the banks.
Such a lawsuit requires only a 'bit more effort' than a normal civil action taken out by one individual, he says.
But other lawyers are less sanguine. If investors think proving they were misled and getting their money back will be a walk in the park, think again, they say.
In Singapore, there is no legal procedure to conduct a so-called 'class action' lawsuit, as is the case in the US.
However, it is possible that one or several litigants may proceed as a test case.
This was seen in the Raffles Town Club saga where some 5,000 members banded together, after discovering that the 'exclusive' club they had joined had a whopping 19,000 members.
But in their case, their circumstances were roughly similar, which made it easier to take out a combined lawsuit. They had received the same marketing material touting the privilege of belonging to an exclusive club.
With Lehman Minibonds and other structured products, the selling process varies from investor to investor rather than being a standard selling pitch via a pamphlet.
One relationship manager could have said: 'Don't worry. It is capital-guaranteed.' Another might have warned: 'It's safe, but of course it depends on how much confidence you have in xyz company.'
Equally, the investor's circumstances range from the elderly widow who is illiterate, to the sophisticated investor who is familiar with other structured products.
Each investor would be willing to live with different degrees of risk.
So, clubbing together to sue is going to be complicated. On the other hand, going it alone entails substantial costs.
The opposition is stiff. The banks in Singapore all employ the top legal eagles to advise them.
If these top legal firms are excluded from the equation, how far will the litigant get, with the help, for example, of the one-man firm Tan Ah Kow who has only limited resources?
Aside from these practicalities, supposing the lone investor is determined to take on the bank, are the legal merits in his favour?
Since such investments are based on a written contract, the investor could try to set aside the contract by claiming misrepresentation or something known as non est factum, which simply put means 'I did not understand what I was signing or 'what I signed is radically different from what I believed it was'.
Alleging misrepresentation could mean, for example, that the relationship manager promised it was a capital-guaranteed product when in fact it was not.
Or it could be that the investor thought for some other reason that it was a capital-guaranteed product - when it wasn't - and signed the contract.
Many of these contracts contain reams of fine print. The investor is asked to acknowledge that he has read and understood the terms and conditions. This is likely to exclude any oral representations made - verbal claims made by the relationship manager, for example - once the written contract is signed.
To succeed in these circumstances, it is likely that only the elderly folk and the illiterate will be able to argue that they did not understand what they were buying and were misled.
The prospects look poor for sophisticated investors, say lawyers.
Another legal hurdle to cross is that much of the evidence is likely to be oral, whereas written evidence would produce a much stronger case.
But not many investors would be able to produce written or taped evidence of conversations with their relationship manager. Such legal hurdles are the reason that the authorities are recommending investors try to settle with the banks rather than resorting to the courts.
If investors cannot resolve their differences with the bank, the next step for them is to head for the Financial Industry Disputes Resolution Centre (Fidrec) for another go at resolving the case out of court.
At Fidrec, the bank is bound by the findings of the dispute resolution body but investors are not.
This three-step dispute resolution process has been put in place by the Monetary Authority of Singapore to handle complaints over mis-selling. Only if all these routes fail should investors go to the courts, MAS advises.
But look at the Raffles Town Club legal saga which spanned some four years.
One would think it was hardly worth the effort. But one of those club members involved said: 'I would do it all again. We persevered and we got justice.'
So don't bet on investors taking their losses lying down. Even though the chances of winning may be low, and even though a legal battle is draining both emotionally and financially, many investors may still sue, just to make their point.
It won't always be reason and good sense that wins, when it comes to irate investors determined for their day in court.
This article was first published in The Straits Times on November 26, 2008.
Suing banks not that easy
It's a complicated legal path if investors choose to go to court.
Fri, Nov 28, 2008
The Straits Times
By Lee Su Shyan
WHEN investors lose money after buying ill-fated investment products, they often contemplate taking the bank or perhaps a financial adviser to court.
They want redress; they want justice; most of all, they want their money back.
They may be inspired by popular television courtroom shows which often depict the victory of the small man over the big guns.
Sadly, real life is a bit different. It is more complicated, costs a lot and takes a heck of a lot more time to get a result.
Since the collapse of Lehman Brothers, reports have emerged that investors overseas are gearing up to sue the banks which sold Lehman-linked products.
So far, these cases have yet to go to court in the United States so the likelihood of success is hard to assess.
In Singapore, it is not known if any disgruntled investor has actually filed a lawsuit yet. Unhappy customers have been making a beeline for lawyer Leonard Loo, who has been holding sessions to advise investors on their legal options.
He told The Straits Times that with 'unity in numbers', legal costs are shared, and that it may be possible to identify a certain pattern of selling behaviour among the banks.
Such a lawsuit requires only a 'bit more effort' than a normal civil action taken out by one individual, he says.
But other lawyers are less sanguine. If investors think proving they were misled and getting their money back will be a walk in the park, think again, they say.
In Singapore, there is no legal procedure to conduct a so-called 'class action' lawsuit, as is the case in the US.
However, it is possible that one or several litigants may proceed as a test case.
This was seen in the Raffles Town Club saga where some 5,000 members banded together, after discovering that the 'exclusive' club they had joined had a whopping 19,000 members.
But in their case, their circumstances were roughly similar, which made it easier to take out a combined lawsuit. They had received the same marketing material touting the privilege of belonging to an exclusive club.
With Lehman Minibonds and other structured products, the selling process varies from investor to investor rather than being a standard selling pitch via a pamphlet.
One relationship manager could have said: 'Don't worry. It is capital-guaranteed.' Another might have warned: 'It's safe, but of course it depends on how much confidence you have in xyz company.'
Equally, the investor's circumstances range from the elderly widow who is illiterate, to the sophisticated investor who is familiar with other structured products.
Each investor would be willing to live with different degrees of risk.
So, clubbing together to sue is going to be complicated. On the other hand, going it alone entails substantial costs.
The opposition is stiff. The banks in Singapore all employ the top legal eagles to advise them.
If these top legal firms are excluded from the equation, how far will the litigant get, with the help, for example, of the one-man firm Tan Ah Kow who has only limited resources?
Aside from these practicalities, supposing the lone investor is determined to take on the bank, are the legal merits in his favour?
Since such investments are based on a written contract, the investor could try to set aside the contract by claiming misrepresentation or something known as non est factum, which simply put means 'I did not understand what I was signing or 'what I signed is radically different from what I believed it was'.
Alleging misrepresentation could mean, for example, that the relationship manager promised it was a capital-guaranteed product when in fact it was not.
Or it could be that the investor thought for some other reason that it was a capital-guaranteed product - when it wasn't - and signed the contract.
Many of these contracts contain reams of fine print. The investor is asked to acknowledge that he has read and understood the terms and conditions. This is likely to exclude any oral representations made - verbal claims made by the relationship manager, for example - once the written contract is signed.
To succeed in these circumstances, it is likely that only the elderly folk and the illiterate will be able to argue that they did not understand what they were buying and were misled.
The prospects look poor for sophisticated investors, say lawyers.
Another legal hurdle to cross is that much of the evidence is likely to be oral, whereas written evidence would produce a much stronger case.
But not many investors would be able to produce written or taped evidence of conversations with their relationship manager. Such legal hurdles are the reason that the authorities are recommending investors try to settle with the banks rather than resorting to the courts.
If investors cannot resolve their differences with the bank, the next step for them is to head for the Financial Industry Disputes Resolution Centre (Fidrec) for another go at resolving the case out of court.
At Fidrec, the bank is bound by the findings of the dispute resolution body but investors are not.
This three-step dispute resolution process has been put in place by the Monetary Authority of Singapore to handle complaints over mis-selling. Only if all these routes fail should investors go to the courts, MAS advises.
But look at the Raffles Town Club legal saga which spanned some four years.
One would think it was hardly worth the effort. But one of those club members involved said: 'I would do it all again. We persevered and we got justice.'
So don't bet on investors taking their losses lying down. Even though the chances of winning may be low, and even though a legal battle is draining both emotionally and financially, many investors may still sue, just to make their point.
It won't always be reason and good sense that wins, when it comes to irate investors determined for their day in court.
This article was first published in The Straits Times on November 26, 2008.
