MAS releases investigation findings on the sale and marketing of structured notes linked to Lehman Brothers

The Monetary Authority of Singapore (MAS) has completed investigations into the sale and marketing of structured notes linked to Lehman Brothers (the Notes). Given the degree of public interest, MAS is releasing a report on our investigation findings.
MAS’ investigations found that the 10 financial institutions that distributed the Notes (see Annex 1) had policies, procedures and controls in place for the approval, sales and marketing of the Notes. However, the extent of the due diligence and level of internal controls differed among them. As a result, there were various forms of non-compliance with MAS’ notices and guidelines on the sale and marketing of investment products. The nature and extent of these failings and their potential impact on the sales process and customers differed for each institution. Some of the specific failings included:

a) risk ratings assigned by some financial institutions to some series of the Notes that were inconsistent with risk warnings stated in the prospectus and pricing statement;
b) insufficient steps taken by some financial institutions to ensure that all their financial advisory representatives were properly trained before marketing and selling the Notes; and
c) weaknesses in how some financial institutions ensured that their financial advisory representatives were properly equipped with accurate and complete information about the Notes.

The findings for each financial institution are specific to that institution and are not general findings.

MAS takes a serious view of all instances of non-compliance by the financial institutions with MAS’ notices and guidelines on the sale and marketing of investment products. In deciding on the appropriate regulatory action, MAS considered the nature and impact of the failings, the steps taken by the financial institutions to rectify these, and the extent to which they accepted responsibility and resolved investors’ complaints. Taking all these into account, MAS has imposed bans on the sale of structured notes by these institutions for periods ranging from a minimum of six months to a minimum of two years. In addition, MAS has issued formal directions to the financial institutions to rectify all the weaknesses identified by the investigations and to review and strengthen all internal processes and procedures for the provision of financial advisory services across all investment products. The financial institutions are also 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. The financial institutions will not be able to distribute structured notes until MAS is satisfied with the measures they have put in place.


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