Views:
Students from the National University of Singapore Pro Bono Group prepared this guide. The guide is for public education and is not legal advice.

What are investment disputes?

Investment disputes are disputes between investors and Financial Institutions (“FIs”) who provide investment products or investment-related services. Such FIs include:
 
  • banks;
  • capital markets firms;
  • financial advisory firms; and
  • brokerage firms. 

Click here for a list of financial institutions licensed by the Monetary Authority of Singapore (“MAS”).

The following are common types of investment disputes:
 
  1. Breach of Contract
This may arise when the FI does not perform its obligations under an agreement, causing you to suffer financial loss. For instance, the FI promises a guaranteed rate of return at 5% per annum for your investment. However, you do not receive the promised returns.
 
  1. Negligence
This may arise if the FI did not exercise due care owed to the client and this causes financial loss. For example, failing to respond in a timely way to the client, and failing to provide regular statements of the client’s investment position.
 
  1. Misrepresentation
This may arise if the FI gives false information or makes misleading statements. Under section 35(3) of the Financial Advisers Act (“FAA”), where the misrepresentation causes the client to enter into an investment agreement with the FI and suffer financial loss, the client may seek to rescind (i.e. end) the agreement or recover losses caused by the false information.
 
  1. Insufficient Disclosure
This may arise if the FI did not provide all material information relating to an investment product to the client. Under section 34(1) of the FAA, material information includes:
  • The terms and conditions of the investment product,
  • The benefits and risks of the investment product,
  • The premium, costs, or other charges involved in the investment product,
  • If the product is a unit in a collective investment scheme, the name of the manager of the scheme and the relationship between the licensed financial adviser and the manager, and
  • If the product is a life policy, the name of the licensed insurer and the relationship between the financial adviser and the insurer.
 
  1. Unreasonable recommendations by licensed financial advisers
This may arise when a licensed financial adviser does not have a reasonable basis for recommending an investment product. For example, under section 36(2) of the FAA:
  • When the financial adviser fails to investigate the investment objectives, financial situation and needs of the client.
  • When the financial adviser fails to consider information provided by the client about their needs.

What should I do when faced with an investment dispute?

Generally, there are 4 possible steps that you can take.

Step 1: Speak to your FI first

Contact your FI so they have a chance to resolve your investment dispute. The MAS expects all FIs to handle all consumer complaints effectively and promptly. You can find your FI's contact details using the Financial Institutions Directory.

Before you contact the FI, you should be clear on your concerns and how you would like the FI to help with these concerns. Get your customer reference number, account or policy number, and other supporting documents ready.

You should actively follow-up with your FI if you do not get a response from them within 2-3 weeks.

Step 2: Approach FIDReC for help

If you cannot resolve the matter with your FI after 4 weeks, you may approach the Financial Industry Disputes Resolution Centre (“FIDReC”) for mediation. There is no cost to consumers to do so.

FIDReC is an independent dispute resolution institution handling disputes between consumers and licensed FIs. FIDReC provides a low-cost and effective avenue to resolve problems that cannot be settled directly with your FI.

FIDReC adopts a 2-step process.
 
  1. A case manager will mediate the dispute between you and your FI. If the dispute is not settled by mediation, you can choose to bring your case to the second stage of adjudication.
     
  2. An adjudicator will decide on your dispute based on the facts and merits of the case. If you choose to proceed to adjudication, there is a nominal fee of S$50 (plus GST).

Please note these limitations before approaching FIDReC:
  • FIDReC is only able to assist individuals or sole-proprietors.
  • Claims that exceed S$100,000 cannot be referred to adjudication unless the consumer limits their claim or the FI agrees to the higher limit.
  • You must approach FIDReC within 6 months of receiving the final reply from the FI to ensure that FIDReC is able to assist you.
  • Your claim must not fall under the types of claims that FIDReC cannot handle under its Terms of Reference. For example, claims already decided in court or settled privately.

You can find out more about FIDReC's Dispute Resolution Process or file a complaint using the Online Dispute Resolution Form. For more information, please visit FIDReC’s Frequently Asked Questions page or submit an enquiry.

You would need to complete and submit a dispute resolution form to FIDReC for them to assess the dispute. You should also submit details of your communications with the FI, and all other relevant supporting documents.

Do note that the FIDReC adjudication outcome only binds the FI and not the consumer. This means that if you are not satisfied with the outcome, you can continue to pursue other avenues of recourse. This includes taking legal action.

Or you can approach the Consumers Association of Singapore (“CASE”), the Singapore Mediation Centre (“SMC”) or the Small Claims Tribunal (“SCT”). These organisations handle disputes across all types of products and services.

Step 3: Taking legal action against the FI

Resolving investment disputes through legal action is usually a last resort. Legal action is time-consuming and expensive. You should get advice from a lawyer before taking legal action. If you wish to engage the services of a lawyer, you can access the Legal Services Regulatory Authority for a list of practising lawyers here.

Or you may approach the Legal Aid Bureau for legal aid and advice. Do note that you would need to meet specific prerequisites to do so. Find out more here.

Step 4: Reporting your FI to the MAS

The MAS is a financial services regulatory authority, and handles regulatory breaches or misconduct by an FI.

You should report to the MAS if you encounter:
 
  • Inappropriate or misleading advice;
  • Misrepresentation of (financial) products and/or services;
  • Lack of disclosure in the sales and advisory process; or
  • Suspicion of fraud, cheating, criminal breach of trust, forgery, or other forms of fraudulent accounting or corruption by your FI.
 
Other offences that should be reported to the MAS include fraudulently inducing persons to deal in capital markets products, market manipulation, insider trading, criminal breach of trust, forgery, fraudulent accounting, or corruption. A list of other offences is stated in the Securities and Futures Act Part XII.

Generally, the MAS is unable to resolve disputes involving:
  • A FI’s pricing policies,
  • Private contractual arrangements between you and your FI, and
  • Compensation that you want from your FI.

To file a report with the MAS, click here. For more general guides or information on resolving financial disputes, click here.

What Precautions Can I Take as a Retail Consumer?

Responsible investing can help you avoid investment disputes. Some precautions you can take include:
 
  1. Research the FI before using their service. Check that they are a licensed FI via the Financial Institutions Directory. Check that the representative that you are engaging with is a licensed representative.
 
  1. Educate yourself on what you are investing into. Understand how the investment works, how the investment value grows or shrinks, and how risky the investment product is. The Singapore Exchange provides free educational material with more information on capital markets.
 
  1. Understand the fees you may be charged for investment products and services. Investing with brokerage firms costs money. Always ask up front what services the FI provides and how much these services cost. You may be charged fees related to your account, such as account opening, closing, transfer, and maintenance fees.
 
  1. Keep a good record of documents and communications (e.g., emails, letters, phone calls) with the FI. This includes keeping photocopies of relevant contracts and service agreements. Make sure you note down the name of the addressee, date, and time of any correspondence with the FI.

Sources

Keywords: Investment