These case studies have been modified so as not to identify any actual cases at FIDReC. They are provided for purposes of learning and are not necessarily indicative of outcomes at FIDReC.
58-year-old Madam Goh worked as a service crew and earned $2,800 a month. She had secondary level education and was from the Chinese language stream. She spoke mainly mandarin although she could understand simple English. In 2018, Madam Goh’s husband passed away and left her an inheritance of $200,000. Madam Goh went to the financial institution (“FI”) to put the money into a fixed deposit for her son’s education.
The FI representative suggested that Madam Goh consider other products that could give a better interest rate. The FI representative guided Madam Goh to fill in a form to determine her financial needs. Madam Goh spoke in mandarin to the FI representative to explain that she wanted a safe product where she could earn interest. The FI representative recommended that Madam Goh purchase a Structured Note product (the “Note”). Madam Goh trusted the FI representative’s recommendation and went ahead to sign the documents to purchase the Note.
Many years later, Madam Goh went to the FI to withdraw money for her son’s education, only to discover that there was no money to withdraw. The Note was linked to four shares and had matured in 2022. A “knock-in event” had occurred. This meant that the closing price of the worst-performing of the four shares was below the strike price on the final valuation date. Under the terms of the Note, this meant that instead of receiving the principal sum invested, Madam Goh received the worst-performing share.
Shocked, Madam Goh asked the FI for compensation. The FI refused because Madam Goh had signed all the documents, including that she understood the product and acknowledged the risks involved. Madam Goh came to FIDReC.
When mediation was not successful, Madam Goh proceeded to adjudication. She appointed a nominee to help translate and interpret for her. After considering all the submissions and evidence of both parties, the adjudicator found partly in favour of Madam Goh.
The adjudicator found that Madam Goh bore 60% of the responsibility because she chose to buy a product even though she did not understand what she was buying. Although the bank representative gave her documents with mandarin text, she admitted that she did not read the documents and relied on what was said. Over the years, Madam Goh had received notices relating to the Note but, again, she did not read them and threw them away.
The adjudicator found the FI to be 40% responsible for Madam Goh’s losses. The Note did not appear to be a suitable product for someone like Madam Goh. The risks involved did not meet the purpose of saving for her son’s education. This was especially so because of Madam Goh’s limited financial means. It was also clear that Madam Goh did not understand the nature of the Note. The filling up of forms and signing of documents should not be a check-box exercise.
Key Learning Points
- When you sign a document, you should expect to take responsibility for the terms that the document contains. Never sign purely based on trust.
- When purchasing financial products, ensure that you read and understand the product. You can always seek help from a trusted individual to explain the documents to you before you sign them. Always seek clarifications before deciding.
- MoneySense, Singapore’s national financial education programme, provides information about investment products on their website. Find out more before purchasing.
- If you are not fluent in English, you can appoint a nominee to support you with interpretation and translation in the FIDReC process. If you cannot find a nominee, please inform FIDReC and we can help you to find a volunteer nominee.
Click here to access more case studies.