The move is significant because the higher amount will apply to the losses suffered, not the size of the initial investment. Take a bank customer who is misled into a buying an unsuitable $1 million product. He can have his case adjudicated by Fidrec if he suffers losses of up to $150,000.
If his losses exceed the limit, he can still ask Fidrec to hold a mediation, which does not cap claim amounts, so both sides can try to settle the dispute amicably.
This change and others on Fidrec's wish list are likely to be in force by the third quarter of 2024 and will further strengthen Singapore's standing as a leading global financial hub because such access to speedy justice will come at virtually no cost to investors.
Free Service - Fidrec's mediation service is free for claimants, while those who go for adjudication in such cases have to pay only a small fee of $54.50, including GST.
Such easy recourse for consumers who suffer losses due to misconduct or misrepresentation should be reason enough for financial institutions to tighten their supervisory and regulatory checks to weed out rogue employees.
If not, they will have to spend a lot of money and effort to deal with the deluge of claims that may land at their door as investors become more aware of their rights.
Miselling By Banker - Consider a recent case where Fidrec helped a 75-year-old woman recover her investment losses after she was duped into sinking $100,000 in a risky product.
The woman had wanted to put her money in a fixed deposit account but a bank employee sweet-talked her into investing it instead by lying that she not only would get better returns, but her initial capital would also remain intact.
She learnt she had been fooled only about a year later when she noticed that her $100,000 deposit had plunged by about 20 per cent.
Fidrec's adjudicator found that the woman, who could speak only Mandarin, was misled by the bank employee who stated in her records that the woman was a seasoned investor even though this was not true.
While the Monetary Authority of Singapore requires banks to safeguard the interests of elderly and illiterate customers, the employee's supervisor had failed to ensure that the woman knew what she was getting into. As a result, the bank was ordered to compensate her.
More Compensation - Many people are deterred from filing lawsuits to recover investment losses due to hefty legal bills. Moreover, they also face the risk of footing the costs of the other party if they can't prove their case.
This is why Fidrec is a boon for the average investor. It ensures that deserving claimants can get back their money without having to worry about paying high legal costs. The rising costs of living and income over recent years mean that investments by retail consumers have become larger. Although only a small percentage of claims exceeds the $100,000 limit now, these often pertain to disputes involving scams, insurance claims and market conduct, which are significant issues for retail consumers.
For instance, the number of claims exceeding $100,000 had been creeping up in the last three financial years (FYs), from about 100 cases in the previous two financial cycles to 157 cases in FY22 / 23.
While raising the claim limit will benefit more people, you should never read the change as giving you the right to file a complaint against a financial institution just because you are unhappy with the investment outcome.
After all, investments always carry risks and the most basic step you should take is to understand what you are getting into and that you can lose money if markets turn. This is why Fidrec will not entertain claims from investors who are dissatisfied with the performance of investments they had bought willingly and through no fault of the vendors.
Similarly, complaints relating to standard commercial decisions and pricing policies, such as higher interest rates and fees, will not be entertained.
Small Businesses Eligibility - Like many retail investors, small businesses may not have the resources to take on banks and insurers over disputes involving day-to-day transactions. That Fidrec is proposing to hear claims from small businesses is welcome news for such entrepreneurs.
Fidrec wants to allow small businesses with an annual turnover up to $1 million to use its services. The move is expected to benefit more than 200,000 of such firms, especially when they face the following disputes:
Like safeguards to protect consumers, this business-friendly proposal will be applauded by smaller businesses as it is tantamount to giving them a much-needed David versus Goliath slingshot against bad and unfair practices of the big financial institutions.
In the wake of rising costs, it is truly heartening that public bodies like Fidrec are looking at ways to improve access to justice without any cost burden being imposed on people.
Together with the judiciary and the enforcement branch of the Government, this is why Singapore will continue to be the best and safest place to invest and do business, even for the man in the street.
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