TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
Comments
R Sivanithy
18 November 2014
The Securities Investors Association of Singapore (SIAS) has hit one nail on the head with its call to revamp the way that remisiers, or retail trading representatives (TRs), are paid. This is a fundamental consideration - one that we have raised before in this Hock Lock Siew column such as “Vital to engage retail brokers too” (Aug 3, 2012) and “SGX should seriously meet retail needs” (Feb 19, 2014) - but has not been addressed.
Equally important, however, is that TRs today find themselves caught between a proverbial rock and a hard place - on the one hand, they are told that they have to reinvent themselves to meet the challenges posed by deregulation, the Internet and a retail body that demands more value for their money yet on the other hand, no one really has a clear idea of how this reinvention is to be best undertaken. Worse, the rules appear to be working against TRs trying to expand their role as plain order takers.
The problem is that under the Securities and Futures Act, TRs are barred from offering investment advice, even though they have to sit for exams to trade or execute trades in complex instruments known as Specified Investment Products or SIPs.
Yet every circular to shareholders carries the following in the heading: “If you are in any doubt as to the action you should take, you should consult your stockbroker, bank manager, accountant, solicitor or other professional adviser immediately”, conveying the impression that TRs are able to offer financial advice when they cannot.
Or can they? Nobody knows with 100 per cent certainty - some TRs believe they can provide an opinion but only when asked; others think that they are prohibited from saying anything under any circumstances. Given the confusion on can and cannot be said, the vast majority opt for safety and say nothing because of fear of breaching the rules.
A vicious circle then kicks in - TRs are afraid to speak for fear of breaching the rules; this alienates clients who feel they are not getting any help from the TR community and this leads these investors to scale back on their trading. Falling retail business then encourages TRs to trade on their own to supplement lost income and because TRs then become more occupied with managing their own portfolios, clients receive progressively less input and aid than before.
This means that any remuneration scheme that attempts to link TR pay to the performance of clients’ portfolios cannot be properly effective since TRs are at the very least forbidden to have any meaningful input when discussing investment options with clients. As one TR put it, “all I can do when asked whether to buy or sell is offer to email them my house’s latest research”.
If TRs are to have their pay tied to the performance of their clients’ portfolios - or linked to clients’ interests - then it is necessary to relax the rules to grant TRs more leeway when talking to their customers. These are investment professionals who are literally the eyes and ears of the market and they should be allowed to share their observations and opinions with clients.
There should also be greater clarity about what can and cannot be discussed between TR and client. More precise guidelines on this point are crucial and would be welcomed by all in the community.
As for TR compensation, the fact is that pay has dropped sharply over the past decade - commissions are about 70-80 per cent down from the one per cent that used to be the norm, and volume over the past six months is half what it was this time last year.
Yet TRs have to still wear the same hat as they always have - they are essentially credit officers who keep check on their clients’ limits and shield their broking houses from risk, a thankless task since they have to do this without access to their clients’ income or spending habits.