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Should you need to dispute a banking or investment matter because of a failure by a financial institution, where might you turn to for help?

Most of us rely on our banks, stockbroking firms and unit trust management companies (UTMCs), and their associated relationship managers, remisiers and unit trust consultants (UTCs), to do their jobs well and thus help us function and succeed economically.

Furthermore, since we take for granted the smooth running of our banking system and our capital market because they have been around all our lives and usually work flawlessly, we should expand our perspective and remember their contributions to the hurtling rates of human advancement in the century since World War 1 ended in 1918.

As the co-winner of the 2013 Nobel Memorial Prize in Economic Science Robert J. Shiller explained in his 2012 book ‘Finance and the Good Society’:

“At its broadest level, finance is the science of goal architecture – of the structuring of the economic arrangements necessary to achieve a set of goals and of the stewardship of the assets needed for that achievement... Once an objective has been specified – such as payment for a college education, a couple’s comfortable retirement, the opening of a restaurant, the addition of a new wing on a hospital, the creation of a social security system, or a trip to the moon – the parties involved need the right financial tools, and often expert guidance, to help achieve the goal. In this sense, finance is analogous to engineering.”

Hold Shiller’s thought as I ask: Have you ever noticed that while our cars, elevators, smartphones, tunnels and bridges work most of the time, occasionally things go wrong?

If they do so through normal wear and tear, we shrug off the glitch, wait for an engineering fix and then get on with life. But if they fail because of greed, malice or incompetence, then legal redress is justified.

In finance, the Latin term ‘caveat emptor’ (‘let the buyer beware’) guides us to behave as civilised adults and thus take personal responsibility for our purchasing decisions. However, there are (very, very) rare instances when through no fault of our own, a bank or broking firm or UTMC drops the ball, perhaps because of bad systems, employees or agents.

WHO TO TURN TO

In Malaysia the rigorous and ever rising standards of our two financial regulators, Bank Negara Malaysia (BNM) and the Securities Commission (SC), are why we have few instances of deep failure.

However, should you or a friend have a genuine problem with a bank or insurance company pertaining to non-investment matters that don’t impinge on the capital (meaning the equities and fixed income) market, then head to the OFS or Ombudsman for Financial Services at www.ofs.org.my/en/.

Its old name was the FMB or Financial Mediation Bureau. (I like the fancy word ‘ombudsman’ – which means an official or body legally responsible for investigating complaints against a company or a public organisation.)

Conversely, for disputes involving the capital market, go to SIDREC, the Securities Industry Dispute Resolution Center, instead. But realise such matters do not cover losses incurred in appropriate risk-on investments because markets rise and fall all the time, which is simply par for the course.

However, if a malicious agent (a UTC, say) of a UTMC collects cash (which is not allowed) from an investor who believes he or she is investing in an authorised investment (fund) of that UTMC, and if that rogue UTC then issues a fake receipt and pockets the investor’s money, there may be some grounds for action and redress. Thankfully, such a case is rare in the tightly regulated Malaysian unit trust industry.

Should it occur, though, SIDREC may be able to help if the disputed sum is RM250,000 or less, or if the sum is larger but the allegedly wronged party is willing to cap his or her claim at RM250,000.

A less favourable scenario might involve a customer of a broking company who – contrary to terms of use – unwisely tells someone else his or her password for online trading, which leads to trading losses in the customer’s account. In such a case, the broking firm may lean on the valid legal defence that all trading statements were sent to the actual account owner, who should have checked them and quickly alerted the broker.

COMMENDABLE ORGANISATIONS

SIDREC’s job is to assess both sides of such matters through impartial mediation. If that informal process doesn’t work then escalation to a more formal adjudication process can be initiated.

SIDREC has a brief video (under 200 seconds) on its Animated Process Flow; watch it at sidrec.com.my/dispute-resolution/ and take notes. If you have family or friends who perceive themselves unfairly treated by a capital market FI, urge them to read this column and watch SIDREC’s video. (To reach SIDREC on an investment dispute, call 03 2282 2280, or email [email protected])

I’ve met SIDREC’s impressive CEO Sujatha Sekhar Naik twice at professional conferences. Both times I’ve picked up on her passion to help people looking for ways to redress investment woes, excluding normal market losses. Quite frankly, as my four previous columns have been on kleptocracy and 1MDB, I wanted this week’s piece to focus on commendable organisations like the OFS and SIDREC that exist to help, not hurt, the Malaysian rakyat.

© 2018 Rajen Devadason

Rajen Devadason, CFP, is a Licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at https://www.linkedin.com/in/rajendevadason, or via [email protected] You may follow him on Twitter @RajenDevadason

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