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CONSUMER protection laws are designed to safeguard consumers and ensure they are not subjected to fraudulent or unethical practices by businesses. One such law in Malaysia is the Financial Consumer Services Act 2013, which aims to protect consumers from unfair or deceptive practices by financial institutions.
One issue that has received increased attention in recent years is “mis-selling” by banks selling investment products to its depositors. Mis-selling refers to the practice of selling financial products to consumers that are not suitable for their needs or financial situation, which can often result in significant financial losses.
Banks have been known to engage in mis-selling by aggressively pushing investment products such as mutual funds, stocks, and insurance policies to their depositors without adequately disclosing the risks involved.
The Financial Consumer Services Act (FCSA) seeks to address this issue by imposing strict requirements on financial institutions to ensure that they act in the best interests of their clients.
FCSA requires financial institutions to disclose information about their products and services in a clear and concise manner, to ensure that consumers can make informed decisions.
It also provides for the establishment of a dispute resolution mechanism to enable consumers to seek redress for grievances.
In addition, the Act requires financial institutions to obtain sufficient information about their clients’ financial situation and investment goals before recommending any investment product.
This is particularly important if customers do not have the same level of knowledge or experience as more seasoned investors.
The Act also provides consumers with greater protection in the event of a dispute. It establishes an independent dispute resolution mechanism that is fair and impartial to resolve complaints and disputes between consumers and financial institutions.
In addition to this, the FCSA provides for compensation for consumers who have suffered losses as a result of mis-selling. Financial institutions are required to establish complaint handling procedures that enable consumers to make complaints and seek redress. These procedures must be transparent and accessible, and financial institutions must take reasonable steps to resolve complaints in a timely and efficient manner.
The FCSA also provides for enforcement measures to be taken against financial institutions that engage in unfair and deceptive practices. This includes fines, penalties, and other sanctions that may be imposed by the regulator.
These measures are designed to deter financial institutions from engaging in practices that are harmful to consumers.
It is important to note, however, that consumer protection laws are only effective when they are enforced. Financial institutions that engage in mis-selling must be held accountable for their actions, and consumers must be empowered to seek redress when they are harmed. This requires a strong and effective regulatory framework, as well as consumer education and advocacy to ensure that consumers are aware of their rights and able to protect themselves.
The FCSA is an important piece of legislation that plays a vital role in protecting consumers in the financial sector.
It provides consumers with greater transparency and clarity in financial transactions, and ensures that they are not subject to unfair and deceptive practices.
The provisions of the Act relating to the mis-selling of investment products by banks are particularly important, as this is a problem that has affected many consumers in the past.
With the FCSA in place, consumers can have greater confidence in the financial sector and can be assured that their rights and interests are being protected.
- PROF DR ONG TZE SAN School of Business and Economics Universiti Putra Malaysia
MORAL policing related to dress codes at government offices has to stop, says a senior government backbencher.
The Chief Secretary to the Government should also issue civil servants updated instructions on the dress code at government offices, police station and hospitals, said M. Kulasegaran (PH-Ipoh Barat).
“There have been cases where people were stopped from lodging a report at the police station or even from getting (medical) treatment because of what they wore.
“I feel this is unacceptable in any multiracial country,” Kulasegaran told the Dewan Rakyat during committee stage debate of Budget 2023.
On March 10, The Star reported that a woman known as Khor Hooi Chin, 41, whose hemline was slightly above her knees, was denied entry into a government building by a staff member who told her that her attire did not comply with the dress code.
There have also been several other recent cases of women being denied entry to hospitals, police stations and government offices due to their attire.
“I hope a guideline will be issued to all to put an end to this moral policing,” Kulasegaran said.
Silicon Valley Bank was shut down on Friday morning by California regulators and was put in control of the U.S. Federal Deposit Insurance Corp..
In this photo illustration, Silvergate Capital Corporation
NEW YORK: Last Monday, the head of the Federal Deposit Insurance Corp (FDIC) warned a gathering of bankers in Washington about a US$620bil (RM2.8 trillion) risk lurking in the US financial system.
Last Friday, two banks had succumbed to it. Whether US regulators saw the dangers brewing early enough and took enough action before this week’s collapse of Silvergate Capital Corp and much larger SVB Financial Group is now teed up for a national debate.
SVB’s abrupt demise – the biggest in more than a decade – has left legions of Silicon Valley entrepreneurs in the lurch and livid.
In Washington, politicians are drawing up sides, with Biden administration officials expressing “full confidence” in regulators, even as some watchdogs race to review blueprints for handling past crises.
To his credit, FDIC chair Martin Gruenberg’s speech this week wasn’t the first time he expressed concern that banks’ balance sheets were freighted with low-interest bonds that had lost hundreds of billions of dollars in value amid the Federal Reserve’s rapid rate hikes.
That heightens the risk a bank might fail if withdrawals force it to sell those assets and realise losses.
But despite his concern, the toppling of two California lenders in the midst of a single workweek marked a stark contrast with the years after the 2008 financial crisis, when regulators including the FDIC tidily seized hundreds of failing banks, typically rolling up to their headquarters just after US trading closed on Fridays.
Even in the darkest moments of that era, authorities managed to intervene at Bear Stearns Cos and Lehman Brothers Holdings Inc. while markets were shut for the weekend.
In this case, watchdogs let cryptocurrency-friendly Silvergate limp into another workweek after it warned March 1 that mounting losses may undermine its viability. The bank ultimately said Wednesday it would shut down.
That same day, SVB signalled it needed to shore up its balance sheet, throwing fuel onto fears of a broader crisis.
A deposit run and the bank’s seizure followed. The KBW Bank Index of 24 big lenders suffered its worst week in three years, tumbling 16%.
“With Silvergate there was a little bit of a regulatory blind spot,” said Keith Noreika, who served as acting comptroller of the currency in 2017.
“Because they wound it down mid-week, everyone got a little spooked, thinking this is going to happen to others with similar funding mismatches.”
Representatives for the FDIC and Fed declined to comment.
The drama is already spurring arguments in Washington over the Dodd-Frank regulatory overhaul enacted after the 2008 crisis – as well as its partial rollback under President Donald Trump.
Trump eased oversight of small and regional lenders when he signed a far-reaching measure designed to lower their costs of complying with regulations.
A measure in May 2018 lifted the threshold for being considered systemically important – a label imposing requirements including annual stress testing – to US$250bil (RM1.1 trillion) in assets, up from US$50bil (RM226bil).
SVB had just crested US$50bi (RM226bil) at the time. By early 2022, it swelled to US$220bil (RM994.3bil), ultimately ranking as the 16th-largest US bank.
The lender achieved much of that meteoric growth by mopping up deposits from red-hot tech startups during the pandemic and plowing the money into debt securities in what turned out to be final stretch of rock-bottom rates.
As those ventures later burned through funding and drained their accounts, SVB racked up a US$1.8bil (RM8.1bil) after-tax loss for the first quarter, setting off panic.
“This is a real stress test for Dodd-Frank,” said Betsy Duke, a former Fed governor who later chaired Wells Fargo & Co’s board.
“How will the FDIC resolve the bank under Dodd-Frank requirements? Investors and depositors will be watching everything they do carefully and assessing their own risk of losing access to their funds.”
One thing that might help: SVB was required to have a “living will,” offering regulators a map for winding down operations.
“The confidential resolution plan is going to describe the potential buyers for the bank, the franchise components, the parts of the bank that are important to continue,” said Alexandra Barrage, a former senior FDIC official now at law firm Davis Wright Tremaine.
“Hopefully that resolution plan will aid the FDIC.”
The issues that upended both Silvergate and SVB, including their unusual concentration of deposits from certain types of clients, were “a perfect storm,” she said. That may limit how many other firms face trouble.
One complication is that the Fed has less room to help banks with liquidity, because it’s in the midst of trying to suck cash out of the financial system to fight inflation.
Another is that a generation of bankers and regulators at the helm weren’t in charge during the last period of steep interest-rate increases, raising the prospect they won’t anticipate developments as easily as their predecessors.
Indeed, even bank failures have been rare for a time. SVB’s was the first since 2020.
“We’re seeing the effects of decades of cheap money. Now we have rapidly rising rates,” said Noreika. “Banks haven’t had to worry about that in a long time.” — Bloomberg
It all seemed legitimate, she said, adding that all she wanted was to have a comfortable life in her twilight years.
But now, she wonders if she would ever see her money again.
“The company I invested in cited the pandemic as the reason for not paying dividends to investors.”
Lee was among 105 victims who lodged police reports against the company at the Sentul district police headquarters here yesterday.
Another victim, Siti, said she had invested RM300,000 in 2019 after she was promised 30% returns in one year.
She said that she felt assured when the agent cited names of VVIPs and prominent politicians.
“I did not know it was a scam because they showed me approval letters from government agencies.”By 2020, Siti still had not received any dividends.
“When I tried to follow up on this, the company did not even respond to my queries,” she added.
In view of the silence, Siti said she approached the Malaysia International Humanitarian Organisation (MHO) where she discovered others in the same situation.
Another victim, a Yemeni national, said he was approached by a “relationship manager” of a supposed bank.
“The relationship manager convinced me that it was a good and safe investment with 10% guaranteed returns,” he said, adding that he invested RM330,000 in the scheme which involved sukuk and seafood.
MHO secretary-general Datuk Hishamuddin Hashim said the victims were involved in five types of investments offered by a marketing management company.
He said they were lured into putting their money into supposed trust funds, shares, and sukuk, among others.
These investors were promised that they would get profits ranging from 15% to 24%, depending on their capital and investment period, he told reporters yesterday.
MHO advisor Tan Sri Musa Hassan suggested the government draft a law to deal with fraud including stock investments to prevent more people from becoming victims.
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