Search

COMMENTARY
FINANCIAL SERVICES | Contributed Content, Singapore
Published: 21 Jan 11
2661 views


Is FIDReC fair?

Consumers depend on Fidrec, the Financial Industry Disputes Resolution Centre, and its job is to mediate disputes between customers and financial institutions.

But is it fair?

Fidrec is somewhat of a monopoly since consumers with a financial dispute have almost nowhere else to turn. The Small Claims Tribunal does not hear financial cases. One can take a case to the courts -- even after losing at Fidrec – but it’s expensive. Costs can easily exceed the damages sought. Contrary to popular perception, Fidrec is not a government body. It is a limited liability company, registered in 2005 and listing over 400 “subscribers” on its web site. All are financial institutions like banks, brokers, insurers and financial planners. Most prominent are the 130 banks.

Fidrec hires, fires and reviews the performance of its adjudicators. It also pays their salaries, which come primarily from the financial institutions. They provided start-up capital and pay $500 per case, while plaintiffs must pay only $50.

On the one hand, the lower cost benefits small investors. On the other hand, it may hurt them as well since Fidrec relies on the financial institutions -- who are defendants -- for its financial survival. Does this introduce a subtle bias at Fidrec in favour of the hand that feeds it?

Some of the adjudicators are retired judges and Fidrec’s web site shows that most who heard structured product cases are from big law firms.

Lamb vs wolf negotiations
How many of these law firms have financial institutions as clients or potential clients? How many if any have excused themselves because of actual or potential conflicts? These key questions have never been addressed.

Fidrec’s most well-known cases involved structured products like Lehman Brothers’ Minibonds and DBS’s High Notes 5. Those and all other cases require that plaintiffs make an effort to resolve their complaint with the financial institution before bringing it to Fidrec. It sounds reasonable but presents two problems:

First, it is unusual for a plaintiff to turn over all his evidence to the defendant and get nothing in return. The financial institutions can use the evidence against the plaintiff if the case eventually goes to Fidrec or the courts.

Second, a financial institution, like a bank, would receive a complaint from a customer and then review the customer’s file. It would look at the bank’s total relation with the customer including loans, deposits, investments and the length of time they have been a customer.

If it’s a highly profitable relationship, the bank may find it worthwhile to offer a generous settlement to keep the client. If it’s not, the plaintiff has less bargaining power and may receive less compensation, if any. This makes sense from the bank’s perspective. From the client’s point of view, it could help or hurt but it has nothing to do with the merits of the case. It favours the rich and well connected. It hurts the less affluent.

A second problem is consistency. Courts, for example, are transparent. In contrast, Fidrec requires that its plaintiffs sign a declaration not to disclose anything about the case’s proceedings or its outcome.

Other arbitration cases (non-Fidrec) may have non-disclose clauses, but these are agreed to by both sides. They are not gag orders imposed by an arbitrator, which happens to be a private limited company owned by the defendant. Common law relies on precedents for fairness and consistency. They make it likely that similar cases will be settled similarly. It is hard to establish precedents, however, without knowing the outcomes of cases and no Fidrec case is publicly available.

Defendants are large financial institutions with a legal staff and a history of how similar cases were adjudicated or settled by their own firm.

It is a powerful advantage and gives the financial institution at least a partial history of precedents plus expert advice on how to interpret them.

 

Larry Haverkamp, Finanicial columnist and adjunct faculty in Finance, Economics and Statistics at SMU
 

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.



Sign up for our newsletter

 

Do you know more about this story? Contact us anonymously through this link.

Click here to learn about advertising, content sponsorship, events & rountables, custom media solutions, whitepaper writing, sales leads or eDM opportunities with us.

To get a media kit and information on advertising or sponsoring click here.

Tags: is FIDReC fair, Financial Industry Disputes Resolution Centre, financial dispute

LATEST FINANCIAL SERVICES JOBS »
PRINT ISSUE »

Subscribe Now
Trains, planes, automobiles and drones

118 views

As goes Hong Kong, so goes Singapore?

978 views

Office property shows no signs of a slowdown

255 views

MOST READ EXCLUSIVES

Singapore’s 20 hotels with most expensive buffet lunches

Singapore’s 20 hotels with most expensive buffet lunches

What is for lunch?

by KRISANA GALLEZO
6 Jun 2014 | 165057 views
 

Singapore’s 20 most expensive hotel suites

Singapore’s 20 most expensive hotel suites

Guess which tops the list at S$20,000 a night.

by KRISANA GALLEZO
30 May 2014 | 139834 views

Singapore’s 18 MBA programmes under $30,000

Singapore’s 18 MBA programmes under $30,000

The cheapest is at SGD15,000.

by KRISANA GALLEZO
17 Jun 2014 | 101899 views
 

10 hottest ad execs and marketers under 40

10 hottest ad execs and marketers under 40

Find out who made it to the list.

by KRISANA GALLEZO
14 May 2014 | 79388 views

Singapore’s 10 most expensive MBA Programmes

Singapore’s 10 most expensive MBA Programmes

The costliest is being offered at over $100,000.

by KRISANA GALLEZO
26 Jun 2014 | 77503 views
 

Singapore’s 10 hottest 40 and under restaurateurs

Singapore’s 10 hottest 40 and under restaurateurs

The list includes a restaurateur as young as 27.

by KRISANA GALLEZO
3 Jul 2014 | 36484 views

Singapore's 7 hot new restaurants in May

Singapore\'s 7 hot new restaurants in May

Have you tried them all?

by KRISANA GALLEZO
5 Jun 2014 | 21890 views
 

Singapore’s 8 hot new restaurants in June

Singapore’s 8 hot new restaurants in June

Have you dropped by to check them out?

by KRISANA GALLEZO
3 Jul 2014 | 20623 views

Korea’s Yoogane to open second outlet in Singapore

Korea’s Yoogane to open second outlet in Singapore

More outlets are soon to come.

by KRISANA GALLEZO
29 May 2014 | 15014 views
 

Pratt & Whitney Singapore office makes you feel like you’re in the outer space

Pratt & Whitney Singapore office makes you feel like you’re in the outer space

Take a sneak peek.

by KRISANA GALLEZO
25 Jun 2014 | 12577 views

Towers Watson Singapore’s Spa Room allows staff to regenerate during lazy hours

Towers Watson Singapore’s Spa Room allows staff to regenerate during lazy hours

Also, check out awesome photos of redesigned meeting rooms and clubhouse.

by KRISANA GALLEZO
9 Jul 2014 | 9577 views
 

Taiwan’s Sufood hit Singapore

Taiwan’s Sufood hit Singapore

Eight more outlets coming in five years.

by KRISANA GALLEZO
12 Jun 2014 | 6766 views

Find out how 3 young men at 20s founded a startup

Find out how 3 young men at 20s founded a startup

At 21, they built a job portal to help young people find their jobs.

by KRISANA GALLEZO
10 Jul 2014 | 3161 views
 

What 3 market leaders can tell you about price comparison sites in Singapore

What 3 market leaders can tell you about price comparison sites in Singapore

Financial price comparison sites face lack of consumer’s confidence.

by KRISANA GALLEZO
10 Jul 2014 | 2822 views

Singapore startup builds world’s first crowdpricing platform

Singapore startup builds world’s first crowdpricing platform

Here’s how you could end up paying less.

by KRISANA GALLEZO
29 May 2014 | 1461 views
 

RIP Tiger Mandala: What carrier is next to die?

RIP Tiger Mandala: What carrier is next to die?

See why Singapore based carriers are the least advantaged.

by KRISANA GALLEZO
27 Jun 2014 | 1452 views

Meet the man who wants to change mobile networking in Singapore

Meet the man who wants to change mobile networking in Singapore

It’s all about ‘the art of click'.

by STAFF REPORTER
7 May 2014 | 1435 views
 

I bet you’ll cry after watching this: Singaporeans say ‘thank you’ to migrant workers

I bet you’ll cry after watching this: Singaporeans say ‘thank you’ to migrant workers

It has been viewed and shared nearly 425,000 times.

by KRISANA GALLEZO
27 Jun 2014 | 1393 views

Singpost acquires Store House in Hong Kong for $12.2m

Singpost acquires Store House in Hong Kong for $12.2m

Here's how management compares HK's self storage market with Singapore's.

by KRISANA GALLEZO
11 Jul 2014 | 1215 views
 

Might as well say, what the :pluck?

Might as well say, what the :pluck?

Ann Siang Hill and Club Street welcome a new 45-seat dining enclave.

by KRISANA GALLEZO
26 Jun 2014 | 1183 views

KepLand in the spotlight: After Equity Plaza, what's next to sell?

KepLand in the spotlight: After Equity Plaza, what\'s next to sell?

Keppel Land determined to hold its stake in MBFC Tower 3.

by KRISANA GALLEZO
26 Jun 2014 | 1134 views
 

See how 99.co plans to pacify exasperated house-hunters in Singapore

See how 99.co plans to pacify exasperated house-hunters in Singapore

Tired of bogus listings?

by CARMINA JARIEL
22 May 2014 | 1126 views

Take a tour at Potato Head Folk’s whimsical dining enclave

Take a tour at Potato Head Folk’s whimsical dining enclave

Murals on the walls inspired by 1930s children’s books are fascinating.

by KRISANA GALLEZO
10 Jul 2014 | 996 views
 

Experience in 3D how your neighborhood will look like if sea levels rise

Experience in 3D how your neighborhood will look like if sea levels rise

This site is hitting almost a million unique visitors already.

by KRISANA GALLEZO
13 Jun 2014 | 990 views

Check out this WhatsApp like program for online chatting

Check out this WhatsApp like program for online chatting

This startup is on its final stages of closing $500,000 fund.

by KRISANA GALLEZO
19 Jun 2014 | 870 views
 

NUS alumni launch Singapore’s first business-sourcing platform

NUS alumni launch Singapore’s first business-sourcing platform

Its total seed funding now exceeded $100,000.

by KRISANA GALLEZO
26 Jun 2014 | 832 views

Check how this campaign compelled many Singaporeans to quit smoking

Check how this campaign compelled many Singaporeans to quit smoking

It claims of reversing five-year upward trend in smoking.

by KRISANA GALLEZO
20 Jun 2014 | 776 views
 

Get a taste of this new food hub offering in-house brewed beer

Get a taste of this new food hub offering in-house brewed beer

See how a game developer and an aircraft engineer pursue their passion for cooking.

by KRISANA GALLEZO
19 Jun 2014 | 707 views

Meet the man behind homegrown K.G. Tan & Co. PAC

Meet the man behind homegrown K.G. Tan & Co. PAC

The rest is history after he founded the firm in 2006.

by KRISANA GALLEZO
25 Jun 2014 | 686 views
 

AdHocSpace creates first short-term space booking portal in Asia

AdHocSpace creates first short-term space booking portal in Asia

Will it become the AirBnB for short-term commercial space rental?

by KRISANA GALLEZO
12 Jun 2014 | 609 views
close Don't Show Again

STAY INFORMED! Get our free weekly newsletter