Business

Thursday November 5, 2009

Plan for investor dispute mediation

By ERROL OH


PETALING JAYA: The capital market is set to get its version of the banking sector’s Financial Mediation Bureau (FMB). Once in place, this will be another avenue for retail investors to seek an end to disputes with intermediaries such as stockbrokers, unit trust companies, financial planners and investment advisers.

In coming up with this so-called alternative dispute resolution framework, the Securities Commission (SC) is consulting industry players as well as public interest groups such as the Minority Shareholder Watchdog Group and the Federation of Malaysian Consumer Associations.

The regulator is also drawing upon the experiences of Australia, Singapore, Britain and the FMB.

The need for such an initiative in Malaysia was highlighted in the Capital Market Masterplan, which was issued in February 2001.

The report said the efforts toward more effective enforcement should include “ensuring appropriate mechanisms for investor redress and dispute resolution that can minimise enforcement costs and delays”. The recent worldwide recession has injected some urgency into the matter.

“The global crisis demonstrates that one aspect for achieving greater investor protection and confidence is to provide a mechanism whereby investors’ grievances can be settled in an efficient, speedy and amicable manner,” said an SC spokesman.

“Our study shows that there exists a gap in redress mechanism available to investors in the capital market.”

The spokesman added that investors would normally try to first resolve their disputes directly with the intermediaries. The drawback here was that the investors might perceive the intermediaries as biased.

The investors cannot turn to the Malaysian Consumer Claims Tribunal because it excludes disputes relating to securities and futures transactions. Neither can they go to the FMB, which focuses on disputes relating to banking, insurance and payment transactions.

“The only other avenue that is an independent and transparent redress mechanism is through legal proceedings in the courts or arbitration process, which can be lengthy and costly for both the investor and intermediary,” said the SC spokesman.

The regulator said details for the alternative dispute resolution framework were being worked out with various industry groups in the capital market. Under the Capital Market and Services Act 2007, regulations may be issued to deal with dispute resolution between persons involved in capital market transactions.

“Once the review is completed, appropriate regulations and guidelines would be released by the SC,” said the spokesman.

The FMB describes itself as an independent body set up to help settle disputes between consumers and the financial services providers, who are its members.

These members include commercial banks, investment banks, Islamic banks, insurance companies, takaful operators, development financial institutions, and payment system operators and payment instrument issuers.

In its website, the bureau explains that mediation is a process by which the mediator helps both the complainant and the financial service provider to resolve the complaint by first investigating the complaint.

If the parties involved in the complaint cannot reach an amicable settlement, the mediator will make a decision based on the investigation, industry practices and the relevant applicable law. The FMB’s award or decision is binding on the institutions but not the complainant.

In Singapore, Britain and Australia, the organisations that mediate complaints relating to capital market transactions come under boards of directors that represent both industry and consumer interests.

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