HIGH-risk investments can make or break an investor, especially during the current troubled times.
If the investor makes the decision to invest, but also expects his
bank's relationship manager to watch out for him, who should be blamed
if the investment turns bad?
This question was raised in the case of a 30-something Singaporean
investor who lost more than $180,000 in foreign exchange trades in just
three months.
John, who did not want his real name published, works as a technical consultant in an investment firm.
He claimed that he was not aware that he suffered so much in losses until it was too late.
The reason: He had trusted his bank's relationship manager and the
bank's services, and had relied on that to keep him posted on his
investment.
However, one investor coach we spoke to said that it can be hard to
pin blame on the relationship manager. The investor is responsible for
his investments. (See report on facing page.)
John said that every time before he made a transaction, he would call his relationship manager to check on his account balance.
On top of that, the bank would usually post a notice to him to let
him know how much he had made or lost in a particular transaction after
it was completed.
He would receive it in about a week.
However, it now appears that these were insufficient measures.
The coach investor we spoke to called such manual tracking 'primitive'.
But for John, this had worked well since 2006, when he started
investing in foreign exchange trading through his ABN AMRO wealth
management account.
He had set aside $50,000 of his savings to open his account. Over
time, he traded in higher amounts as his returns from each trade
increased.
Then, things started going wrong in August this year.
From August to October, John, who had hoped to get bigger returns
with the volatile markets, placed several trades of more than
US$100,000 ($149,000) each time in the US dollar and the Australian
dollar.
'I wasn't told'
On 15 Aug, he said that his trades made a US$129,000 loss, and John
is now claiming that he did not know about this until a month later.
He claimed he did not receive the weekly notice on that transaction,
and found out only in the monthly statement, which states the profits
and losses made during the month.
He also claimed that he had been calling his relationship manager
before he found out about the loss, but was not given the information
earlier.
He said: 'When I called, I wasn't informed of the losses. I presumed
that the profits from my other transactions had managed to cover my
losses. I was told there was still an excess in my account.'
This led him to mistakenly believe that he had more money in his account than he really had, John said.
After the loss in August, he placed another trade, which resulted in a US$190,000 loss on 19 Oct.
He said he knew the risks of forex trading, and he had a 'stop-loss level'.
'I had a buffer amount of losing no more than US$150,000,' he said.
'By neglecting to tell me that I had made such a huge loss, the bank
exposed me to a very risky situation and caused me to over-extend
myself.'
Affected behaviour
He said: 'If I had known I had to top up my account with US$129,000, I would have lowered my trading limit.
'What was the possibility that they missed out such a huge transaction? I even called them regularly to check.'
Frustrated, he wrote in to the bank demanding an answer.
He said the bank apologised for the error, but he was not satisfied.
When approached, a spokesman for ABN Amro said: 'As (part of) the
bank's policy, we do not comment on individual client matter due to
client confidentiality.
'We have taken the issues raised very seriously and conducted a thorough investigation and review.
'We believe that our current processes and the steps we have taken
are in line with market's best practices. We will continue to actively
address any further concerns the client may have.'
This article was taken from Singapore's The New Paper.
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Anne Chapman
Currency Analyst
