The Straits Times Editorial (2009-03-17): Now for a cultural revolution in bank selling

DRAFT proposals published by the Monetary Authority of Singapore (MAS) to regularise the sale of investment products are stringent, covering information disclosure and risk assessment for clients. The onus placed on financial institutions and their sales staff to observe operating regulations, on pain of legal sanction, could even impede growth of the fastest evolving segment of retail finance. But the safeguards are necessary - absolutely. The tightening will fulfil the express wish of investors, soured by the experience of investing in the dark, that banks and brokerages be made to discharge fully a vendor's responsibility to go with the scope for immense profitability in the investments which they design or spew out as associate parties to the product originators.

Last year's eruption of investor anger over product misrepresentation in all the main financial centres, East and West, showed that no one country's investors were more savvy or less so than others. They had operated under a collective misimpression that the range of structured notes, unit trusts and derivatives they bought (or had foisted on them) were 'suitable' and 'safe'. Singapore should yield to no jurisdiction in its regulatory zeal to deal with the risks posed by mis-selling of products and of their suitability for different categories of investors.

A word of caution: Regulatory cautions can be parsed or interpreted too broadly by vendors. As an example, the risks summary to give clients an overview of suitability, called the product highlights sheet, would be worthless if written in dense officialese or couched in generalities that provide little information. This is a big-print primer meant to be read and comprehended, not a small-print compliance meant to deter but taken as read. Caveat emptor, or 'buyer beware', never suffered a worse case of disrepute through the years of fine-print abuse in prospectuses. MAS must be on guard. The same principle should drive the product risk-rating and 'professional advice' that is to be given before 'complex instruments' are sold.

Properly implemented, the restrictions amount to fomenting a cultural revolution in the transparent way banks and brokerages will sell paper, and in how investors educate themselves and get educated in the intricacies of investing. No longer tolerated will be the old habit of bank staff cutting corners and using subterfuge to meet sales targets set by unreasonable management. It will take some time for the banks and their workers to develop a culture of responsible selling. The task cannot start soon enough.

The Straits Times Edotorial (2009-03-16): A way to contain China-US naval spats

CHINA-United States relations have hit a spot of turbulence again. Last week, five Chinese vessels shadowed and manoeuvred close to the USNS Impeccable, an unarmed ocean surveillance ship. The incident occurred 100km south of Hainan Island in the South China Sea. Beijing alleged that the Impeccable was conducting 'illegal surveying', a phrase understood to mean spying on Chinese submarines. Angry confrontations have occurred recently, but the incident is the worst dispute since China's detention of an American EP-3 spy plane and its crew in 2001.

Amid the flurry of protests from both sides, some perspective is called for. As an independent analysis points out, China maintains that the Impeccable's activities come under the marine scientific provisions of the United Nations Convention on the Law of the Sea (Unclos), which require consent from Beijing. However, the US argues that the Impeccable was undertaking hydrographic and military surveys, which do not require consent. Their contrasting views represent interpretative differences of Unclos. China's view emphasises its need to deny access to what it regards as its sphere of influence in the South China Sea. America's view is informed by its need to assert freedom of navigation on the high seas.

There is also American complicity involved. The US has signed but not ratified Unclos. Put differently, the US expects China - which has ratified the Convention - to adhere to legal standards America itself does not adhere to. A rhetorical question would be illustrative: Would American naval ships behave likewise if a Chinese surveillance ship sailed close to the nuclear submarine facility at King's Bay in Georgia?

There fundamentally is a need for the two nations to move beyond the recurrent nature of such disputes and craft a regime for managing future confrontations. With the People's Liberation Army Navy expanding its reach, some friction with the US Navy can be expected. The 1972 US-Soviet Incidents at Sea Agreement greatly reduced friction between the two navies. Incidentally there is a 1998 agreement between the US and China that established a consultation mechanism to strengthen military maritime safety. But as the Hainan incident showed, this agreement proved inadequate or both sides wanted to show who was tougher. If any good should come of the episode, it would be that the two powers will rush to design a Sino-American agreement similar to the 1972 US-Soviet one. That absent, it would not be smooth sailing for merchant shippers and military ships in the Asia-Pacific region.