$670,000 Loss: A Cautionary Tale

In this case study, there are two contentions here.  The first is that the investment banker, the client’s relationship manager, recommended an investment that was not through the bank, but in his own personal capacity.  In effect, this is contrary to MAS guidelines, and is disallowed.  The relationship manager was remiss in his advise.

The second is that the investor is not honest in his claims as well.  It is likely that he put his money there out of greed, the promise of a return of 8%, without considering the risk.  His claim that he signed the documents without reading them is also unlikely considering his instruction to the bank.  His claim that he had a low risk profile was further contradicted by his own investment history, and his decision to put money into a company, instead of an index of fund. 

For investors, there are two primary lessons here.  The first is to put in the effort to get a good financial advisor or relationship manager.  This requires a deep conversation, and some due diligence on their part.  The second is to consider the risk of every investment, and read the relevant financial documents before signing them. 

This is the article: Man's $670,000 Investment Loss a Cautionary Tale, dated 12^th September 2021. 

SINGAPORE - There are plenty of cautionary tales about mishaps in the financial world but few come with a price tag of $670,000 plus tens of thousands of dollars in legal fees.  This sorry saga began in 2017, when a bank customer, Mr. Andy Poh, plunged headlong into an investment on the recommendation of a bank relationship manager at UOB at the time. 

Mr. Poh sunk US$500,000 (S$670,000) into a British investment company to supposedly earn 7 to 8% of annual returns through its business of giving loans to big institutions.  He did not read the documents he signed but still invested in the company because he had relied on what bank relationship manager, Ashley Wong, supposedly told him - that the company PixelTrade would continue to do well and that Mr. Wong's own colleagues were allegedly also dealing with the firm. 

Mr. Poh viewed Mr. Wong as his friend as he had made substantial bond investments with the bank through his help and guidance.  But about a month after he completed his transfer of funds to PixelTrade, the Monetary Authority of Singapore put the company on its Investor Alert List in January 2018 to caution the public that it was not licensed to do business here.  Mr. Poh tried to recover his money but when this proved futile, he lodged a police report against PixelTrade in October that year.  Mr. Wong had resigned from UOB by then due to personal reasons. 

As it turned out, Mr. Wong had recommended the company to Mr. Poh on his own, without the bank's knowledge because PixelTrade products had nothing to do with UOB.  Mr. Poh tried to get back his money from PixelTrade, and Mr. Wong, who knew “the main person” at the company, helped to arrange a meeting.  That attempt also failed, so Mr. Poh asked UOB’s senior management “to find a way” to recover his hard-earned cash.  A UOB team met Mr. Poh to discuss the situation but no compensation was offered because the investment was not made with the bank; Mr. Poh had dealt with PixelTrade directly and signed its documents. 

Mr. Poh’s next step was to file a lawsuit, claiming that Mr. Wong had defrauded him by making various false representations about investing in PixelTrade.  But the suit was directed not at Mr. Wong, but UOB, on the basis that as it was Mr. Wong’s employer, it was liable for his alleged fraud.  Mr. Poh also claimed that UOB had been negligent in not protecting him against the loss of the money that he had transferred to PixelTrade.  But his case was dismissed by the High Court last year.  Mr. Poh appealed and the case was heard by two judges of the appellate court recently.  Their decision last month upheld the High Court ruling on the case. 

Mr. Poh’s main argument was that he was misled by Mr. Wong into thinking that PixelTrade was a UOB-approved investment, which was why he put in so much money.  When Judicial Commissioner Andre Maniam heard the case in the High Court, he found that Mr. Poh had failed to prove the manager had indeed said that, noting that he was no novice investor.  Just before he bought into PixelTrade, Mr. Poh had made four bond investments with UOB and he had to sign bank documents.  If PixelTrade were indeed a UOB investment, he would also have signed similar documents.  But in this case, he had signed PixelTrade’s own documents and transferred money to it and not to UOB. 

“Indeed, Mr. Poh’s case is contradicted by the documents which he received from UOB and PixelTrade, all of which he claimed he did not read even though he had signed them and returned the signed copies to UOB and PixelTrade,” noted the judge, adding that Mr. Poh was clearly negligent in “blindly” investing hundreds of thousands of dollars. 

“Mr. Poh says that if he knew the contents of the documents, he would not have signed them.  The short answer to that is: Mr. Poh should have read the documents, and if he did not agree with the contents, he should not have signed them,” the judge added.  Judicial Commissioner Maniam also noted other evidence that would have alerted Mr. Poh that PixelTrade was not a UOB investment - UOB sent him trade confirmations for his bond purchases but there was no such confirmation for his PixelTrade investment. 

During the trial, Mr. Poh said that he was very “risk-averse” and that he would not have bought into PixelTrade but for that fact that he was misled into thinking UOB was selling it.  But this was contradicted by his own investment record with UOB because he had signed documents on “understanding your investment decision”, and such documents stated that even the bonds that he bought were not risk-free.  For instance, his wealth planning document dated 04^th October 2017, stated: “I want to maximise my return.  I am comfortable with taking significant levels of fluctuation to the value of my investments, including the possibility of losing more than my initial investments.”  Mr. Poh said that he just signed documents whenever they were given to him without reading them, even though they warned customers not to sign if they did not understand the contents. 

The judge also looked at Mr. Poh’s police report against PixelTrade.  The report focused on the company and made no mention that Mr. Wong had deceived Mr. Poh into thinking his investment in PixelTrade was “UOB-approved or UOB-guaranteed”.  “If Mr. Wong had defrauded him, Mr. Poh would surely have told the police that,” noted the judge, who concluded that Mr. Poh had known all along that PixelTrade had nothing to do with UOB.  Judicial Commissioner Maniam said that as a frequent investor, Mr. Poh should have known that even bonds issued by banks or financial institutions were not risk-free.  “Indeed, Mr. Poh went on to purchase 10 more bonds from UOB, after he had been informed that his PixelTrade investment was not a UOB-approved investment product,” he noted.  “Those 10 bonds, like the first four he invested in, were neither risk-free nor guaranteed by UOB, but that did not deter him.” 

Mr. Poh’s claim that the bank was negligent in transferring his money to PixelTrade was dismissed as well, with the judge saying that the transfers were according to his instructions to UOB.  The bank had no duty to ensure that Mr. Poh did not lose money by investing in PixelTrade, simply because bank transfers were common transactions for many purposes.  “To take a simple example, if a customer remits money to buy gold, a bank is under no duty to check whether that is a good purchase or investment, let alone to reimburse the customer for any losses if the price of gold falls,” Judicial Commissioner Maniam ruled.