Hard to reclaim losses if you sign investment contracts without reading

Hard to reclaim losses if you sign investment contracts without reading

https://www.straitstimes.com/business/invest/hard-to-reclaim-losses-if-you-sign-investment-contracts-without-reading

2025-01-11

Tan Ooi Boon Invest Editor The Straits Times 

If you value your money, make sure you absolutely understand what you are investing in and read any contracts before signing on the dotted line.

Make a point of always checking the things that matter to you – if you want your capital sum to be protected, ensure that this guarantee is stated in the contract. It is also prudent to look at the conditions that could result in you losing part or all of your funds.

If you don’t read the documents, the law will not allow you to take advantage of your own negligence and carelessness to avoid the consequences of your action.

Here are two cautionary tales involving seasoned investors who lost money because they did not check their investment documents before signing.

Losing $18 million over eight years

This investor dabbled in the high-risk trade of foreign exchange (forex) and yet, when the chips were down, he sued the investment bank employees, claiming they pulled the wool over his eyes by hiding the steep losses.

But the High Court found it hard to believe that the wealthy businessman did not know what he was getting into and how his investments were faring, given that he received monthly updates on his account.

He also signed documents in both English and Chinese – not once, but eight times – during that period to certify that he was an “aggressive investor” who would take high risks for bigger profits. There were also transcripts of phone recordings showing that the bank’s managers had provided regular updates.

His forex trades included conversions of account deposits from one currency to another, drawing down the loan for investment purposes, and conversions of the loan from one currency to another. These trades were carried out by managers following telephone calls or text messages with him.

In early 2019, he complained to the bank, claiming he had realised only then that he had been suffering investment losses every year since he started trading in 2012.

He blamed the bank for causing and concealing the losses from him because its managers always told him that his accounts were profitable. He said he would have stopped approving such investments if he had been aware of the losses.

But the bank produced multiple documents signed by him since he started trading, stating that he was an investor with the then highest “level 5” risk rating. There were also telephone records proving that he did not raise any objection when the bank manager explained the risk profile to him.

The court noted that if the manager had wanted to manipulate the rating, he would not have highlighted this point to the customer in a telephone call that was recorded.

More On This Topic

Why not checking trading account for 3 years proved costly for investor

How a woman lost $200k after investing in complex financial product

Buying a non-bank product

In another case, a seasoned investor trusted his bank relationship manager so much that he put more than $600,000 into an investment without even checking or reading the documents that he signed.

As it turned out, the manager was doing an illegal side hustle by selling a dubious product from a foreign company that was flagged on the Monetary Authority of Singapore’s Investor Alert List.

Not surprisingly, the customer lost all his money in the dubious deal that promised 7 per cent to 8 per cent of annual returns through its business of extending loans to big institutions.

He lodged a police report and would certainly have had a case against the rogue manager, who later resigned from the bank.

But he chose to sue the bank instead by claiming that its then employee had caused him to lose the money.

However, he could not prove that the bank knew the employee was peddling the product illegally as this was clearly outside the scope of his work.

The seasoned investor himself did not find anything amiss when he signed different documents from the foreign company.

Just before he invested with the dubious company, he signed four bond investments with the bank. If the dubious deal had also been an investment from the bank, he would have signed similar documents too.

The High Court dismissed his claim, noting that he should have read the documents, and if he did not agree with the contents, he should not have signed them.

Bottom line: Never sign a document that you haven’t read.

More On This Topic

Why putting verbal agreements in writing can avoid disputes

Invest microsite: Get more investment and career tips