Recently we come across cases of the “accredited investor” getting a rough deal with the unsecured bonds of Swiber. What is not known in these cases is whether the “Reverse Inquiry” trick was used as well.
What is a “Reverse Inquiry”?
“A method of initiating issuance of debt securities whereby an investor consults a broker/dealer and then the broker/dealer approaches an issuer with a proposal for a specific security issuance that will meet the investor’s needs. ”
In other words, the customer approaches the broker and makes a request to buy the bonds or other products. Normally, it is the salesperson who will make a pitch at roadshows etc. or telemarketing calls from the banks.
In the case of Swiber Bonds, clients may have heard about the bonds from their bank relationship managers (RM) or from their friends. Then when they approach the banks to inquire about such bonds, the bank usually makes them sign a form to declare that the purchase was done on a reverse inquiry.
The bank’s liability drops to nothing once this form is signed. Not that there was very much consumer protection to begin with. This is Singapore.
What I would like to highlight is that if the bank or other salesperson asks the customer to sign a Reverse Inquiry form when there was no such inquiry from the customer, then that is a breach of the law and the customer should record down the form, the salesperson’s particulars, and make a police report.
Long ago, I did make my one and only reverse inquiry to the bank to buy some technology unit trusts during the first Dot Com Boom. I bought at $3 and did not sell when the units went up to a high of $6.50. I was busy with work and thought the bank RM would advise me to sell. Later, she told me “It was not her job to advise me”. Now I know why.