Warning from Japanese Financial Regulator

Shibuya Tokyo

Shibuya Tokyo

It looks like déjà vu all over again as the Financial Services Agency in Japan warns on the sale of complicated funds that charge high fees to clients who may not comprehend the potential risks.

After the financial crisis in 2008 the financial authorities across Asia worked hard to bring in new regulations and rules after thousands of investors, particularly in Singapore and Hong Kong lost massive amounts, in some cases life savings, via the eventual collapse of Lehman Brothers.

At that time many of the victims were elderly men and women who had trusted their financial advisers as they themselves did not understand the intricately constructed structured investments. In the aftermath of that debacle the victims claimed they were misled and mis-sold high risk credit derivatives.

Elderly Investors at Risk

In Tokyo the financial regulator has highlighted its concerns to Japanese financial institutions who are bundling assets into vehicles called layered funds or double decker funds, some of which are leaving investors with large losses, says a report in the Japan Times.

The alignment of elderly and wealthy investors looking for guaranteed returns just as a new array of attractive funds giving monthly dividends are selling well has shown up brightly as a danger sign on the radar of Japan’s SFA.

With domestic deposit rates in Japan at almost zero and with the majority of investors there being elderly and in many cases naïve when it comes to structured funds, the Japanese regulator is becoming extremely concerned that history may repeat itself.

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