An analysis and comparative study of the local remedies available to wronged investors

Abstract

The thesis examines the availability of alternative measures to litigation for wronged investors within the financial service sector. As in all aspects of human life disputes arise, and in the securities markets disputes might involve huge sums of monies, which sometimes represent a large portion of a retail investor’s life savings. Unfortunate occurrences involving fraud and manipulation of investors have become rife within the industry. On other occasions an entity might become unable to honour its obligations towards its clients for financial reasons independent of fraud or other criminal acts. At this point in time what becomes crucial from the concept of investor protection are the statutory remedies available to those investors. The commonest remedy that first comes to mind is litigation, however there are alternative measures within the financial services sector which have been established for the purpose of providing an effective alternative to the lengthy and expensive court proceedings. The focus of this thesis has been the analysis and comparison of such alternative remedies. The first chapter is dedicated to the introduction of the financial sector from a psychological perspective noting that the human factor presented by the financial service providers participating in the market place is a reality and a risk on the market as a whole which investors need to consider prior to investing. It ends with an introduction to alternative dispute resolution measures. The second chapter is focused on the alternative remedies established locally, mainly the Consumer Complaints Manager, the recent Arbiter for Financial Services, the Investor Compensation Scheme and the Depositor Compensation Scheme. The third chapter shifts the discussion on the alternative remedies present in other jurisdictions and allows the comparison of such models to the local scenario. The fourth chapter is dedicated to analysing the local remedies from a practical perspective. This has proven to be more challenging than expected in view of the fact that the Investor Compensation Scheme and the Depositor Compensation Scheme have only been applied once, respectively. In conclusion the local alternative remedies seem to be quite robust. The thesis closes off with possible reforms that might improve the local legislation establishing these remedies, as well as their effectiveness from a practical perspective.