A Study on the Process Management of the Launch and Sell of Financial Instruments by Compliance Program -Taking the Sell of Structured Notes in Taiwan’s Banks for Example

Lehman Brothers Holdings Inc. declared its bankruptcy in September, 2008. More than fifty Structured Notes issued by or related to Lehman Brothers had been selling in Taiwan. Around fifty thousand people bought those finacial products which amounted to NT$ eighty billion. There were a lot of disputes and social problems come out from these investment cases.

This thesis finds many problems arisen on the background that Taiwan’s banks tried to modify their core business from deposit & loan to other new businesses like wealth management due to the low interest spread since Year 2000 and high credit risk of credit/cash card business. However, most of Taiwan’s banks had limit experiences on wealth managemen business then. In addition, regulatory requirements and banks’ internal guidelines seemed not sufficient on many aspects such as KYC operations, suitability principles, information disclosure and personnel training. These issues brought a huge amount of controversy and damaged Taiwan bank enterprise.

This thesis takes a certain Taiwan’s bank for example. It is found that legal compliance program and PDCA cycle are helpful for managing the process of the launch and sell of financial instruments in wealth management business, for example, to buid up a special committee and process for reviewing the features of financial products, to classify the products and customers with their risks, to make SOPs for KYC and suitability. Besides, it’s also very important to provide the financial planners/consultants with the sufficient training courses and to reschedule their conpemsation and sarlary. This thesis also finds that those improvements did help the bank on lowering the dispute rate, increasing the income and rebuild the bank’s reputation. The bank got No. one ranking on a title of a research which is hosted by a famous magazine and an academic institute. On the last chapter, the thesis brings up three conclusion and three suggestions and hope those ideas can help the wealth management business of Taiwan’s banks.