This morning, I woke up to the best news I have heard in more than a year. See HERE.
Indemnity commissions are being banned in Hong Kong. Indemnity commissions are a form of illegal bribery. It is the system by which 5 years or even 25 years worth of commissions are paid to advisers instantaneously (historically done in secret). It is the system by which insurance companies use deceptive fee structures to illegally defraud investors out of their first 1.5 to 2 years of savings in order to recoup illegal indemnity commissions paid to advisers.
Banning indemnity commissions means no more ILAS savings scams (i.e., contractual savings plans). It means companies that earn a significant percent of their revenue from selling these scams, such as Convoy Financial Services, are likely to collapse. (Click HERE to see Convoy’s stock price.)
This means Hong Kong regulators are finally starting to work for the people. (Great job! I know you are reading!)
This means there is hope that the millions of people who have been sold a savings scam could get their stolen money back. Regulators are implicitly admitting that savings scams are literally a scam. If regulators do not intervene on behalf of defrauded investors, then, when a class action lawsuit is finally launched against some of these big foreign insurance companies (perhaps in their home country), a judge won’t be able to ignore the message that HK regulators are now sending. I believe he or she will be more inclined to rule in favor of the victims.
Hong Kong’s actions could and should create a snowball effect, by which country after country starts explicitly outlawing indemnity commissions, and hopefully all commissions, just like the UK. I believe Singapore will be next, and I personally aim to do something about it. (MAS, I know you are reading. Get ready.)
6 months ago, I promised an article on why ILAS savings scams violate Section 16A of the Theft Ordinance, which deals with fraud, a crime punishable by up to 14 years imprisonment. That article will be coming soon.