SOME people think the Government should have regulated the whole financial sector better and prevented the sale of products like the Lehman-linked structured deposits which went bust after the collapse of Lehman Brothers.

Some think the state should now step in and investigate claims of 'mis-selling' of these products to elderly, untutored folk.

Others may just be investors trying to get some money back after an investment turned sour.

Whatever the responses, the ongoing saga over the Lehman-linked structured products highlights one thing: that between those who want financial transactions regulated, and those who say caveat emptor (buyer beware), lies a vast middle ground.

That middle ground is where consumer activism has a role.

It is now a ground amply filled by individuals like Mr Tan Kin Lian, the former CEO of NTUC Income, who has emerged as the champion of investors seeking redress after buying either Lehman Minibond Programme, DBS High Notes 5 or Merrill Lynch Jubilee Series 3 LinkEarner Notes.

Mr Tan is becoming a one-man consumers' watchdog for the financial industry. Just five months ago, he questioned his former company's decision to restructure bonus payouts to policyholders.

This time round, he organised a rally where 500 people turned up at Speakers' Corner to discuss solutions. A petition to the regulator, the Monetary Authority of Singapore (MAS), garnered nearly 1,000 signatures.

These efforts no doubt helped sustain the media spotlight on this issue - and put pressure on organisations involved to reach settlement quickly. Several banks selling the Lehman-linked products have agreed to compensate elderly, less-educated buyers and evaluate other claims.

Since the issue was reported on Sept16, the state regulator MAS has been active on this issue, ordering banks involved to appoint a third party to investigate claims of mis-selling - although anxious investors dub its response tardy and subdued.

The truth is that there is a limit to what MAS can do, beyond using its moral authority. So those asking for stiffer regulation of financial products may be barking up the wrong tree.

There was nothing financially wrong with the Lehman-linked products. The collapse of a respected institution like Lehman Brothers was nearly unthinkable. No regulation can safeguard against the the totally unexpected.

If there was mis-selling, then the banks themselves, the independent experts, or the Financial Industry Disputes Resolution Centre (Fidrec), will get involved.

At the same time, the laissez-faire position of caveat emptor does not do justice to the claims of elderly folk who say they were misled into parking their life savings in a too-risky product.

In between the hardline positions of ever more regulation and free-for-all in the financial sector, is a third way: that of consumer advocacy and activism.

When you buy a widget, say, a handbag or a shirt, you know what you are getting yourself in for. There is little need for a middleman to get involved.

Where products are complex, the average consumer may not have the capability to make an informed choice. The middleman can play a role to aggregate information, verify claims and provide an informed, impartial assessment.

The financial industry is replete with products too complex for the average consumer to grasp. Apart from investment products, health insurance offerings are another category of complex products which would benefit from the scrutiny of consumer advocate groups.

Nor would disclosure requirements make much difference as financial institutions can roll out reams of technical information that satisfy requirements, but end up confusing consumers even more. Yet the financial industry is also one where over-regulation stifles innovation.

This is the ground most fertile for consumer activism. And as the Lehman fallout shows, this is sorely underdeveloped in Singapore.

The main consumers' group, the Consumers Association of Singapore (Case), was active in pushing for financial services and products to be included under the Consumer Protection (Fair Trading) Act enacted in 2004. The law was revised just two months ago to cover precisely this.

It was also Case which, in 2002, raised the idea of having an ombudsman to investigate claims of misconduct in the financial industry. This led eventually to the setting up of Fidrec, which is, however, a dispute resolution body, not a consumers' advocate.

Case's silence on the Lehman saga, given its active interest in the financial industry, is thus deafening.

The Securities Investors Association of Singapore has spoken on the issue, but not played a leading role. It could justifiably say it represents securities investors, not purchasers of structured products. But then again, its stated objective includes educating investors on all types of investments.

Instead, the leaders in trying to resolve the issue have been the state - in the form of MAS - and individuals.

That Mr Tan's actions found broad support is a reminder to consumer groups that civic-minded individuals will step in to fill the role they cede.

Aided by the Internet, and the Speakers' Corner now being a permissible venue for free and large public gatherings without a permit, folk such as Mr Tan can easily publicise their intent and rally support.

Unless mainstream consumer groups review their modus operandi and their role, and react faster to breaking crises, they risk losing relevance.

This would be a pity, because there is a great deal of good that consumer activist groups can do - if they broaden their ambit and take a bolder stance.

In the financial industry, there is no shortage of associations formed by the financial institutions: of banks and insurance companies, for example.

But there is no equivalent group for consumers of financial products and services. If existing consumer bodies do not take up their cause for whatever reasons, investors have little recourse except to self-organise.

This may be an opportune time for disgruntled investors to get together and form the nucleus of a future consumers' advocate body for financial matters.

This article was first published in The Straits Times on October 24, 2008.