Follow us on Telegram for the latest updates: https://t.me/mothershipsg

[Editor's note, May 25, 3pm: An article detailing Tiger Brokers' response is published here.]

A Singaporean man allegedly lost S$15,000 after making a trade using online brokerage Tiger Brokers.

Kong Weng Hong, 29, told Mothership he sold about US$5,000 (S$6,976) worth of a US-listed penny stock in April 2022.

After the trades went through, he realised that he was charged settlement fees of about US$16,000 (S$22,187) -- more than three times the price of the stocks.

This fee had effectively put Kong in a US$11,000 (S$15,253) debt in his Tiger Brokers account.

Kong, who works as an account manager, claims that he was not sufficiently informed of the new settlement fee, which was enforced in January 2022.

He was also shocked that there was no cap on the fees, which far exceeded his trade value.

What happened

In April this year, Kong had put in some orders via Tiger Brokers to sell 5 million shares of a stock priced at US$0.001 each, which adds up to a total trade value of US$5,000.

The next morning, after his trades went through, he opened his Tiger Brokers account and was shocked to find his account in a US$11,000 deficit.

Upon investigating, he realised he was charged a settlement fee of US$0.003 per share.

This fee was three times the value of the share price.

“What really shocked me was that I was actually put into debt from transaction fees. I didn't do short selling, nor use leverage in these trades. Nobody believed me that I was put in debt solely from transaction fees,” Kong said.

Why no maximum cap on fees?

Kong said he was unaware of such fees, and later found that a “settlement fee” had been imposed on all U.S. stocks and ETFs.

This change had apparently come into effect on Jan. 13, 2022.

When Kong traded 500,000 shares of same stock in March 2021, he was only charged US$22.50 in platform fees, and was therefore shocked at how high his fees were when he traded the stock again in April this year.

When Kong approached Tiger Brokers about the fee, he received a staff reply saying that they had informed their customers of the revised rates in an email sent on Dec. 27, 2021.

Kong said neither the revised rates, nor a table displaying the new rates, were included in the email.

He claimed that Tiger had failed to sufficiently inform their customers of the changes.

He added that not having a maximum cap on the fees levied made little sense, especially if the transaction fees cost more than the share price itself, as this would mean an automatic loss if a person were to sell their shares.

Kong also pointed out that a maximum cap on the settlement fees was implemented for Tiger Brokers Australia and New Zealand, where the settlement fees would be capped at 7 per cent of the total trade value.

This cap was not implemented in Singapore, however, as Kong found out.

Kong said, "It totally doesn't make sense that the transaction fee will exceed the trade value. Who in the right mind will sell their shares if it puts them in debt instead?"

Kong also expressed concern over the interest his debt in his Tiger Brokers account is accruing.

Wrote to Tiger Brokers CEO

Kong has since escalated this issue to the CEO of Tiger Brokers Singapore, Eng Thiam Choon, and the Monetary Authority of Singapore (MAS).

Upon reviewing his case, Tiger Brokers informed Kong on Apr. 29 that they would be unable to waive the approximately US$16,000 in settlement fees, and offered a "token sum" of S$50, via a stock voucher.

"Prior to changes in any transaction fee, valued customers like yourself should have been notified with ample notice. Transaction fees are also published on our official website for reference," Tiger Brokers wrote in the same email to Kong, which Mothership has seen.

Tiger Brokers had also explained to Kong in another email on Apr. 27 that the settlement fee and trading activity fee were both "regular fees" for U.S. stock trading.

It added that during their campaign period, the settlement fees were subsidised by Tiger for their clients.

It also added that Tiger Brokers Australia and New Zealand, while under the same group, are separate business entities, which may explain the difference in charges.

Tiger Brokers implements cap on settlement fees, will refund affected clients

On May 18, Tiger Brokers informed its clients it would be imposing a cap on the settlement fee with effect from May 19.

The fee will be capped at 7 per cent of the trade value.

It added that it will be contacting clients who were previously affected by the change in settlement fees to arrange for refunds.

Kong was contacted by Tiger Brokers on May 19 to arrange a refund of the fees, in line with the new cap on settlement fees.

With the new cap, the fees for the trades he took in April is now US$511.50 (S$705). He will receive a refund of US$15,675.50 (S$21,598).

Kong had this to say about his ordeal, "I'm pretty disappointed with [Tiger Brokers] and I might not use the platform again."

"If they really cared about their customers, they would have investigated properly from the start on whether these fees made sense and if the fees, with no cap, were even legal. If I didn’t get MAS and the press involved, how many people would have fallen prey and would they have refunded me my money?"

Mothership has reached out to Tiger Brokers for comment.

Follow and listen to our podcast here

Top photos via Unsplash and Tiger Brokers/FB