Two months ago, the New York State Attorney took action against several financial institutions for marketing the "auction rate securities" to retail investors on the representation that they are liquid investments and can be redeemed at any time. The financial institions had to buy back these securities at no loss to the investors.
I hope that the Monetary Authority of Singapore or the Attorney General can take similar action on behalf of retail investors who had been misled into investing in the Mini-Bonds and similar structured products by their bank's relationship managers in the belief that these investments are safe.
It is time to hold the financial institutions accountable for their mis-selling activities and for our regulators to be pro-active.
I bet MAS won't do that. Singapore laws are and will be pro-business, pro-rich, pro-FT and not pro-ordinary local folks. That's why "talent", capital and investment flows readily here and with high economic growth and as a financial or what-not hub. Never mind wide income gap or nothing much or even suffering for ordinary folks. Just ensure many election walkovers, strong mandate and no by-elections. If I were the PAP, I would have done the same. Haha!
ReplyDeleteDear Mr. Tah Kin Lian
ReplyDeleteI am not a risk taker. Recently I was convinced by fund manager(hong leong) to put my money in mini bond series 9.
On that, I invested $150,000 and I do not know how this lehman brothers involved in this series9. I was told by her it only based on 6 baskets which I found ok. Now, I wish to know what I do or I deal with it. Will I be getting any some money or nothing. Please advise. SAD.....
Melvin Ng.
Mr. Tan , MAS has conflict of interest.
ReplyDeleteThey are not serious about fair dealing for consumers. They are only interested in the growth of the industry. They are not interested how bank consultants and RMs conduct the activities.
They are not interested how the insurance agents conduct their sales.
They always said that compliance is best left to the financial institutions..The question is how stringently is compliance applied.
I know they are for show and for specific audit at company level.
Banks and insurance companies don't shoot their own foot.
The current market debacle is the result of lackadaisical regulation.
Pualson has recongnised the need for stricter regulation at every level.
Did you know the subprime problem was also and really caused by loan salesmen who cheated the lenders (Banks). They gave loans to any tom dick and harry and vagrants too all because of commissions.Like insurance agents they are the first line of underwriters. There was no proper conduct of practice. Of course the lenders suffered but the rest of the worlds suffered too becuase of loans being resold in packages as CDOs and etc.
This may happen to Singapore if the MAS keeps defending the players.
The consumers are getting rotten bad deals from banks and insurance companies through their greedy intermediaries. The conduct of these intermediaries are very much below required standard and almost like day light robberies like insurance agents being allowed to operate like highway robbers at roadshows robbing passers by.
At company level a lot of complicated and DUBIOUS products are being rolled every now and then.They use the greedy agents and consultants who have no conscience at all to cheat, to lie, to cover up, to mislead, to confuse and misrepresent to the consumers before robbing them under their nose.
It serves you well to avoid agents with mdrt or cot titles;to avoid wholeife products and endowment; to avoid structured products and all those products with exotic names;to avoid bank presentation by bank RM.
Surely, the consumers have found out what rotten deals whole life and endowment products give. AIA may have the worst return and so are the other companies...If you pay a lot to the agents and companies but do you expect of the result.. Return depends on costs.
Low cost means higher return. High cost means lower return.Portfolio management is bullshit. It is no brainer asset allocation . You sit and wait type.
these so called mini-bonds are effectively hidden credit-default-swaps.. the instrument that brought AIG to their knees.. even aig a sofisticated insurer (with a glut of brains) misjudged the risk, how abt the general public??.. besides, financial engineering textbooks is simply intellectual fraud.. the world does not function according to the assumptions phd's made for their thesis..
ReplyDeleteordinary citizens was sold on the premise it was a safe bond, but its not.. effectively, the investor has become an insurer of the credit of the reference companies in return for 2% more interest.. the public should never sell insurance becoz they cant evaluate the risks, and they, evidently cant rely on marketing-banks or credit-rating to do it for them...
MAS must take action now... we cant always rely on the market to decide (greenspan's favourite excuse for sitting on his butt during his age of bubbles)..
I wrote to MAS regarding our deposits and investments with Banks on 21st July this year but received no reply. I just want to know why so little protection is given to customers who put and place their money in deposits and investments in local banks. Maybe, this is an insignificant question and I am not
ReplyDeletesupposed to be attended.
At least, whenever I write to you Mr Tan, I can get a short and sweet reply.
Dear Mr Tan,
ReplyDeleteSince this financial disaster blew up, I've searching the net for the components banks in the DBS High Notes 2 & 5.
The DBS website behaves as if nothing has happen. They don't have a prospectus online and I don't have my copy with me as I'm working overseas. They also don't answer their e-mails.
Can you please help by telling me where I can find these details. I know so fat that the DBS High Notes 5 have Goldman Sachs, Morgan Stanley, Merrill Lynch, Macquarie and Lehman Brothers. Can't get anymore details.
Appreciate you help and advice at this juncture.
the main cause of the financial crisis is the fractional reserve banking system..
ReplyDeleteaustrian/misean economists knew this even before the great depression.. when offered a high profile job at a bank in europe in 1928, von mises reported said "a big crash is coming, and i dont want my name associated with it"..
i hope the press will educate the public that a fundamental change of our global banking system is needed urgently, instead of focusing on it's symptoms..
everyone is urged to watch the cartoon "money as debt" on google video to understand something fundamental is wrong!
I feel that consumers have too an onus to find out for themselves what products they are getting instead of placing total blame on the financial institutions who sold them the product. I am very sure that the prospectus or factsheet would have mentioned that there is a chance that the instrument may have risk of becoming worthless. It is $10,000 or $100,000 that they are investing here. Their hard earned money... Won't be it very silly to listen to some RM about where to put their money without reading/finding out the risks themselves? You are responsible for your own money, and should not go about blaming others when you lost the money.
ReplyDeleteIf the RM has lied to you that the bonds are 100% safe instruments, and you have bought them on the belief of that, you would have also signed a document that mentions that they are risky products. Why did the consumer neglect to read the factsheet too? And clarified with the RM the discrepancy?
The average recovery rate is 45% but for Lehman it is said that you may get a bout 30%.
ReplyDeleteNothing you can do for return of the capital.
But If you can show that you were misled, misrepresented, no full disclosure of material facts and risk by the salesperson or consultant and there was no thorough analysis of your financial circumstances and needs and that the recommendation was inappropriate and not on REASONABLE BASIS (FAA) you may have a case to sue the company.
Examine the fact finding forms that you did with the consultant and get a competent financial planner to help you study the forms. I believe that you have been
misrepresented and misled.
Don't worry the court will assume you a lay man and the seller an 'expert', especailly the product is complicated.
It is dangerous to assume that investors or buyers of financial instruments know what they are buying.
ReplyDeleteOn the other hands the consumers must not assume that they know too.
Financial products are NOT as simple as many people think. Imagine it takes a 100 page prospectus to explain an investment product or 20 pages of jargons and figures in an insurance quotation. Have you read them when you buy an investment product or insurance policy? Even after reading them do you understand? Yet you will sign that you have read and undersood them, right? Is it simple?
Let me tell you, the sellers or the consultants or the insurance agents promoting them hardly know them or understand the products.
They are 'experts' and you layman, and yet they don't know much more than you.What chance you have to get a good buy? All that they are trained is a few salient points , positive points, points you like to hear and build them into their selling spiel and the rest is up to the sellers' lying skills, untruths and concealment to add to the 'punch'.
Then the onus of decision is left to the customers after listening to the presentation. Can the customers make the 'informed ' decision? No!!!!
The sellers are supposed to be the 'experts' and are supposed to help the customers to make the decision.In other words the onus lies with the sellers.He or she is responsible for the outcome IF THE RECOMMENDATION IS NOT OF REASONABLE BASIS relative to the customers' needs and financial circumstances. This should the approach.
Unfortunately, currently it is not of this appraoch. The customers are left to decide, to conduct due diligence, and whatever the decision he or she makes becomes his or her risk. This risk is NOT to the customers' advantage.This IS CAVEAT EMPTOR . Caveat Emptor is very unfair to the customers of financial and insurance products.
The customers have only information, most of the time complicated, to read and listen. He or he relies on the 'interpretation'of the sellers or agents. They cannot see, touch, feel, test or test drive, trail period and check. There is no warranty of defects, money back guarantee, after sales service and etc like those for consumer or tangible products.
MAS MUST stop this. MAS must regulate and apply the FAA and whatever notices and guidelines to the T and not making a mockery of them. There must be some hanging of heads for warning.
DBS High Notes 2 is chatted on forums.sgfunds.com.
ReplyDeleteDBS High Notes 5 is chatted on forum.channelnewsasia.com.
ReplyDeleteYM Said.....
ReplyDeleteDear Mr. Tan,
I was misled into buying minibond. I am not sure if I have signed "Know your client" form when buying minibond. If I did, can I use it as proof that I was misled? Thank you.
It certainly was a mistake to put money into this misleadingly named Minibond and getting a low yield for unknown high risk.
ReplyDeleteFor Minibond Series 3, Lehman Brothers is just the arranger while the 6 Reference Entities are still fine now, even after the mess. After reading the booklet given to me many times, I still could not find the line telling me that the bankruptcy of Lehman Brothers would cause the failure of the product. I remember in Feb 07 when I signed up for the product, I only checked the soundness of the 6 Reference Entities and not Lehman Brothers.
Having read it many times yesterday, I still could not find any line telling me that Lehman Brothers Bankruptcy can trigger the Credit Event.
to the-other-ym :
ReplyDeleteknow-your-client form may not apply to structured products.. i am not sure..
anyways, i think most people do not understand most of these structured products.. these are very complex credit derivatives (options swaps etc)..
and i suspect banks like to push them to the public becoz it effectively gets the public to insure assets of the banks.. i am pretty sure the money lost will be going to the banks!..
i suggest that investors get together and pressure the banks, MAS and CASE..
ym
The fact finding or the know your client form is your best bet to nail the bank or the consultant.I am confident the consultant left a trail of self incriminating evidences . Get hold of a competent financial planner to help you .
ReplyDeleteThere is a very good chance that you win.
Singaporeans lost millions collectively in these investments. If MAS doesn't step in, and don't think there's a cause for stepping in, then there really is something going wrong.
ReplyDeleteI've bought from Minibond Series 2 and had the idea that the risk comes from the reference entities only.
In these past years, bank tellers at the counters always referred the customers to bankers (on standby) when they noticed your savings deposits have big sum of money. Financial products are also distinctively displayed at the counters whereby the tellers introduced the products after bank transactions are done.
ReplyDeleteThese are my observations that financial products are sold to their customers. Of course, I was one of them who took up the financial products in this manner.
Maybe, MAS should forbid such practices of banks to introduce their products to their customers who do not know what they are investing in with their hard-earned money.
I find that banks must take up the responsibilites because they are the ones that recommended such dubious products and sold them like hotcakes in recent years.
Your reputation and integrity are at stake now if you conveniently shrugged off your obligations and allowed your long-standing customers to bear the losses!
This issue should not be regarded as insignificant losses by the banks. What about other investments in other funds with the so-called well established distributors?
My understanding was that the risk is only in relation to the Reference Entities. I also understand that if the arranger becomes bankrupt, the whole arrangement would be unwound. This is obvious as you can't have any bankrupt involved in the arrangment. But we were never told that if the arrangement is unwound in such circumstances, we would suffer any substantial loss (so long as no Default Event by the Reference Entities has occurred.)
ReplyDeleteIs there anyone who is prepared to take up the matter with MAS? I would like to lend my support.
YM-22 Said...
ReplyDeleteYM:sorry to used your initial.
Dear Mr. Tan:
In the KYC form, I stated that the Max. loss of value I can stomach in any 1-year period is only 10%.
In the KYC form, I also understand that I may suffer loss only when there is credit event by any one of the 6 Reference entities. I do not know that I would suffer losses if the arranger went down. Do I have a case? Thank you.
THE KNOW YOUR CLIENT FORM (KYC)
ReplyDeleteThe fact finding or the know your cleint form is a very important document.Make or break for the insurance agents and consultants depends on this form.
The form documents all the interview , info gathering, objectives, risk profiling and analysis activities. It is the "BLACkBOX" of the transactions. A lot of information can be retrieved from this 'black box', like whether there had been a conflict of interest, mis-selling and misrepresentation, unethical practice, non disclosure and inappropriate recommendation not on reasonable basis; whether there had been proper gathering of data and analysis.It is from this 'blackbox' that you retrieve evidences to use as basis for your legal suit.
I know you can get enough evidence against the consultants because many insurance agents and consultants treat it as just another form to fill. They also cook up the KYC form and it is done as a after sale activity which is absolutely an inappropriate practice.This resulted in contradictions and discrepancies .
This KYC form is supposed to be used as information gathering before a solution(product) is recommended but for the salesmen and product pushers it is the probably the last form to fill.
You can check this form and get an expert to help you.
I wonder MAS is aware of this practice.It is no use for MAS to audit at company level and depend on the words or report of the compliance officer. I bet MAS will be shocked if they were to audit the agents and consultants individually. If cost is a problem charge an annual license fee on all consultants and agents.
Of course, if only MAS is sincere
about putting the industry right otherwise we will be barking up the wrong tree.
Alvin,
ReplyDeleteYou might want to read this to answer your question:
Minibond Series
The prospectus and all selling aids of minibonds focus on the referenced entities. I invested based on the refereneced entities credit risk that I was prepared to take. Now the issuer has gone bankrupt I assume that all the refereneced entities bonds were held by the custodian bank. Now I know they did not hold the bonds so I do not know what is the role of the custodian bank and how they can protect the bond holders interest?
ReplyDelete