Tan Kin Lian's Blog: Mini-bonds - ask MAS to investigate

Saturday, September 20, 2008

Mini-bonds - ask MAS to investigate

Hi Mr. Tan,
Last year due to some unfortunate series of events, my parents and I decided to invest in the minibonds, which is already gone as Lehman Brother is undergoing liquidation. It is very sad, but we have to accept the loss.

REPLY
It is unfortunate that Lehman Brothers went into bankrupcy, triggering a credit event. If they had been rescued like AIG, the credit event could have been avoided.

You should write to ask MAS to investigate what happen to the mini-bonds. Although a credit event has been triggered, you should ask what really happened to the money. Who took the money when a credit event is triggered?

It seems that many investors lost their money, and someone must have made a big gain. I undersand that the money raised from the mini-bonds are actually invested in other assets and are not invested in Lehman Brothers. So, somebody must have made a big gain at the expense of the small investors.

Please ask MAS to investigate this structure on behalf of the small investors.

8 comments:

Unknown said...: Dear Mr Tan,

It's a pity I came across your blog too late. I signed up for this Minibond in Feb 07. I had a sum originally meant for Fixed deposit until I was attracted by the low risk (linked to 6 very strong reference entities (REs)) and that bonds were listed as the underlying assets. My understanding was that this product is the mother of many mini bonds of the 6 REs.

When I signed up for the product, the manager did not elaborate much and simply assisted me in filling up the form. No where was it listed that the collapse of Lehman Brothers would also result in the loss of my deposit.

I felt that consumers like me who signed up for this product cannot be labeled as greedy and asking for it as Minibond was marketed as a safe place to earn a decent yield.

I have sent a feedback to MAS regarding this Minibond.; September 21, 2008 1:31 AM
zhummmeng said...: You are right that you should not be blamed for your 'greed'. It is very natural that investors are attracted by high return. The problem is high return is always used as a selling point to allure the customers but not the risk or risk is downplayed. In many cases customers are given the impression that they are low risk and some even said they are guaranteed.Some may use, for example, a local bank as risk benchmark and customers are asked the probability of that bank going belly up.Ya lah, unlikely DBS will fail but then the other entities which you have no idea of their financial strength like Lehaman, Morgan Stanley or Merill etc . This is a selling ploy to get around risk. This is not disclosure. In fact it is tantamount to misrepresenting risk or to lull the customers into the false sense of security.
Check the 'know your client' form and see what is written and for discrepancies or inappropriateness
of recommendations relative to your
financial circumstances and your needs. I am sure you can find something that gives you ground to sue the company or the consultant.; September 21, 2008 11:57 AM
Bert said...: I was one of those who bought the Mini Bond Series 3. During the presentation, no mention was made of the fact that the Mini bond is linked to about 150 CDOs. I just came to know about it from the Bank Consultant several days ago.; September 24, 2008 10:55 PM
Anonymous said...: Hi Dear Mr Tan,
I m also one of the Lehman Brothers Victim, i bought USD500K of mini bond series 2,from the bank, and the RM said that its AAA+ Grade n Lehman Brothers is an arranger n its very safe. I m a PR n from India. I have no friends here n no one to turn to. I m very grateful for your support. So see u at tomorrow's gathering. I m so lost n worried now cos my hard earn money is at stake.; October 10, 2008 2:47 PM
F. Chandran said...: Hi all victims, can anyone tell me whether the rumours is true that at present there is a Hong Kong Bank n Berlyn r interested in taking up the role of Lehman Brothers as the swap counterparties so there is a slight hope for the Lehman Brothers Minibond. I bought Lehman Brothers Minibond Series 2. Pls respond.; October 15, 2008 1:39 PM
Anonymous said...: i agree...when i purchased the mini bonds, my impresssion that they are like government bonds an d not like structured deposits...no one briefed me on this. MAS should not allow anyone to use the word "bonds" if it is not one.; October 17, 2008 10:29 AM
cindii said...: I bought S$50k mini bond series2 from OCBC Securities. I don' know what to do now... Anyone in the same boat with me?; October 28, 2008 5:44 PM
Anonymous said...: I recently went for a hearing at FIDREC and OSPL. My views are that the hearing is one sided and waste of time and money. Looks like FIs, FIDREC and MAS and the government are all protecting the banks and FIs to the core and it will be very difficult to prove that the ordinary buyer was misled and not properly briefed. All these institutions are bent on making money from ordinary folks like us. I have decided to terminate all dealings with my FI and remeiser henceforth and go to others who are more sincere. I think the government will only act when the ground feeling is against them(eg during elections and after the results) as they are quick to defend all their regulatory office like MAS and local FIs and banks who continue to make huge profits. Lets show them that we are a force to reckon in the coming elections. thanks.; August 12, 2009 9:12 AM