Tan Kin Lian's Blog: Negligent or dishonest acts

Sunday, September 28, 2008

Negligent or dishonest acts

I need to find some examples of negligent or dishonest acts of the financial institutions that create or sell the financial products. Here are some of my views:

1. The adviser fail to inform the investor about the risk of the product
2. The adviser recommend the product (with high risk) to investors who are not aware or do not understand the risk
3. The adviser did not understand the risk of the product that they were selling
4. The adviser failed to give the prospectus and other pricing information
5. The adviser get the investor to sign documents, without explaining what the documents were
6. The adviser failed to advise the investor to diversify the risk, and recommend a large sum to be invested in a single product.
7. The product creator failed to disclose the charges that are taken away from the investors
8. The product creator has conflict of interest as they are also the counter party for some of the swap and other transactions
9. The trustee or product creator failed in their duty to take care of the interest of the investor
10. The product has high risk as they need to earn sufficient income to pay the high charges, and this is not disclosed to the investor.
11. The adviser or the managers of the financial institution did not buy the product that they are selling to the investors (consumers)

Any more angles?

Please give supporting evidence to back up the above allegations of negligent or dishonest conduct of the advisers or the product creators.

13 comments:

Anonymous said...: For buyers who purchased through UOBKH, Philips security and other broker houses, they do not even explain the product. You were just asked to complete the application form to buy the "bond". How can such complicated product be sold this way? This is another negligent act.; September 28, 2008 2:32 PM
Anonymous said...: Calling the product "Minibond" when it is not a bond an act to misrepresent the product.

Providing the prospectus and pricing statement only AFTER investor signed the application is unethical if these are important documents that customers need to understand.

Marketing brochure and RM explanation projecting the Minibond as a basket of bonds of 6 asset when it is not is dishonest.; September 28, 2008 2:45 PM
Anonymous said...: Dear Mr Tan

I have these two points to add on:-

How about the Risk profile of the investor? If it is CONSERVATIVE and wants low returns, stable and low-risk investment that require minimum action and monitoring?

Also, wants HIGH CAPITAL PRESERVATION: maintaining capital without the need for growth or to keep pace with inflation. Any potential growth would be a bonus.

(These are extracted from the Wealth Management Planner and Wealth Recommendation forms).

Considering the two points above, the RM should NOT have recommended such a HIGH RISK product to investors.; September 28, 2008 3:19 PM
Anonymous said...: Hi all friends,especially MS,
Let make it simple way to be understand and go arround n ask anyone(not chidren).IF you borrowed
me $100 then I paid you $140 after
5 years but condition is that:
1)Not been employ due to recession
----Return$60
2)Unfortunely I dead,No return
I will very sure everyone tell you
You think Im so stupid; September 28, 2008 3:25 PM
Anonymous said...: The problem with the minibonds and Jubilee is that they were sold as products and not as solutions to your needs. Therefore, your needs were not taken into consideration and your risk and financial circumstances were not examined. The result is wrong solution and wrong product..
You have definitely have a case against the advisers or salesmen and the company for malpractice.; September 28, 2008 5:06 PM
Anonymous said...: I think point 8 is further emphasised if the product creator is also the sole sales agent to promote their own product. There shld a disclosure of 3rd party comments in the product brochure otherwise can be construed as inadequate disclosure possible misrepresentation.; September 28, 2008 8:06 PM
Weng Mao Fa said...: The investor can NOT read or understand ABC.; September 28, 2008 8:45 PM
Anonymous said...: I have additional input for DBS High Notes 5. Beside the 8 reference entities, the Pricing Statement also listed 8 Reference obligations, i.e Bonds that pay a certain % interest and maturity many years away. One Example, Maybank Bond US$380millions 6.125% Maturity 07/06/2012. These bonds served to convey a false sense of security to investors that each of the Entities has Bond locked in and will pay interets for many years to go.; September 28, 2008 8:52 PM
WY said...: Attached is a link to CFA Institute’s Standard of Practice Handbook (Ethics):
http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2005.n3.4000

It may provide some insights on ethics on investment field.; September 28, 2008 9:46 PM
Sunshine Gal said...: look through the marketing brochures and spot inconsistencies to the realties of the product. eg. one blogger said one brochure claims that risks are spread over a basket of credits. this is contrary to the prospectus and since it is the brochure that's used for sale, this can be deemed to be mis-representation.; September 28, 2008 11:48 PM
Anonymous said...: With reference to point 3 on your list, in my initial meeting with the bank's financial advisor, I told her I wanted safe products(I purchased an HDB bond).
Later she called me up about a new launch which she thought was good for me. My risk profile in the bank records was changed to make it suitable to sell the product to me.
Despite the gloom in the financial markets, DBS wrote us not to worry about our 'paper loss', the downgrading of the Notes recently was 'just a formality' and in late August when I thought of cashing out, I was was advised not to as there was 'no credit event yet!'; September 29, 2008 8:16 AM
Anonymous said...: 1.Analysing investor's risk profile only after investor has signed the product application form. A case of putting the cart before the horse?
2. Application form is not signed by the RM.; September 29, 2008 8:17 PM
Anonymous said...: ABN Ambro Bank, now Royal Bank of Scotland sold me the MiniBond Series 3. The additional point is:

1. No where in the prospectus did it mention that there were about 150 credit linked securities. I just came to hear from the bank staff on 18 Sep 2008.

2. The prospectus is ambigious. It mentioned "underlying securities" but does not define what they are. It leaves you to connect "underlying securities" with the "referenced 6 banks" and it went to great length to emphasise this point. No one, unless you have pre-knowledge of the 150 securities, would ever imagine that the MiniBond is totally dependent on these "unspoken and hidden" securities. Isn't this misrepresentation?

3. To this day, the bank refused to release this list although it was verbally said in a face to face meeting.

4. Most people thought it was a bond that they were buying into.; October 01, 2008 12:12 PM