Monday, September 29, 2008

Why did the banks continue to sell these products?

Dear Mr Tan,

Firstly, thanks for your blog very much!

I‘d like to highlight one point on your appeal for minibond holders. I am Pinnacle Note 1 investor. The issuer is Morgan Stanley. It is exactly same product as minibond. So, I have same worry as minibond holders’.

I bought Pinnacle Note 1 in 2006 because the newspaper advertisement keep saying it is some kind of bond. As an experienced bond investor, I took it as another alternative. For example, LTA 4.17% bond, we were paid every half year and I can cash out anytime as the price hardly change. The Pinnacle Note 1 is linked to 4 countries which are China, Malaysia, Thailand, and Korea. My understanding is unless these 4 counties have credit issue then I will have trouble. It is some kind of government bond.

However, I realized I made a big mistake one month later. I found the price of this product keep dropping at a very fast speed. It didn’t perform as my other government bonds at all. It is too late to read your opinion from your blog one year later.

My point is, if we are the first batch people cheated by this kind of product, so are the dealers if they do not know this kind of product before, I can accept their excuse. However, how could they continues market these kinds of product and promote it as safe bond to other investors when they have already known it is not safe at all from the experience of the first note?

The dealers also can not answer why the price dropped so much but only explained it should be penalty for early redemption. They do not fully understand their product also.

I am not sure Pinnacle Note’s future. The dealer told me I can get back my principle if I hold it until mature, but I do not know how true it is?


I hope that the Government will investigate the following:

2.2 Were the financial institutions that marketed the product aware about the real risks of the products? Did they train their front line advisers to hide the true facts? Were they negligent in not understanding the true risk? Did they monitor the conduct of their front line advisers to ensure that the products are sold to the right people, based on their risk profile and preference?


ym said...

the banks/rms genreally dont give a rats A$$ abt your money and retirement..

your money is their means to a their comfortable retirement.. they are only after the commission and spread and revenue..

besides, they really naively believed that their products were sound.. after years of easy credit and being thought the intellectual fraud of financial engineering..

Anonymous said...

If this is true, then something is very fishy.....
Thank you very much for providing this valuable information to all concerned.
Hope MAS is also aware of this.

Anonymous said...

Glad to see so many people join in now. I'm seriously thinking of joining in now, I've nothing to lose now, since I'm already prepared to lose my capital of 30K through investing in minibond.
More & more, I think that I'm being mislead now...

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