Monday, October 27, 2008

A fair compensation

Dear Mr. Tan,
Why should the investors in the mini-bonds and other notes expect to get full compensation for the investments? Surely, they know that there must be some risk, when they expect to get interest rate of 5%, when FD is only 1% or less.

Do you know that the people who invested in stocks are suffering losses of 50% or more. Can we ask for compensation? Even A-rated bonds can fail. Can the investor than ask for compensation from the distributor?

Surly all kind of investments have risk. Why should the mini-bond holders expect full compensation? Why are you supporting this unreasonable claim?

REPLY
I believe that these structured products should not be sold in the first place. If the distributor had properly described the product, it is likely that nobody would have bought them.

In my personal view, the loss should be shared equally between the distributor and the investor (i.e. noteholder). It will not be fair for the investor to shoulder the loss entirely. It is also not fair for the distributor to make a full compensation. I hope that both parties will make a compromise and agree to share the loss equally. Many investors have told me that they will accept such an offer.

16 comments:

Anonymous said...

I agree with Mr Tan KL's comment on shared responsibility for the sale of structured products.The % sharing can be worked out separately. What I cannot accept is the investor bearing 100% responsibility regardless of how he bought the product (eg relative's recommendation, thru broker, enquiry made at road show etc). The common denominator here is that the product has been misrepresented, never mind the risk profile of the investor. I hope FIs (and some bloggers) can understand this issue.

Too many bloggers are confusing the issue about paper losses on stocks vs potential losses on CLS. The main difference is when you buy stocks you are fully aware of ALL the risks. When you buy CLS you are NOT fully aware of ALL the risks. Think about it.

Tan Kin Lian said...

Hi 6:45 PM

Your views will be stronger, if you give your actual name. Let us be willing to be identified.

Anonymous said...

I am surprised that at this point there are still people making comparison between the minibond deal and other investment such as stock/bonds. I admire Mr. Tan for his patience towards such comment. To the person who posed this question, I only have one question for you, what would you do if one day you realised that the A-rated bonds that you think you bought are actually not A-rated bonds. I expect you to counter me by saying that I shouldn't buy it in the first place if I know it's not A-rated bonds. That's precisely the problem here. Many of us put too much trust in the people that explains these stuff to us. They made us believed that these are A-rated bonds, when in fact it's not at all. In most cases, I would agree, like what Mr. Tan mentioned, both investors and distributors need to shoulder the loss together, but in cases where it's an outright mis-sell, they need to make full compensation, no two ways about it. I urge you to read a little more on the minibond issue so that you get up to speed with the problem we are dealing with and not feel frustrated when people are fighting for a little justice here.

Anonymous said...

Please don't confuse people with all kind of "theories".
Even if you are "legally" right, you cannot win over people's heart.
Worse, if you try to use your own "logic" to confuse or force yr opinion thru, u are going to hurt people's feelings.
You may loss big in the end. Think about it.
Furthermore, stock may recover, and u may earn even more in future. For "mini-bomb" victims, if it is loss, it is loss forever.

Anonymous said...

The person who posted this note obviously is not an Investor. In early 2007 when some of these products were being sold, the SGD$ Fixed Deposit rate was as high as 3% (not less than 1% as you have IGNORANTLY mentioned). You can check up some major banks.

Anonymous said...

Yes, with the financial tsunami, I lost money in shares, bonds and currencies but these risks I know so there is no question of asking for compensation. But minibond is mis selling so it is different!

Anonymous said...

Anony 8:01
You are right, I rememebred I placed some FDs with a Fin Company at the interest rate of btw 3.2 to 3.6% per year (for 3 to 5 years tenure)at that time. That was why I told my adviser I only wanted safe investment.
I was thinking of "diversify" that I bought into Minibond. The different in interest rate was quite little.
Now I really regret the decision.

Anonymous said...

to the writer of this articles. If you donot know what is going, shut up!! If you want to put your idea along, do some homework first.
Do you know the company Minibond doesnot do the Bond business but some cdo, cds....etc. Lehman just use this name to fool the investor to believe that they are pulling money together to buy the Bond of the reference entites because the normal size to buy the Bond of 1 company is 250k. The sale pitch and brochures are constructed to let he investors believe that they are actually buying Bond of the reference entity. Nothing is mentioned that the collapse of 1 entity will wipe our the entire capital and nothing is mentioned about the arranger.

HS

freeier said...

Markets are screaming unfairness and whatever language. But in all proper context of definition, mini-bond IS a bond.

And this come from one of the team trying to fight the case on HN5.

The market has alot of misconception and trust me, too many people talking nonsense on the product that are too emotional and too little facts.

Anonymous said...

Hi 8.01,
You are absloutely right - around mid 2007, the FD rate was easily 2.5% p.a. So why would anyone take the risk of losing everything when the return of all those structured products was only about 5% p.a.!!!

lew said...

HI there,
My case was just a difference of
1.25% from FD promotion rate,so do you think you will take the risk of lossing everything?

Concerned said...

You have completely misunderstood what the 10,000 investors are saying? What investors are saying is that they are being mislead by the FIs into buying the Minibond?
The key point here is being mislead and FI is using the higher interest rate to mislead. Therefore FI have to refund the investors

Anonymous said...

No point arguing going on each other throats on pen and paper, or in virtual worlds

There is likely to be NO compensation beyond whats already offered, even whats already offered might not be equitable AND timely compensation

Accept it as reality and move on, the loud voices will fade into background eventually

Anonymous said...

It is not a question of whether the buyers knew there was risk. Everything has risk even a bank deposit.

It was a question of whether the buyer knew the correct amount of risk present and whether that amount of risk was correctly explained to them.

nhyone said...

8:01 PM, was the FD rate for $10k? Or only $50-200k and above?

The return of the structured products were attractive because they hit the magical 5%, and also because you just need $10k.

No one would lock up their money at 3% for 5 years. 5% is a different matter.

Jeremy said...

Mr Tan has always advocated a 50-80% compensation rate as a guideline. The details has to be sorted out, but this range looks reasonable to me.

As for the vulnerable group, it is also fair for the banks to compensate up to 100%. Misrepresentation is highly possible in such cases, and will likely withstand the test of our Courts. Therefore, the FIs are making a wise move by giving full compensation to this group with dual objectives:- To protect themselves from legal risks & to improve their public relations.

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