I am a medical doctor and have been a specialist cardiologist for 18 years. As an educated, mature and risk adverse investor, I purchased $130,000 of Lehman Brother’s Minibond Series 5 from Maybank Singapore last year.
Events over the last few weeks have shown that there has been fraudulent misrepresentation and clear mis-selling of the Minibond for the following reasons:
1) The product is not at all a bond, but calling it a Minibond, marketing it as a low risk product and offering a modest return of 5% yearly was clearly intended to mislead the purchaser into thinking that it ranks as a bond in default risk.
2) By associating the product with 5 well known banks, by highlighting the good credit ratings of these banks and by linking the default of the product with a default of any of these banks, the purchaser is made to believe that the bonds are instruments supported by these banks. In fact, the banks have nothing to do with the Minibond which is created solely for the profit of Lehman Brothers and its agent Maybank Singapore.
3) By constantly referring to the ratings of the reference banks, the impression is given that the Minibond is of similar low risk and high grade, with holders protected as would any holder of bonds issued by these banks. It is only now apparent that the Minibond is an unrated structured product; purchasers are NOT holders of bonds issued by these reference banks, and are not even considered to be holders of bonds issued by Lehman Brothers.
4) The impression is given that funds invested in the Minibond will be used to purchase high quality securities that could easily be sold to safely redeem its value if the need arises. In actual fact, even the officers of Maybank do not know what the underlying securities are and an article in the Sunday Times of 19th October reported that the value of the securities in Minibond 5 have been determined to be zero.
I write in the hope that the Monetary Authority of Singapore will take the necessary action to ensure that those dishonestly misrepresenting financial products face the consequences of their action. It is in the long term interest of Singapore as a trusted financial centre that those who behave like unscrupulous traders, mis-selling and cheating purchasers be made to fully face the music. Thank You.
Dr Ong Hean Teik
20th October 2008
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