Friday, October 31, 2008

High Notes Investor Group - Press release 30 Oct 08

HNIG Press Release 31st Oct 2008

1. On Thursday 30th October 2008, in response to a petition by the High Notes Investor Group (HNIG), DBS met up with approximately 400 investors of their DBS High Notes 5 (HN5) product in two separate sessions. Session 1 started at 2.00pm and Session 2 was at 5.00pm.

2. Both sessions were originally scheduled to last one hour, but eventually ran for more than two and a half hours each time.

3. Many attendees urged DBS to treat all investorsas a group rather than go through a case-by-case process on the subject of compensation.

4. To buttress the above argument, the HNIG revealed at the forum that they had requested an industry insider who has experience structuring such products to go through the HN5 pricing statement. After a six-hour preliminary analysis of both the document as well as the real-life experiences of investors, it would seem that in HN5, there appears to be SYSTEMIC Failure on three fronts:

a) Failure in the PRODUCT
i) Product was arranged, issued and sold by DBS
ii) Product was leveraged on Credit Default Swaps
iii) Product was secured on CDOs

b) Failure in the SALES PROCESS
i) Product was sold through a large sales force who were inadequately trained, and
ii) Relationship managers who were and are still not familiar with HN5 and customer’s suitability

c) Failure in CUSTOMER TARGETING
i) HN5 was sold to inappropriate customers
ii) HN5 was targeted at customers with little or no knowledge of financial concepts like CDS, CDOs, and Leverage

Because of the failures in the product itself, we are asking DBS to undertake compensation in a blanket or collective manner, and not on a case-by-case basis.

5. DBS was also questioned on the issue of RISK MANAGEMENT – there appears to have been serious lapses in this area that has resulted in a detrimental impact on the customers of HN5.

6. In response to questioning, Mr Rajan Raju, Head of Consumer Banking admitted that the HN5 is “NOT a low risk product”. Further, in response to a pointed question on the actual risks inherent in HN5, Ms Frances Chan, Senior Vice-President revealed that, on a scale of 1 to 10, the HN5 product was a “8 to 9”. We feel that a risk factor as high as this is in no way commensurate with the relatively low returns from HN5 and a locked-in period of 5.5 years. This bolsters our argument of the presence of a Systemic Failure in HN5.

Other Highlights

7. One attendee questioned the rationale for GIC to pump billions of dollars of government reserves into UBS and Citigroup to bail out foreigners while a government-linked bank like DBS is being parsimonious in compensating its customers in a cut-and-dried case of mis-selling and misrepresentation.

8. Many attendees highlighted their long-standing relationships with POSB/DBS, some stretching over a period of more than 30 years. They expressed a deeply felt sense of betrayal by DBS which they said violated their trust in the bank. Many also spoke of their past willingness to buy products from DBS because they saw it as “the national bank” they could have complete trust in.

9. There were detailed questioning on DBS’s ability and competence in giving timely advice on the status of HN5. Attendees referred specifically to a letter dated 31 March 2008 which had actually advised DBS customers to hold HN5 to maturity.

10. At least one attendee made the point that the overall mishandling by DBS of its affected customers will result in an eventual pulling-out of funds from DBS to its competitor banks, with a concomitant negative impact on its share price. The latter had already fallen drastically in recent weeks, a phenomenon which most analysts attributed partly to the fallout from its High Notes 5 debacle.

11. The immediate post-forum reaction of most attendees is that the Thursday sessions have not moved the complaint nor the compensation processes forward in any significant manner. In comments to HNIG, many people expressed the doubt that if DBS had sold HN5 in an irresponsible manner to make money, how seriously could they be taken when they are now in a damage control mode. The basis for such comments arises from bruising encounters customers have had with DBS’s Investor Care personnel in interview sessions where sometimes three to four staffers question a lone customer.

Others felt that DBS in referring Relationship Managers to the Monetary Authority of Singapore (MAS) is missing an important point - in the words of one DBS customer, “If the RM doesn’t know what he is doing, if he is set impossible targets, and if he is rewarded based on commissions, whose fault is it? DBS must teach RMs first”.

12. HNIG is a group of DBS High Notes (HN) investors that has been formed to communicate with DBS and undertake relevant collective actions where and when necessary.

13. HNIG currently has about 300 investors in our contact list and these consist of investors of various HNs. More joined during the dialogue sessions yesterday. HNIG handed out leaflets to request HN investors to turn up at 4.30pm on Saturday 1 November 2008 at Hong Lim Park (Clarke Quay MRT station).

14. For any clarifications, please contact dbs.hns@gmail.com. Our blog can be found at http://dbshns.blogspot.com.

24 comments:

Anonymous said...

Let's all sue those cheats.
Let's all boycott their banks.
Let's all stay away from their shares.

Let them experience SYSTEMIC Failure

Morg

Anonymous said...

FAILURE in PRODUCT, SALES PROCESS and CUSTOMER TARGETING !!

Short but very clear, factual and to the point. Nothing could have describe it clearer and better. The best so far.

Wilson said...

I am fully with the HNIG. DBS is fully responsible for creating all the HN series and allowing them to be sold to the public. To punish the RMs is just to pass the buck. It is the bank management's duty to be responsible for what they do and how they control their staff. If I entered a house and was attacked by a dog, the owner of the house must be responsible for not able to control his dog and protect the visitor.
Unfortunately, HN5 is the first one to get into trouble, but there are other HNs that may get into trouble sooner or later, like the HN2. More to come. All HNs victims must therefore be prepared to fight this battle and support each other. I cherish the good old days when DBS was the Development Bank of Singapore, when DBS was run by a group of responsible, capable people of high integrity. Alas, things have changed. It is now no different from those in Wall's Street that only look for profits.

Anonymous said...

DBS HN5 is the first one in the series to fall.
DBS HN Series 1,2,3,9,10 & First to Default link notes are all on the queue.
Followed by other structured products such as Pinnacle Credit-link notes Series 1,2,3,5,6,7,8,9,10,11,12,13,15 &16.
It is terrible!
U have my full support.

Anonymous said...

Is there a similar sub group for minibonds?

This high note sub group is very well organised.

Anonymous said...

I hope the RMs who are punished come forward and tell their stories, may be that will reflect what wrong things DBS have done and how they were done wrongly!

Anonymous said...

Looking at the explanation of minibomb, it seems that the HN2 and HN5 have a lot of similarities, may be copy for it , DBD for Lehman, Constellation for minibond.
The different is Lehmen design and cheat the money from people is Asia, Hongkong, Taiwan and Singapore, but HN is design in Singapore to cheat people in Singapore !!!! How sad !!!ooi ooi

Falcon said...

Well Done! The power of organised committee. Under an able leadership, the power of a group of people is magnified and multiplied. You are now a powerful and potent force, not to be bullied by any bank.
Well Done!

Wilson said...

Yes the HNIG is very well organized but I think this is because they are targetting only 1 institution, unlike minibonds that are sold by many different shops (they should not be called banks) hence not easy to have enough people to come together, but I think they should try too.
I agree with 6:16 that those RMs punished by the FIs should come forward and tell their side of stories in this blog. As I mentioned, the main culprits are not the RMs, the FIs just want to pass the buck and make them the scapegoats. If LB had not been bankrupt now, I think the FIs would be quite happy that the RMs had push the toxic products so hard and helped the FIs earn so much.

Anonymous said...

If DBS doesnt make a full refund to the HN investors, I think its safe to say that a law suit will surely ensue... Most of us know tat law suit can drag on for a year or two... A law suit is a LOSE-LOSE situation for DBS. If they win the suit, HN investors will still not give up and Sporeans will see DBS as a truly merciless blood sucker... If DBS lose the suit, they still have to compensate the investors and worse still, give people an impression tat DBS is a bank which need a court ruling to admit its own horrendous mistake... DBS is not only losing Sporean customers. The wealthy Indonesians and Malaysians will definitely not trust DBS anymore too...

Anonymous said...

The mastermind culprit is the FI top management, the RMs are just the scapegoats. The FIs position is very clear now. More then 80% of the investors will not get compensation. Let's go all out to shame the cheaters over the whole world. Tell the whole world that we have many depicable high class cheaters in Singapore under the world class government with A-team leaders.

Chen

Anonymous said...

What about the insurance companies?
They also got their insurance agents to do the dirty works pushing useless whole life products to people
who need high protection but end up with low protection because whole life products have high profit margin to pay the high commission to agents and to the company. The insurance companies are cheats too.MAS don't care whether the consumers get a good deal or not. They already said they don't judge the merits of the products. If there is toxic it is the responsibility of the consumers to find out. So the the insurance FIs take advantage and make use of the greedy agents to carry out their dirty work, promising them high commission and incentive trips.MAS must check these companies before they become like the minibombs.

Anonymous said...

No wonder Jackson Tai has resign, I think he knows long before that DBS will one day get into trouble. Shareholders should ask him to cough out the millions paid out to him when he resign.

Anonymous said...

It is our govt flawed foreign talent policy that has got Singaporeans into this mess. The govt has also tainted its own reputation through its flawed foreign talent policy. If they still stubbornly refused to see their mistakes then they will have to pay for it in the next general election.

Chang L.E. said...

I feel sad for the people who have lost their life savings. I have also been burnt but I only put the minimum amount and I guess I have accepted the reality and would not pursue the matter.

I do hope those that have lost their life savings and were mis-sold would get something back. However, I think its going to be very difficult as once signed, its done deal. No backing out isn't it. At the end of the day, the common person won't be able to beat the corporate or government muscle. The worst thing that could happen is that the investors end up paying more for legal fees. My friends in the legal industry tell me that its quite hopeless. It could end up dragging and cumulating hundreds of thousands in legal fees. That's the main fear I have that's why I did not want to pursue.

It's going to be tough to win as this has never happened in Singapore and never will. All those who went against the system have been beaten down. Unless there are some major changes in our society and culture, this event will breeze by.

Mr Tan, you truly are one different Singaporean. I admire that you dare to challenge the system and risk yourself to help the investors. I hope and pray that you be extra carefully in dealing with these big players. The consequences may be disastrous for you. We've all seen how some Singaporeans who have bravely stood up to voice their differences and were silenced. All the best!

Anonymous said...

Who say sporean are stupid. Some Taiwanese used to say sporean are stupid. When moeny is concerned, sporean are not stupid.
The points "systemic failure in 3 fronts":
a) Failure in the product;
b) Failure in the sale process;
c) Failure in the customer targeting.
provide a very good summary.

Anonymous said...

Just wondering whether the minibond group can tackle the weakest FI that distribute the minibond instead of tackling all to conserve energy and cost as a test case as a strategy?

Anonymous said...

We are shock to learn that in a scale of 1 to 10, such structure product rank 8 to 9.
We are all risk advser people, is that the reasons why the adviser / RM tick the disclaimer, after doing risk assessment in KYC.
Is it a case of "此地无银三百倆"??? (They know it is wrong to sell it to you, so they say it has nothing to do with them. It is the investors who wanted to buy".
Legally we are lossing out. But it is more of a moral issue, and it really hurt our feelings, especailly when we are so trusting.

MT

Anonymous said...

"Legally we are lossing out. But it is more of a moral issue, and it really hurt our feelings, especailly when we are so trusting."

Again, this is a LEGAL issue, NOT a moral issue.

So you got the answer yourself.

Anonymous said...

When the RM know fully well know the product is not suitable for you. The written evidence also show clearly it is not suitable to you.
But in order to sell it to you, he / she say it is your choice. So there is contradiction between two "written" evidences.
Is it a clear case of misrepresentation, even legally?
In addition, it is also morally not right to do so!!

MT

Anonymous said...

This press release is not published by the press. I suspect there are some constraints imposed. For the awareness of the general public and also to correct the one-sided view put up by the FIs and the cautious response by regulatory authorities of this toxic product , an advertisement space should be bought to publicise this release. I am very sure this will swing the public opinion of many on the plight of HNIs.

Anonymous said...

Chang l.e, I think you are a pessimist. If everybody think like you, nothing is possible. Look at Taiwan, it was ruled by Koumingtan for 50 years, but in the end, it was defeated by ah bian. Anything is possible, if you put your mind to it. If one day, our government become corrupted, Singaporeans just have to change party and vote for the best. Nothing last forever.

Anonymous said...

But one can only question up to a point based on Availability of Information.

Without base information even questioning is hindered.

And how can one expect questions to be answered and answered directly?

Yes, the whole world can learn from TW story - A Perfectly designed system potentially can still be broken by the people tasked to uphold the integrity of the system, EASILY. Yes, the culprits are slowly all being handcuffed. Made possible by the free media. Some media may be biased left or right. But there is free media that gave the people more info about the investigations that could have potentially applied pressure on the investigation team to do their jobs faster.

Disclaimer: Having said this, I am not saying this thingie will happen or has happened in sigapore. Its just a good knowlege for the whole world to wake up.

Anonymous said...

DBS says they have started compensating.
My parent are in the vulnerable group and has done all that was advised by authorities including the interview.
But we did not recieve any news of compensation yet.
Has anyone receive any compensation yet as claimed by DBS?
Has DBS proof that they have started paying?
In HK or sg? Anyone?

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