Thursday, October 02, 2008

Loss of hard earned money (2)

Dear Mr Tan,

My 71-year old mother is a victim of the recent Lehman Brothers collapse. She worked hard in the civil service for more than 30-years of her life, skimped and saved to provide for her family. Now, her life savings and retirement funds are suddenly lost. All because she invested $100,000 in the mini-bonds sold by Hong Leong Finance just a year ago.

The money was originally in a Fixed Deposit account with HLF until the relationship manager promoted the Lehman product to her last year, saying it would offer her a much higher interest rate of 5%. My mother is not investment-savvy, neither would she be able to read, much-less understand, the fine prints of the 'Agreement' (if there was any at all) that she ignorantly signed on the spot. She did not know that HLF was merely an 'agent' for selling those bonds. She trusted HLF as a secure local banking institution with which she has placed her savings all this while. Therefore, when the bank's executive promoted the mini-bonds to her, she felt safe enough to take it. Afterall, this past one year, she has been receiving the interest as promised. There were no warning signs whatsoever that the minibonds were about to come to zero value and her money might be gone.

Our burning questions as layman in this tumultous financial market are these :

1. Was Lehman Brothers already in dire straits when they sold these mini-bonds? Were these one of their life-lines?

2. Did our local banks know what they were selling to their clients? Did they exercise due diligence by checking up on Lehman's financial standing before they acted as agents for the bank? Were our banks aware of the huge risks that their clients bear vis-a-vis the interest they get?

3. When our agent banks promoted the product to Singaporeans, did they explain in detail the risks and implications especially to the elderly folk knowing that they are putting their entire life savings into this very risky venture, before they enticed them with the attractive interest rates? Did they inform clearly that they were not underwriting any risks since they were just agents for Lehman? Were the sales people just interested in getting the agent's commission?

4. Where does MAS come into the picture here? Is there any auditing on what our banks are selling? Is there auditing on the bank's process and practices? Is there control at all, akin to what insurance companies like AIA are claiming as stringent controls by MAS such that they are now able to stand firm amid AIG's struggles?

Mr Tan, we badly need some answers. You will be well aware how the man-in-the-street, old folks, non-investors, non-speculators, have lost their hard-earned money overnight. The outlook appears grim as there seems to be no legal recourse in sight, and MAS has not taken a stand perhaps because this has not reached industry proportions.

We feel our mother's pain, as well as the suffering of all those who are depending on these funds for their retirement years, medical needs etc. I am sure they are lack of sleep and unable to eat during this period. It hurts terribly to think that life savings have gone to feed the highly-paid executives of Lehman who have probably mis-managed the company and still sitting rich now. Do we just blame it on hard luck?

As if their anxiety counts for nothing, the victims were given a letter by the bank and told to wait for further decision and announcement.

Mr Tan, we appreciate your help in championing this, and are hoping against hope that something reasonable will come out of it to mitigate the suffering of all those affected by this sudden turn of events.



Anonymous said...

MAS, please stop and disallow financial consultants, whoever or whatever title these salesmen use, from selling and pushing financial products. Mis-selling and misrepresentation and conflict of interest are inevitable in selling.
Please stop them before more people get hurt.
Financial products range from insurance, to banking and investment products..except motorcars.

Wealth Journey said...

I hope those folks who have invested in minibonds show their support by turning up at Speaker's Corner.

I'm sure a lot of them are just sitting at home and waiting for Mr Tan to resolve but this is your way of showing appreciation to someone who was not even involved in the saga.

Melvin said...

Dear Mr. Tan

My mother in law is 70years old also a victim of the recent Lehman Brothers collapse. She worked hard as a cleaner and now still working at school canteen to maintain her income. She has been working almost her entire life and children gave her to save $100,000 put in hong leong mini bond series 9 on Aug(interst 4.3% not much difference from 3% insurance saving). She just invested 1 mth ago and did not even has a chance to receive 1st interest and whole saving collapsed. I really felt sorry for her that she walked into wrong place at wrong time. The money was in FD with HLF till FM introduced mini bond to her and her daughter. FM told both of them that it based on only 6 entities which are fundamental well established (all singapore companies). She(FM) told them if any of the companies collapsed they will pay based percentage paid out. How is Lehman brothers involved in this mini bond series 9they still unknown? because they do not understand overseas investment status at all. My mother in law only knew HLF, she always trust HLF because HLF always helping senior citizen folks to get better and high interest than other banks. My mother in law always praised HLF boss is a good boss. Till today her daughter did not tell her mother the true. She praying and hoping for good news to come. She hope MAS will help to get back the money. She not hoping for full pay out but at least 80% will be fine. The rest she will top up for her and let the whole issue rest.


Anonymous said...

Blame MAS for not enforcing the rules it set stringently like section 27 of the FAA governing the behaviour and the way advisers should approach the needs of their clients.
Blame MAS for not vetting stringently the products before allowing for release into the market.
Blame the company for being greedy and overly profit oriented and overlooked the need of the consumers.
Blame the company for being lax in the compliance by their salespeople, the RMs and agents.
Blame the salespeople or RMs or agents for being greedy and NEGLECTING and ignoring WILEFULLY AND WILLFULLY the needs of the consumers.
Blame the RMs and the agents for being unqualified and incompetent to dispense this advice.
The banks must bear the full responsibility for their errors and their salespeople's incompetence and mis-selling. The aggrieved investors must be compensated minimally the return of their capital

Concerned Singaporean

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