Dear Mr Tan
I bought Minibond Series 5 & 6 through one of the local Financial Institutions with the understanding (from the sales brochure and newspaper advertisements) that the bond is issued by six leading banks namely, DBS, Citibank, Merrill lynch. Goldman Sachs, HSBC, and Standard Chartered bank. The bond pays 5.1% interest per year for a 5-year tenure.
I understand that the principal amount is not guaranteed but the risk is very low, as the six leading banks are very strong and sound. And if one of the banks go bankrupt, the maximum loss will only 1/6 (16.7%) of the principal amount. I will suffer a substantial loss of my principal amount only when all the six leading banks go bankrupt.
Comparing with the OCBC 4.2% and 4.5% preference shares available from the stock market, which I can sell the shares anytime if I need cash, the interest offered by the bond is not very attractive because I have to part the money for 5 years for 5.1% interest. But because it is a very low risk bond issued by the six leading banks, I decided to buy the bond.
Recently, I discovered from the newspaper that the bond which I bought is actually not issued by the six leading banks and will suffer a substantial loss due to Lehman brothers go bankrupt. I further discovered that it is not a bond and instead, it is a very complex product which even the sales people from the Financial institutions are unable to explain clearly. Until today I still do not kwon who is the recipient of the ‘bond’ and how is the Lehman brothers related to the bond ?
The key to this issue is that, how can the information provided from the sales brochures and newspaper advertisements, distributed by the local Financial institutions, are so misleading that it misled hundreds and thousands of ordinary people into believing that the product they bought is a bond and that it is issued by the six leading banks ? Will the authorities go after those parties who are responsible for the misleading sales brochures and newspaper advertisements ?
REPLY
I agree with your views. The Petition signed by 983 investors ask the authorities to investigate any wrong doing, including misleading advertisements.
your explanation is similar to my case......if one bank collapse , i still able to get back 5/6 of my principal investment. So now i still hope i can get back my hard earn money
ReplyDeleteMs.ST
I am afraid the regulators themselves have not discharge their role diligently. So how can they investigate and take action when they have been sleeping on the job for so long?
ReplyDeleteSame situation here. I purchased Minibond 5 because I thought it was a bond jointly issued by the 6 Reference Entities; and the nature of a bond is such that I would be able to get back my principal amount at maturity. When I confirmed this with the RM at Maybank, she concurred!!!
ReplyDeleteEven FM say it is a "A" rated bond???? So must not over regulated.
ReplyDeleteYou have the wrong understanding. Even one failure may wipe out the entire capital.
ReplyDeleteIf you got this explanation from your RM, better lodge a complaint with your FI asap.
All of us have very similar story. Why is the govt continue to wait for us to petition again and again while in Hong Kong, they are facing the same problem. Doesn't it show that something is really wrong? Why must we petition and ask CAD to investigate when this should be done by the Govt when the issue exploded 2 weeks ago?
ReplyDeleteI invested based on the newspapers advertisement and the brochures. Before I signed the dotted line, I read the prospectus on risk but it is difficult to understand the prospectus so I fall back based on my understanding of the newsparers ad and brochures. Now I know better thar my understanding is all incorrect!
ReplyDeleteThe way the whole product is marketed is to mislead the general public. Why call it a "minibond" when it is not even bond at all? In the case of a bond, bondholders are in line to receive the proceeds of the sale of the assets of a liquidated company ahead of some other creditors. Seriously wonder what are the "regulators" in MAS doing. We have such strict laws against gays and chew gums but seem to have virtually no law protecting the citizen against such misleading and fraudulent finance product.
ReplyDeleteI am in the same situation when I decided to put my money into minibond series 5 & 6. I always think that Bond of 6 banks. I never know it is so compliciated.
ReplyDeleteSad that no Minister comming out to say something. Guest, they are pro banks and pro USA ...