Misleading advertisements

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.