Tan Kin Lian's Blog: Regulator should disallow the sale of bad products

Wednesday, October 29, 2008

Regulator should disallow the sale of bad products

The CEO of a large government owned organisation told me,

"Kin Lian, you are opening a pandora's box. By speaking for the investors who were misled into buying the structured products, you allow other sophisticated investors to claim that they were also misled and to claim compensation. How can you differentiate between the two group?"

I showed this blog to him on my notebook computer: http://tankinlian.blogspot.com/2008/10/nature-and-risk-of-structured-product.html

After reading it, he changed his mind. He did not realise that the product could be so toxic and was surprised that it was allowed to be sold. Nobody would have bought the product, if it was properly described to them.

I showed to him another potential time bomb, concerning the leveraged dual currency investment:
http://tankinlian.blogspot.com/2008/10/leveraged-dual-currency-investments.html

He was again surprised. He wanted to check if his wife also invested in these dual currency investment. It is so easy for the unsavvy to be fooled.

He suggested to me on how the message of these bad products could be disseminated more widely to inform the investors. I replied that, by naming the products, I stand the risk of being sued by the creators of these products. In my view, it is the job of the regulator to ensure that bad products cannot be sold.

8 comments:

Anonymous said...: IMO, what Mr Tan did was right. He provides advices and options for the affected investors be it un/sophisticate. The job to differentiate between these 2 groups is that of the FIs and not his.; October 29, 2008 11:33 AM
Anonymous said...: Bad products are not allowed to be sold in the market.
Bad practice like product pushing or product advise should not be allowed to be used.
Both of the above have caused mis-selling and misrepresentation and many people to be cheated by consultants from the banks and insurance companies.
Another recommendation is to review the reward system for the insurance and bank's consultants and insurance agents.
Commission driven sales are abused like above and caused conflicts of interest. A work or advisory related remuneration should be considered, eg Fee based , Fee plus nominal commission. Commission should be as low and capped within this range 5-10% to discourage agents and RMs from circumventing the the process.Fee is to be negotiable between the consumers and the advisers depending on the scope of service and the complexity of the case.
The advisers are to be made responsible for their advice and for whatever the outcome.
Gifts and other rebates must be banned to prevent inducement.
MAS must enforce the laws that regulate the above otherwise their inaction will mis-interpreted as kelong.; October 29, 2008 12:44 PM
Anonymous said...: Hi...I think that for DCI only suitable investors should be allowed to purchase these. DCI is meant for people who have need for an alternate currency (buy house overseas, children studying overseas....). I think that its wrong to push these to people to buy as an investment as its more for yield enhancement for the more well heeled investor who has no preference. In any case, this should be identified by the RM upon fact find. RM should not advise people to enter into too big a deal as even currency may have very large swings. A DCI in essence is just selling a naked option on a currency otherwise know as unlimited loss in the case of a call option. BEWARE!!; October 29, 2008 1:29 PM
Anonymous said...: Mr Tan:

I suspect that none of the government officials, including the MD of MAS and PM Lee, really understand the nature of these products. That explains why they keep saying the government cannot intervene or cannot bail out the investors. They are easy too busy or too lazy to sit down and study in depth what these bogus investment products are. If they had done their homework, they would understand that the literature sent to the customers and advertising were designed to cheat rather than to inform. Then, they would definitely change their mind and decide to help the investors.

You can help in this regard. Please use your influence to educate Mr. Heng and Mr. Lee, and let them see that a crime has been committed against a large group of singaporeans.; October 29, 2008 3:30 PM
Anonymous said...: Tan Kin Lianm
Thank for continue to fight for what is right rather than conform to immorality and intimidation of the business world.

It takes a maverick and expertise like you to expose the underhand means of organisation that earning immense profit at the expense and high risk of the investors.; October 29, 2008 5:57 PM
ph he said...: Mr. Tan,
In fact, there is a need for MAS to fully investigate all on-going strutured products even though they have not collapsed yet - though many of them will, pretty soon! They must STOP all these products immediately and insist for 100% refund if found to be TOXIC!!!; October 29, 2008 9:44 PM
Anonymous said...: MAS got a HaRVARD GRADUATE, you know.
But NUS graduates are bvetter.; October 30, 2008 1:05 AM
Parka said...: Here an article on Credit-Default Swaps written by Brett Carman, a writer on Donald Trump's blog.

I would just like to quote the last line: It’s criminal in my estimation what has happened and I hope the “perps” are brought to justice.; October 30, 2008 11:27 AM