Friday, October 31, 2008

Undergraduate reply to Prof Lan

Hi Professor Lan Luh Luh,

I refer to your comments published in the article titled “Structured Products: Let’s not forget about personal responsibility” in TODAY on 2008/10/30.

I read your comments with a heavy heart and really hoped that the reporter has taken your comments out of context. I believe you are the first academic in Singapore to speak out and at the same time advocate caveat emptor.

I do not agree with what you said at all. I disagree with what you said on factual and moral grounds.

1) The returns on the structured products are certainly not double digits. The reporter may have asked you to comment on the wrong structured investment product. From what I have read, the returns on the structured products average about 5%. The returns on this product certainly does not match the risk the investor is undertaking.

I once commented to a friend that if the returns on these products are more than 10%, then the investors have no one to blame but themselves, as the returns would have match the risks.

In this case, the returns clearly do not match the risk. In equities, there is the risk of losing. But the investors have the opportunity to make big gains too. Here, the investors bear the risk of losing everything, but their returns are capped at ~5% no matter how well the market did. Is this fair?

2) "When people make money, nobody complains,” I think it is wrong to state this as an argument. When nothing happens, and the investors receive their ~5% returns every year, is it correct to fault them for not making any noise? I think this is normal human behavior. As the saying goes, when there is nothing wrong, why fix it?

They brought the investment product based on the relationship manager’s (RM) recommendation and trusted their RM’s explanation on how the product should work. And when the product is providing returns, is it correct to fault the investors for assuming that the product is working as it should and that they did not question further how the product should work?

For example, would a child check what are the specific hardware in a computer he just brought (assuming the child does not have the ability to check the hardware himself, and that the child has the power to purchase a computer himself), other than to just use it as it is and trust what the sales people told him? In this case, he will only find out that he has been sold a different hardware configuration only after the computer broke down and the repairman tells him that.

3) The third is on the general investor profile. When I first heard of this, I wanted to find out about the investors themselves before I make a judgment. Hence I went down to Speaker’s Corner personally on the first Saturday gathering to see for myself. I was stunned. The majority of the people I see there are people in their 50-60s who speak little or no English. The moment anyone sees this, statistics nor any scientific measures matter.

It is common sense that the people in the crowd certainly do not fit the risk profile of the investors the structure products should be targeting. If professor Lan has not seen the investors personally, I suggest professor Lan to visit the Speakers Corner this Saturday and see for yourself. More information about the gathering can be found here, http://tankinlian.blogspot.com. I stopped visiting the gathering after the first one as it really hurts to see and hear them.

4) I would like to stress that, from what I heard, the investors “thought” they “know” what they are investing. The risks and downsides were not clearly explained to them. I am almost certain that if the downsides and the true natural of the product was clearly explained, no one would buy them.

5) On caveat emptor. I think this idea is wrong and should not be encouraged at all. Caveat emptor encourage businesses to be irresponsible. I do not think that this is a desirable outcome for our economy or society. Our economy would just cease functioning normally. Everyone would have to spend lots and lots of time double checking and double check again before they buy something. Common goods that are purchased everyday on the basis of trust would have double checked, as the consumers know they have no one to turn to if something goes wrong, and that they are on their own. Is this desirable?

Our society would become one engulfed in suspicion, of anything and anyone. No one would help one another and no one is interested in one another. Everyone for themselves. Is this sort of society a desirable one to live in?

The examples I used are extremes, as I am trying to illustrate a point here. Let’s not assume caveat emptor is “correct” and just use it as it is. The question to ask should be, is it right and desirable in the first place to “advocate” something like caveat emptor even if it is an accepted reality that buyers should check their purchases? Who coined it anyway and under what circumstances was it invented?

Just imagine if the Chinese told the affected “too bad, you brought the milk yourself, no one forced you to buy my milk. It’s your business that your babies are being poisoned”, what will happen? And isn’t the melamine milk incident a perfect platform of advocating caveat emptor too? Think about it, why didn’t the Chinese do that?

To me, the MAS is equivalent to AVA. Its role is not there to check if the food taste good or not. Its role is to check whether if there are harmful substances in the food. I believe the AVA scientists do not have a easy time trying to determine whether something is harmful or not too. But they do their best, and when things happen, the products get redrawn, an apology issued and people get treated. A person financially ruin is akin to getting poisoned. Especially if what taken away from them are lifetime savings they intend to live on when they are old.

6) I know that the banks got themselves covered legally. Even a disclaimer from a local broker’s analyst report is longer than the actual report itself. However, it is a moral issue here, and not a legal issue. I believe if the banks were to buy back the products at cost right now, which many has the ability to do so without hurting their bottom-line, the amount of goodwill this action generated will last for multiple generations. This beats years and any amount of advertising. It’s like the 1982 Chicago Tylenol murders, and the banks are in the shoes of J&J now.

I believe professor Lan’s viewpoint may be slightly legalistic, considering your legal background. However, I urge professor Lan to be empathic to investors who have lost their savings.

I would like to stress that these are my personal opinions, and is not an attempt to show any form of disrespect. I am not personally involved any of the affected structured products.

Yours sincerely,

Morgan Wu Min-han
Undergraduate, SMU

59 comments:

  1. Very good article, well researched and well done.
    It shows the students' quality in NUS is very high - really world class!
    Even an undergraduate can point out many "mistakes" of a "professor". sigh......

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  2. The argument of Park At Your Risk, Eat At your Risk, and Invest At Your Own Risk do not apply all the time in all the cases.

    Please do not miss the main issue on the structured investment fiasco. The main issue is not finding and allocating blame to which party. The main issue should focus on :-

    1 The manner this product was market.
    2 The suitability of this product to the masses, especially to retail investor.

    3 Is the Risk and return matched? ie within the same financial environment is that a better products than this one.

    These will lead to a probe on the possibility of mis selling, lead to the possibility of incomplete disclosure or even fraud if any the distributors know the product is at flaw.

    It is high for the regulators and all parties concern to pull resources to find way to have a better regulations to ensure a healthy financial environment.

    Let us not lose our focus to find and debate on who are to blame.

    In this world there is no reason to put blame on people who want the best return on their investments. So is for all companies the main objective is to maximize the shareholders return.
    But all have to be done on a fair and health environment.

    G C Tham

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  3. Very Well written. We are proud of you, SMU undergraduate.

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  4. Very funny, the professor write an article as if a undergraduate, so childish, and the article written by undergraduate semms like from professor, make personal visit to the speaker corner, see the victims himself before opening his mouth. While the professor just sit at home, daydream and write the nonsence. Just wonder where the professor got the qualification from ??? Or hey, did any body verify that he/she is a professor????or just a self proclaim one

    HS

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  5. Caveat emptor is a powerful tool if you know how to use it and have good connections. It is a free licence to cheat.

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  6. Hmm, seems our undergraduate quality is high but the same do not seems to apply to this professor. Another unexplained paradox.

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  7. Very well written. Morgan should take over the "professor's" job and she should be his student.

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  8. Dear HS,
    The link provide the Prof credential. It is real.

    SMU undergraduate standard is very high. I am encouraging my son to attend SMU as a first choice.

    http://www.strategic-concepts.com/www/content/view/72/67/

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  9. Dear Morgan,
    You not only write a good article and articulate well, you also have the courage to spak up. Congratulation and well done.

    However, I will encourage you and together with your fellow undergraduates to attend the Sat meeting to give moral support and comfort to the many distressed investors.

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  10. The affected investors trusted the FIs so much that they have lost their hard-earned savings due to the high risks not explained to them.

    Even if the FIs refund everyone, the FIs will still earn record profits when the economies boom again. The total amount is so small if U combine the yearly net profits of the FIs.

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  11. The difference between the undergraduate & the professor is basically in that the undergraduate 'kick the ground' as 'caveat emptor' principle alone is not good enough when the fatal fact is not uncovered. Besides,"Complacency" may also aptly describe the professor's fallacy in "..When people make money, nobody complains,..." and "...Having read a flyer promoting one of the affected products, Assoc Prof Lan said the potential double-digit investment return advertised certainly looked attractive..." which simply reflect the complete ignorance of the risk analysis required playing with the complex structured product. "Complacency", too, sound well in regard to MAS, FIs & FIs RMs on the sale of structured product in a pure belief that solid like 'Lehman Bro' & 'Morgan Stanley' will not fail.
    Btw, We must be thankful to the professor for acknowleging that the high risk in the structured product should command a double-digit return on the sound 'High risk High return' logic.

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  12. "Our society would become one engulfed in suspicion, of anything and anyone. No one would help one another and no one is interested in one another. Everyone for themselves. Is this sort of society a desirable one to live in?

    ...

    However, it is a moral issue here, and not a legal issue."



    THAT is THE Society we are living in and have been living in, please break out of your idealistic world.

    This is a legal issue here, and NOT a moral issue.

    And I am not sure you have done yourself any big favors by posting in name, any good one that is.

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  13. Is this Prof Lan Luh Luh a PRC?

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  14. Dear Prof Lan,

    Please do some research before commenting. Don't make irresponsible remarks.

    For a start, try talking to Professor Bernard Yeung, the dean of your NUS Business School.

    Phua

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  15. Can this artical be published in local newspaper?

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  16. Morgan Wu, congrats for your excellent article. It is a no doubt a great contribution for the investors. You will be invited as a guest of honour, together with all those who have done so much for the investors, if/when investors recover their money [in full or partial] and feel a dinner celebration ought to be organised.

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  17. The Professor while advocating "Caveat Emptor" should also be aware of the doctrine of the "Contra Proferendum Rule", i.e. a Court may be pursuaded to interpret the sales brochures or whatever written documents provided at the point of sale against the party that drafted it (FIs).

    A Court would show empathy too for the highly vulnerable investor. That is why FIs agreed to compensate them 100% without hassle. For the rest, it is still not lost, with this Doctrine.

    There are always two sides to a coin and issue.

    I would say the Professor was commenting in a Climate of Fear.

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  18. To 11.26 am,
    As is her resume...

    Lan Luh Luh is an Associate of Strategic Concepts International, Deputy Director of the Corporate Governance and Financial Reporting Centre, National University of Singapore Business School, and a faculty member in Law with the Department of Business Policy at the National University of Singapore. Prior to joining NUS as an academic, she practiced as an advocate and solicitor in banking and corporate law with Messrs Allen & Gledhill, one of the leading law firms in Singapore and in the region. She is a member of the Singapore Academy of Law and she is also the honorary member of the NUS Business School Chinese Alumni where she acts as an advisor to the board.



    Luh Luh earned her Ph.D. in Business Policy with the National University of Singapore. She has a LL.M (First Class) with the Faculty of Law, University of Cambridge where she also received a Book Prize from Magdalene College. She obtained her LL.B (Honours) from the Faculty of Law, National University of Singapore, where she spent her undergraduate days on a scholarship conferred by the Overseas Union Bank. She is the co-author/contributor of several books in corporate law and management which include Walter Woon on Company Law (2005, Thomson-Sweet & Maxwell, with Tan Cheng Han as the General Editor); Woon's Corporations Law (2005, LexisNexis); From Conformance to Performance: Best Corporate Governance Practices for Asian Companies (2006, McGraw Hill, with Mak Yuen Teen as the General Editor) and 36 Stratagies of the Chinese (1998, Addison Wesley, with Wee Chow Hou).



    Besides research and teaching university courses, Luh Luh also conducts high level seminars and training in the area of corporate law, banking law and corporate governance. She is a highly sought after speaker in executive and professional seminars in Singapore and overseas. She has given seminars to Motorola Singapore, the Singapore Institute of Directors, the Singapore Association of the Institute of Chartered Secretaries and Administrators, Guangdong Local Tax Bureau, Bank of China, Party School of Chong Qing Municipal Committee of CPC etc. to name a few. In addition, being effectively bilingual, she is the only instructor from the Business School who teaches both the English and Chinese Asia-Pacific MBA courses catering for middle and top level managers

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  19. In this new world era where materialistic is the up most priority we definitely need professional who has no only knowledge but also with integrity and the love to care and love.

    Morgan has proof that he not only has the knowledge but also have the altitude to make judgments and interpret issue with care and love.

    I strongly we should move the financial checks to include all the moral values that was so lacking in this new world era.

    Life is not just making money and profit. It should be govern with the love of mankind and contribute to the development of society.



    G C Tham

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  20. Hi anonymous 1123,

    I would say it is very sad if that is the world you perceive it to be. There are a lot of good things in life, maybe you just happened to miss out on some of it. But you should not generalize across the board and come to a conclusion just like that.

    A legal framework is just the most basic form of social control to ensure things don’t get out of hand. It works best after a period of turmoil, like war, to keep things in check and to set things straight.

    For a country as advanced as Singapore, which the global competitiveness index has already classified as an innovation driven economy, discussion about issues should go beyond what is “legal” and what is not.

    I do not see what is wrong with having my name up there. I am responsible for my own words. You mind telling me what is the fuss about?

    Morgan

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  21. Hi anonymous 1123,

    I would say it is very sad if that is the world you perceive it to be. There are a lot of good things in life, maybe you just happened to miss out on some of it. But you should not generalize across the board and come to a conclusion just like that.

    A legal framework is just the most basic form of social control to ensure things don’t get out of hand. It works best after a period of turmoil, like war, to keep things in check and to set things straight.

    For a country as advanced as Singapore, which the global competitiveness index has already classified as an innovation driven economy, discussion about issues should go beyond what is “legal” and what is not.

    I do not see what is wrong with having my name up there. I am responsible for my own words. You mind telling me what is the fuss about?

    Morgan

    12:48 PM


    Brother i supposed you are studying, maybe working part time or something

    you wait until your letterbox gets filled with bills, your baby is crying the moment you goes thru the door, your partner in life or peers or boss start gives you funny vibes somewhere down the road, maybe its diminishing relationship or simply disparity in other aspects, whatever

    And when you decide to try for an once in a lifetime opportunity to get promoted or moved to a higher order of things, then someone informed you they are somewhat concerned about some remarks you made about some social-politico issues sometime back in the past, and decided its best you look into the matter yourself soonest while they review other potential candidacy.

    THEN what i said and what YOU said now will dawn fully on you at that point.

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  22. well written, i agree.

    Look, read & write, not just with your eyes, but heart & soul!

    THe prof shd pen his/her opinion with more compassion, not just legalistic point of view.

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  23. 2.14pm,
    You really kiasi. Dont think it works that way in Singapore. As far as I know, if you work in US MNC and you are as quiet as a mouse, you can work 25 hours a day and you will not be promoted or noticed This is from my 25 years of experience working for US MNC. So stop discouraging a logical, sensible and out spoken young man.

    I do not know what experience you have to shape your view but you are probably some looser on the quiet in life. So sad. sigh...

    As for cc, fyi, the prof is a lawyer by training.

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  24. It would not be
    unsurprising if the prof is considered to have spewed crap. People considered to be highly intellectual are also known for making irrational comments, once in a while.

    We are all human. However, now that other people have pointed out the flaws in her views, prof Lan should be humble and decent enough to admit the errors she made.

    Please, no more rationalising while sitting on your armchair, Luh Luh.

    WKC

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  25. Hi Morgan,
    I hope you turn up this Sat as I am sure many investors would like to chat with you.

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  26. To 1423,

    I am still responsible for words i said, and things i do. No matter whether people knows about it or not.

    That may happen, i don't deny it. But don't you have any happy moments at all to pull you through?

    And if that happens, i would ask myself why. Is it that i spent too little time with my wife? I work too long hours? I didn't care for them enough? I wasn't there when they need me?

    Why did i chalk up so much bills that i need that next promotion? What can i do to slow down and spend more time with my family? Do i really need that new car? What can i do so that i can survive comfortably on my current salary?

    And if i am capable, and yet denied the chance of promotion, what is stopping me from owning the corporate ladder myself? What is stopping me from leaving Singapore?

    I would like to reiterate that we shouldn't measure everything in dollar and cents. If we do not have the courage to speak up, what will we have courage to do?

    You know, it doesn't hurt nor cost a cent to be more cheerful and optimistic. i feel better, the people around me feel better.

    So, why not cheer up, have hope, and press on regarding the structure products.

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  27. The society of today need young talents not only knowledge but with conscious and integrity. Knowledge is really secondly to the ultimate advancement of society but moral value is.

    The financial crisis that the world facing today was the advancement of knowledge without the moral value in it.

    As I always believe one shall never lose as you can see there are people and young people like Morgan who can analyze this issue with his soul and heart. The future leader of tomorrow should have these characteristic is the financial world is not going to repeat its mistake again.

    G C Tham

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  28. This undergraduate has more cow sense than the professor.

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  29. 3:07 PM

    I am sorry to hear your rebuttal.

    I hope you would not be in any way an affected victim in this fiasco, that your investments from your 25yrs 25hr a day, quiet as a mouse, no promotion job could be at stake

    If not, you have my condolences you on your losses. From what you said, I would have thought you would be wiser.

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  30. Anonymous,

    It is opinions like yours that hinder the growth of this nation.

    CR

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  31. Morgan, well done and I admire your courage and righteousness. I believe you can become a good lawyer if you are doing law in SMU.
    The Chinese say: "Fa ri bu wai ren qin", meaning roughly that laws are to be applied with our heart. Lan Luh Luh is a typical bookworm living in ivory tower. Maybe she has achieved so much academically that she is blinded by her own achievements.

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  32. and the reason you are STILL staying around is...?

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  33. 3.07pm.
    I lost only a small amount and its of no major financial consequence to me. But I support the cause not because of my losses but I view the injustice done to the investors.

    By the way, I work hard and smart, always contribute and speak up and I was promoted without the 25 hours day.

    But for you with a kiasi mentality, you are likely a looser working 25 hours day somewhere!

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  34. Anonymous said...

    3:07 PM

    I am sorry to hear your rebuttal.

    I hope you would not be in any way an affected victim in this fiasco, that your investments from your 25yrs 25hr a day, quiet as a mouse, no promotion job could be at stake

    If not, you have my condolences you on your losses. From what you said, I would have thought you would be wiser.

    5:04 PM

    To the above,

    No need to say sorry. Because you deserve it.

    FY

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  35. it only shows how ignorant she is despite having a MBA. Anyway MBA doesn't make you a qualified expert to speak about structured products. Even CFAs have problem understanding it. Maybe she thinks she is lawyer but sad to say she missed the section 27 of the FAA which clearly spells out the steps the RMs and the FIs have to take.

    Jay

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  36. FY,
    You sounded like SiewKhim? ooop... expose your secret identity! Feel sorry for u!

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  37. This Lan Luh Luh, full of IQ but do not seem to have the EQ to match. Poor thing!

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  38. 3.07pm.
    I lost only a small amount and its of no major financial consequence to me. But I support the cause not because of my losses but I view the injustice done to the investors.

    By the way, I work hard and smart, always contribute and speak up and I was promoted without the 25 hours day.

    But for you with a kiasi mentality, you are likely a looser working 25 hours day somewhere!

    5:53 PM

    I see, now you re-state that you work hard and smart, always contribute and speak up and was promoted. That case then, I am sure your losses, I hope minimum as you have claimed so, would be unable to make you feel anything less than a winner.


    To the above,

    No need to say sorry. Because you deserve it.

    FY

    8:54 PM


    I am not sure if you are the one and the same, having second thoughts coming back again with another sharp personal remark, but I rather let the matter rest as is as none of which ARE relevant points here on this matter.

    I am but alerting Morgan that he should not forsake the possibility there might be pple out there keen on nominating Indian Chiefs out of greenhorns out of personal desperation AND interest. Thats all.

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  39. Is the Prof a foreigner? In Singapore, there are many topsy turvy situations if one looks beneath the glossed up surface. For example, the private in the army who does better outside than the officer, the dedicated and successful tutor who could not get a place in the Ministry of Education Schools vs the molester and perverted main stream convicted teacher or principal. At the end of the day, it is the heart vs the head. Passion vs streetsmartness. I hope we can now see the direction we are heading with the many flawed policies like the foreign talent policy. What to do? It has happened, let's move on to more good years.

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  40. Prof Lan reminds me of our ministers, only have impressive paper qualifications but nothing else to show. Don't understand the crux of the matter but want to open big mouth and talk nonsense. And make a fool of themselves !

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  41. To 10:56

    There's more to life that dollars, cents and promotions.

    There's more to life than having the prettiest wife, having the prettiest house and having a fanciful car.

    It's this kind of 'practical' mentality that makes Singapore sick. And what's so practical about being 'practical' anyway, when it only results in one ending up as a hermit, with no courage to do what he wants and what he deem is right, with no courage to live.

    What's so practical in living a life of cynicism, superficiality and spiritual emptiness. What's the point of living a life where no one appreciates you for who you truly are.

    I really pity you.

    What Morgan has said might result in negative consequences, but I'm sure the spiritual satisfaction that he derives is priceless.

    I'd rather live a life making my own decisions and facing the brunt of possible negative consequences, rather than be a blind follower of the 'real world' never to have done the things I want to do, and never to have loved the people I care for.

    And if he, as a future undergrad, cannot survive just because of a lack of promotion opportunities by other idiots, then are you saying there's absolutely no hope for people without a degree then?

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  42. I suggest that the reportor who interviewed Prof Lan Luh Luh and posted her comment in Today Paper to post Morgan's commnet in Today paper also.


    Let the public readers judge the issue.

    Otherwise, it is unfair to investors if the public only know the one-side story

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  43. Teacher said: "When people make money, nobody complains,”
    Make what money. This is part of the sale, and is what the customers entitled to.
    If you buy a TV for watching TV, that is what it suppose to do. If it doesn't, then you complain. It is mis-reprenation!!!
    This is unlike buying share where the upside is unlimited.
    When people grow up and climb up the "ladder", simple things become very complicated, and they can no longer understand simple things. They use complicated terms to explain simple things, and confused everybody, including themselves. Anyway "That is life".

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  44. Well written, I agreed with 10.56 rebuttal on FY. Why discourage expression of different view and speak out what u believe in Society will be better off in the process rather end up in life as a yes man and a turtle always with head retracting when confront with a problem.

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  45. The undergraduate can analyse/understand better than the professor. Another highly paid FT not worth her salt?

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  46. I am glad our university are producing people of Morgan's quality. He showed a strong ability to analyse/empathize and rationalize his arguments. But I cannot say the same of the professor, perhaps the university needs to review his appointment.

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  47. Teacher making a living by making difficult things simple.
    Some Fin experts making a living by making simple things very difficult.

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  48. Blogger TeE said...

    2:29 AM


    I am not certain if you are young, or you are, well, simply young at heart. Good for you either ways.

    But I ever came cross such remark by someone, share with you,

    "When I was young, I thought money was everything.
    Now that I am older, I KNOW it is."

    HOWEVER I myself am quite certain I would be wise enough to leave the decision of Who Pity Who to the very end of this race.

    I would want to see Who could reach the finishing line. How, Why and When. In What manner.

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  49. Teachers supposed to make difficult things easy for people to understand. When a teacher trying to make simple things difficult, we hv to feel worried.
    When a simple product like fixed income instrument(received fxed income regularly) was made a into complex structured product by some fin experts, we really hv to feel worried.
    After this bad experience, we hv to be very careful, because "buyer beware". We cannot trust such fin. experts anymore.

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  50. Hey, where this retirees got such huge of money to invest in such toxic products?

    Was it easy money?

    If yes, then let face it guys: " Easy come, easy go"

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  51. Well, the race is defined by how would one has chosen to. One certainly doesn't have to run the race defined by others.

    Anyway, in the long run, we are long dead. I'd just say sometimes, Singaporeans would do better by taking themselves a little less seriously.

    We already have many people of admirable drive. What we are lacking now is people with sense and soul.

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  52. Hi Morgan

    Kudos to you. though young, u are righteous and more human than some old dinky professor.

    Your parents must be very proud to have a son like u and i am sure your parents are equally impressionable.

    If can, lend your support to the lost-investors, they need lots of concern and help.

    Surely you would be a big contribution to common people like us.

    Your next door auntie stella

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  53. Blogger TeE said...

    Well, the race is defined by how would one has chosen to. One certainly doesn't have to run the race defined by others.

    Anyway, in the long run, we are long dead. I'd just say sometimes, Singaporeans would do better by taking themselves a little less seriously.

    We already have many people of admirable drive. What we are lacking now is people with sense and soul.

    7:41 PM


    Once you get older you realise you are running the SAME race with everyone. You are joining SOMEONE's race, not yours. Not even Bill Gates is running his own race.

    Second all, I disagreed with your statement Singaporeans would do better by taking themselves a little less seriously and even finding it contradictory to the precise reason you are here.

    Its becos some number of Singaporeans had NOT taken matters seriously, looking deeply into what they are forking over their signatures and monies for and to whom, that ended them up in this fiasco.

    And for that hence, I do very much agreed tho, what we are lacking now is people with sense and soul.

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  54. Morgan thanks. Well written, well analysed and factual. You have my respect.

    Caveat Emptor is a term that cannot apply to everything. Can a doctor tells the patient that he has to research the medicines 1st before he takes them and if anything adverse happens, too bad, caveat emptor, no one force you to take them.

    SIA paid compensation to the SQ006 plane crash victims. Can SIA uses caveat emptor as defence and says no one force you to take this flight and you take it at your own risk, too bad you got killed in the plane crash. The answer is NO!!

    Can SIA says, it is the pilot's fault, go and find him if you want to sue someone. The answer is obvious.

    So will really appreciate people to think through thoroughly, understand the whole facts 1st before expressing their opinions. Don't add salt to the injuries.

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  55. I wonder how the new Dean of the NUS Business School, Prof. Bernard Yeung, is going to react to Prof Lan Luh Luh's "serve you right, you don't exercise caveat emptor" since Prof. Yeung has also lost money.

    Morgan is an outstanding example of a future dean (business and/or law faculties), just that he was born a little to far behind Lan LL.

    This leads us to conclude that we better exercise caveat emptor when listening to Prof Lan's teaching and not accept whatever advice/suggestion she gave at her lectures and talks.

    Ditto for Prof. Yeung, the biz guru who cannot analyse the structure deposits and minibonds and lost money too. How to be his student and learn from him? Learn how to lose money, maybe.

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  56. In respond this wonderer anoynymus,
    "I wonder how the new Dean of the NUS Business School, Prof. Bernard Yeung, is going to react to Prof Lan Luh Luh's "serve you right, you don't exercise caveat emptor" since Prof. Yeung has also lost money.

    Morgan is an outstanding example of a future dean (business and/or law faculties), just that he was born a little to far behind Lan LL.

    This leads us to conclude that we better exercise caveat emptor when listening to Prof Lan's teaching and not accept whatever advice/suggestion she gave at her lectures and talks."

    I don't see morgan is 'outstanding' because he wrote this repond to Lu Lu.

    1) using the example of a child, who could not identify 'dangerous appliances', could not illustrate the financial illiteracy of investors, who does not know how to ask questions. children know how to ask questions. morgan used a silly example. children do ask meaningful & difficult questions at times, that we can't even know the answer, but the yield-hungery investors blind-folded themselves, though they received higher educations, up to a professor level! A child has yet to have sufficient ability to 'self-learn' to protect oneself against 'dangerous appliances'.

    2) research has shown that, pple make decision on 'emotion', and not through rational thinking most of the time. morgan is 'almost certain that if the downsides and the true natural of the product was clearly explained, no one would buy them'
    Most investors 'ignore' the downside and 'believe' only the upside, that explains why people loose money in the stock market most of the time. This confirms the research that human being make decisions on emotion.
    unless there is a new findings by morgan.

    3) on caveat emptor. it also applies to our daily lives... Do u simply 'trust' anyone in the street who try to sell u something, and just buy them? if u don't protect yourself, who will? this is also known as personal responsibilities. this is not an ideal world. it's world of sinners, practising caveat emptor is for your own protection.

    4) This is the most silly. compare the melamine in the milk???
    There is no disclosure of melamine in the milk!
    Please don't force something to make your point. u may have yr reasons, but don't force any examples. morgan is a U grad and can't have this basic reasoning, don't u think it's a disgrace?

    5) since morgan knows that the banks 'got themselves covered legally', then it is only wise to be prudent and not to fall prey by them. do our homework. and not point fingers when things go wrong.
    look now, if the FIs set the precedence to compensate, then there will be endless cry for compensation when pple start loosing money. no respect for contract law - lead to lawlessness and can be very low crime rate.

    morgan, yr ideal world does not exist at all, just like theory does not apply all the time. its time to learn and not be a bookworm

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  57. Well, it is another case of barking the wrong tree.

    It is the issue of mis-selling & misrepresetnation of the product sold to unsuitable persons. There is LAW in place. There is regulator to enforce. There are stakeholders (Minibonds & CLS note holders, shareholders of equity and holders of other instruments). There is also the 'TRUST' in every field that established over the long years hard works. Will it be extinguished by just on incident?

    A collective action or a class action suit will expose the weakness of the entire system from the regulator to the man in the street thus a total 'DAMAGE' to the TRUST.

    Btw, where will be the payout to vulnerable group of investors from? From shareholder's fund? It seems to me that the job will be easier paying only the vulnerable group on 'Moral duty' & 'goodwill' when the FIs are called upon to answer to the shareholders during the AGM.

    Then, will there be an EGM to be called to seek shareholder's approval for the compensation. See, another group of stakeholder's interst is affected.

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  58. Good comment Adego!

    But I still think Morgan made his point though, and for a Undergrad like me, I think he is already miles ahead of me in critically reasoning.

    But yet again, I think both Prof Lan and Morgan have valid points and points to be questioned, but that does not mean either is a "bookworm", if we do not agree with their theories

    My 2 Cents worth.. Great work Morgan!

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  59. To anonymous below - he's from SMU. yes - very well written indeed!

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