Wednesday, November 12, 2008

Call to the Government to be fair to the affected persons

Dear Mr. Tan,

I am writing to commend you, as many before me had, for the care and bravery you have displayed in giving a much-needed helping hand and direction to thousands of aggrieved investors. I personally have not invested in these investments but unfortunately my homemaker wife have in the above said notes. To be honest, we cannot be said to be in the vulnerable category as defined by the FIs. But neither are we high risk investors, never going beyond stocks, shares and properties.

We take responsibilty for a lapse of care and caution in not fully realising the extent of the risks and toxidity of these notes, partly because the returns do not commensurate these. We also were lulled into comfort of its officialdom and apparent similarity in process to the equity market by the fact that CDP is the official custodian for these notes.

We regretted for not receiving or asking for a risk review by the distributors or a copy of the Prospectus before we signed up for the purchase. For sure the implication of the most damaging and hitherto unfamiliar term of "first-to-default" credit event, in the nature of a total loss on the weakest link, was lost in us and had this been emphasised to us, I am quite certain that the risk-return will not be accepatble to me.

Under this situation, I had not lodged a complaint to the the FI or signed any petition, as I could not with clear conscience alleged no-responsibilty on my part. But I have been following closely what's going on through your website in particular.

I believe there are many aggrieved investors in a similar position as mine. Having absorbed all the comments and opinions by investors, MAS and the senior-level ministers (including the damning comments by MM), the first strong impression is that our authorities is taking us to task on the grounds that we signed the sales documents on our own will and "caveat emptor" applies. Case closed as far as our ministers are concerned.

By doing this, MAS and the authorities are without solid evidence taking sides, in the favour of the FIs. This is unaccepatble coming from a supposedly popularly-elected govt who should a fiduciary responsibilty for the care of its people.

In fact this riles me and spurs me now not to want to call it quits. Why? I don't expect the government to provide financial subsidy for our losses nor to take the sides with the investors just because they are citizens. If we have made a wrong and bad investment decision, we take what comes with it. But it doesn't absolve the FIs from any wrongs they might have committed. Then the most decent thing we should expect from our govt is to embark on an independent investigation to verify if there have been any wrongdoings by the FIs.

We the investors are not in the position in technical and financial capability and authority to conduct this on our own if we deal with the FIs on case by csae basis.

In this respect, an investigation should be addressed at the least the following:

1) design, structure, pricing and comission /fee income of these products,

2) the ill intent and motive of the originators in introducing these products, especially whether there is ill or even fraudulent intent in scheming to lay off to the unknowing public risks embedded in substantially subprime exposures which could be anticipated by the originators to deteriorate in credit quality in short time after the sales

3) the callousness and carelessness of the distributors in the marketing and selling of such complex and risky products to retail investors, and the use of unqualified and poorly trained sales staff to engage in mass selling on a brochure-based mode. A test is whether if the sales staff were in fact well equipped to counsel intending investors adequately on the complexities and high risk nature of the products.

4) whether the marketing brochure was designed with an intent to mislead the investing public on a "No Ask No Tell" approach and focuses on better returns and the strong rating of the reference companies while downplaying on the real toxidities.

Now if an investigation indeed reveals negative revelations against these FIs, then they ought to be taken to task, fined and penalised to compensate investors, as had happened in othe jurisdictions. As you had said before, sharing (rather than taking full) responsibilty and pain with the investors will be satisfying to most investors.

I wonder if you think you will re-focus or redirect the petitioning along this line and if so whether you will talk about it at this Saturday's session at the Speakers Corner.

If you wish to develop this approach further and want me to contact you, please let me know by return email.


The first Petition sent in early October asked the Government to carry out an independent investigation into the possible wrong doings by the financial institutions that created or marketed these credit linked securities, and to take the appropriate action against these financial institutions, including seeking fair compensation for the losses suffered by the affected persons.

I have been disappointed by the lack of information from the Government on this matter, although they appear to be taking some action on behalf of the "vulnerable" investors. The other investors are left to fend on their own to face the financial institutions who are now emboldened by the remarks by our Government leaders.


Anonymous said...

Dear SB,

Excellent summary of the feelings of the people.

What is interesting is the "spike" in unkind remarks from "the other side" in not only this blog but others as well. Wonder if this is because the 10000 victims do have a case after all.

G C said...

We can always argue using all the existing law and rules that the investors should be responsible.

But the big question is for the pass we have never heard about toxic financial products? This term was never in the financial text books that I have studied along my road to qualify as an accountant.

Why then we have and nicely term toxic financial products? Who create it? Those who create them must know the consequences? So for those who market these should also have to take full responsibilities?

Why use the law against the investors and deprive the investors remedy and compensation?

All must ask this critical question?

Is the so call toxic products are food and cause life. Will only them the authority to take action?

It is not all toxic products regardless financial or foods should be investigated and the cause to be found? It is not that all who responsible to be taken to bear its responsibilities?

Again I wish to commend that investors are investors. All investors come to invest with the some motive and as such all investors should be treated equally.

G C Tham

Anonymous said...

The more unkind remarks, the more we should stay focused in this fight. These remarks only anger and frustrate the investors, but will not stop us from fighting for what is injustice to us

Anonymous said...

To be brutally realistic (and this being Singapore, that is the prevailing ideology), the fate of 1,000 or 10,000 will not be allow to affect the economy and the fis. So sad to say the fate of minibond and other structured products holders do not look optimistic.

Anonymous said...

Now that the "vulnerable" group have been taken care of, the rest would be left w/o a "face" to appeal to the compassionate side of gov, FI & the public.

Anonymous said...

Hi GC ,

Good question: (quote) “...Why then we have and nicely term toxic financial products? Who create it? Those who create them must know the consequences? So for those who market these should also have to take full responsibilities?”…

The best person in Singapore to answer your question is Mr. Koh Boon Hwee, chairman of DBS Group Holding.

Everlearning said...

Don't give up just yet! Next year, the Government is helping their vested companies to tide over the current economic crisis might be a hint that most of you will get back some kind of compensation.

It just doesn't make sense that banks and financial insitutions can get away scot-free by exposing their long-standing customers to all these toxic financial products, and maybe many more such investments are going to fail that we are unaware of.

Anonymous said...

Very well presented article, SB. Thank you and for your offer of help as well!


kilroy said...

the only conclusion I can come to is that the total amount "lost" by the investors in the minibond and similar products is "peanuts" cf to the real money lost in the ill-timed and probably indecently prompt investments by the fiduciary and custodial agents of our taxpayers monies...anyone has other views?

Anonymous said...

"Call to the Government to be fair to the affected persons"???

whats NOT been fair

you are offered an investment product, you took it up after with your consideration, the risks manifested, they agreed to look into it, and now you are crying its not fair?!

Anonymous said...

If this government were independent, they would have kept their b- mouth shut and not pass judgement before any inquiry was even called. GCT, LHL, LKY have all spoken.

I'm eagerly awaitng elections. The ground is sweet...

Anonymous said...

"I'm eagerly awaitng elections. The ground is sweet..."

I am sure someone will win something with 10,000 votes. or so.

Anonymous said...

Personally, I think from the Top to bottom cannot escape the responsibility

1) Monetary Authority of Singapore
(MAS) should bear 50% of the loss for those investors that invest the MAS Approved Lehman Related Products. All the top talents and scholars just simply closed their both eyes and APPROVED these complicated products without knowing how serious will be.

MAS have the duty to prevent such products from flooding the retail market by "testing" the suitability of the prospectus for digestion by the general public.

2) Following by FI should bear 30% the losses. This because they did not bother to check properly before they sell it to the Layman/Low-risk people who have no Financial Knowledge

There is simply too much technical jargon for us to understand all the contents written in it. Although we have a responsibility to read it, is it actually reasonable for laymen like us to understand it? Because of this complexity, we have to depend on the integrity and expertise of the RMs or the bank officers selling the product to advise us properly on the risks. There must be a fundamental change in the way these prospectus are written so that the general public can understand them.

3) The investors itself should bear 20% of the loss as they should not trust anyone. They thought that we are well protected here but unfortunately there are still loopholes. After all, those top talents are also human being cannot foresee anything.

Even Singapore can overtake Hong Kong become Financial Hub, there will no Retail investors anymore. No one are willing buy any products from the Banks or RM. No one trusts anyone anymore so in this environment, how to become World Class Financial Hub.

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