Tan Kin Lian's Blog: Educate the public about the structured products

Saturday, November 01, 2008

Educate the public about the structured products

Hi Mr Tan,

I am a HN2 investor and had attended the HN2 dialogue arranged by DBS. A lot of investors brought out their cases of how they were misled by the RM and bought the product. The DBS VP gave the standard answers in different forms by asking the individuals to sending in complaint and they will investigate case by case. Cases with evidence will be compensated with different amount.

Obviously this is "divide and conquer". Everyone complaint about their RM. Nobody complainted about DBS, the creator of the product. As a whole, this dialogue is just a SHOW put up by DBS. I think the VP is very happy that the focus is on the RMs and not DBS. I am very angry and disappointed.

I have brought out the question of whether it is a leverage product and whether it is a suitable product for general public. But no answer from him.

I feel that not many of the investors have realized that this is the DBS fault of creating such a toxic product and well packaged to be sold to investors who do not have much knowledge in the derivatives. (In fact even the university lecturer in Business got trapped.) It is regardless of whether you are educated or not, above age 62 or not, speaking only Chinese or not!

I have a suggestion here that shall we revealed to the public via media WHAT HN5 AND HN2 ARE. Show them what an expert had analyzed both in the technical and layman terms. Only in this way that we can make everyone understand how toxic the products are. Only in this way that we can tell those people who are un-empathized, and obviously not directly involved to shut their mouth.

We must not only be united within us, we must reveal everything to all Singaporeans and get all Singaporeans who have conscience to be united and don't get bullied by such an entrusted business giant.

Mr Tan, hope that you can advise us what we should do next so that DBS and MAS would face the problem and return to us, thousands of Singaporeans, a justice.

Many thanks again to what you have done for us!

LK

14 comments:

Anonymous said...: Yes, quite agree with 8:59AM. DBS should be responsible for issuing such toxic product.

Just read the notice about HN5 from DBSwebsite. I had thought I had understood the product after more than one month's study. But the way they compute the redeemption amount astounded me. According to the formula, the investors would get zero even if the CDOs did not have any loss. On the other hand, if the CDOs failed, the investors would also get nothing even if the reference entities are all intact. as all the money would be used to pay the loss in CDOs.

the products are invested in two baskets, but they are not used to diversify the risk, but to intensify the risk. What a malicious product!; November 01, 2008 10:06 AM
Anonymous said...: The only way I see to make FI wake up is to take legal action, otherwise we are just playing their game. I think the cost mentioned by Glenn knight is afforable if shared by all investors of one FI.

regards
lkf; November 01, 2008 10:53 AM
Anonymous said...: I agree. We cannot expect the general public to be like Morgan, to take the efforts to find out the mechanism of how the products work, & empathize with our grievances.

Being a victim of Minibond, I can't help but to suspect:

(1) swap ctt, reference entities
are just smoke screens to
divert our attention from the
underlying securities, CDO

(2) could the real purpose be: to
get rid of the toxic CDO?

If above suspicions are true, then the intention to deceive starts from the product design stage! We will have a strong case to demand compensation, whether in FIDRec or Court.

Only the authorities have the rights to open the records/ correspondences in the arranger & issuer, & determine whether (1) &
(2) are true or false.

If true, bring the culprits to Court on behalf of the investors!
If false, at least the investors know the truth.

I'm pinning my hope on HKMA and MAS.; November 01, 2008 11:10 AM
Unknown said...: Dear fellow HN5 investors,
We have all heard what Mr Raju Rajan said during Thursday evening’s dialogue session. Key statements made by him were as follow-
1 HN5 is not a low risk product;

2 each complaint would be dealt with on a case-by-case basis via their complaint process. DBS targets to finish resolving all 1,400 cases by end of this year.

3 Mr Raju confirmed that he was representing DBS and he was authorized by the bank to speak to us. Mr Gerard Ee would be the witness to all statements made by Mr Raju.

4 Part of the resolution process would involve interviews of both victims and the RMs by DBS bank. Both the interview results of investors and RMs would be reviewed and a resolution would be reached by the senior mgt of DBS. In addition, the selling and response pattern of investors attached to the same RM would be reviewed before making a final decision.

5 The complaint file would be handed over to Mr Gerard Ee after DBS has completed their investigations. Mr Gerard Ee’s role was to ensure that the process was in accordance with what had been laid down by DBS. Mr Gerard Ee clarified that his job was not to Participate and ensure equity in the resolution. Determining the quantum of compensation will be the prerogative of the senior mgt of DBS.

6 Mr Raju confirmed that DBS did not make any profit from the whole transaction. After the dialogue session, he clarified that DBS received 3.5% commission from the sale of this product but they did not make any profit after accounting for the unwinding cost.

7 The S$70m-80m compensation mentioned in the press statement issued sometime last week was an estimate based on information gathered at that time. There was no reply from Mr Raju when asked if this number would be increased in view of the additional information and facts provided to him during this evening’s dialogue session. Had DBS budgeted only the mentioned amount of S$80M for possible compensation for investors in both HONGKONG and Singapore?

8 After the dialogue session, we spoke to both Mr Raju Rajan and Mr Gerard Ee. Both said that they did not watch the particular episode of TV programme “GET REAL “ on the sale structured products linked to Lehman Brothers televised over Channel News Asia last week. DBS had stated categorically that all information would be gathered to assist in their decision making. We believe that this episode provided critical facts that DBS should consider in their review. Therefore we urged the senior executives of DBS watch the episode as it showed the severe impact of a possible negative DBS bank decision would have on the lives of victims.

9 After the dialogue session, we highlighted our displeasure over the way the Zero sum was communicated to us. MediaCorp 93.8 called us in the morning on the day the news appeared over the media. We had yet to receive the letter. We the affected victims had to be informed about the fate of OUR investment by the press! Both Mr Raju , Mr Gerard Ee and Ms Karen (responsible for DBS communication ) apologized for overlooking this aspect of communication. This communication mode clearly demonstrated DBS bank’s perspective on the whole saga ie INSENSITIVE & HIGH-HANDEDNESS and possible BREACH OF BANKING SECRECY!

We need to communicate the above points to the press at the Hong Lim Park gathering this week. This is the only channel that we can communicate to the press without getting any police warning.

In our humble opinion, we believe our strategy should be as follows –
1 communication via press & Hong Lim Park – use the press to communicate our suppressed feeling to the government and the world;

2 persevere on and we must ensure that DBS does not succeed in their “conquer, divide and tire us” strategy.

3. Do not commit to a compensation amount; let DBS come back to us with an amount;

4 aggressively pursue the MP route ie everyone to bring their complains to the MP

5 gathering all 1,400 conned victims to sign a petition to the PM;

6 think of a last resort action if all above fail. Eg like what one fellow investor said he did – visit HSBC!

STAY UNITED & FOCUS … Always remember that unity is strength. As a group we can hope for success; no hope if we are not united!; November 01, 2008 12:14 PM
Anonymous said...: Good idea!

This will not only draw more supporters for the victims from the un-affected, but also prevent people from falling into such traps in future.

Especially the Chinese media (Sin Min, Wan Bao?), not to leave out the non-English educated, non-internet-savvy group.

Better still, if Jack Neo can firm
a movie using this theme...; November 01, 2008 12:51 PM
G C said...: I am very empathized with all those who become victim of these structured products. Not with standing that I am a qualified accountant, I find all these structured, derivative beyond my comprehension. As I have commented in this blog before, many may believe me regardless what education back ground you may come from, it is almost impossible to get a clear understanding on what have been written in the prospectus of any structured products. Also bear in mind that any calculation of so call return on the investments are dependence on many many assumptions and theory. The prospectus are documents for financial analyst and not for the normal investors to understand. Even you want to understand them you may have the time and knowledge to do some.

That is why after reading Mr. K L Tan blog on one feature of good investment product is simple and easy to understand that I believe in him advocating something that is practical and honest to the investors.

I myself have in many instant face the situation when I renew my FD at FI was approach my RM to the so call alternative investment to FD.

Please believe me, no one will be able or have the time to read the prospectus and it end up we put our trust in the RMs to tell what the products is all about, and in most of the time we will be mis led in one way or other into believing that the products is more superior simply it offer highly rate of return then FD rates. We are not be emphasized on the risks involve. We also never in many instances that the Risk and Return are properly matched or other wise.

It is therefore my opinion that these kind of products should never to be promoted as an alternative to FD and should not be promoted and market to the masses over the counters.

When thing get wrong it is always the first to find who to fault.

In this financial fiasco I believe many investors who have become victim should be blame in totality. From what have been reported in Hong Kong many got into these kind of investments with out proper understanding on the features on the products and most of them put their trust on the RM and so to say the distributors. It is only fair to say that the distributors should bear the responsibility in one way or other on this fiasco. I do not say that the investors are not at faults at all, but many have become victim simply they have put their full trust on the RM who represent the FIs and whether the FIs understand fully the nature of the products or other wise no body will know unless the regulators willing to investigate. This is what I believe one of the most important issue to attend to other wise we may never learn from what has happened.

And to the investors, they have to fight on on to get a fair due out of these fiasco and to those who are not empathized are simply inhuman and uncaring so to say.

G C Tham; November 01, 2008 2:09 PM
Anonymous said...: I totally agree with you. Banks like DBS, ABM AMRO, May Bank, Hong Leong Finance etc will be very happy to push all the blame to their Relationship Managers and say "not our fault". We have punished/suspended our RMs who "do not meet our standards." Naughty boy! What a cheek! What standard are they talking about! It is a joke! They will try their best to deflect attention from their own wrong doings - creating mislending sales brochures & providing incentives to their RMs so that they push the toxic products to unsuspecting customers to maximize their profit. Shameful!; November 01, 2008 3:00 PM
Anonymous said...: Hi LK,

FIs not only must "do the right thing" but "the honorable thing".

There are 10,000 victims waiting for a speedy resolution, waiting with 3 family members, supported by 5 relatives, comforted by 5 work colleagues and encouraged by 5 friends = 3,750,000 pairs of eyes and ears, not an insignificant number; and word-of-mouth is one of the many powerful tools available.; November 01, 2008 3:29 PM
Anonymous said...: The roots of these causes lie with the FIs and the RMs.
1.Poor and impossible to understand products.
2.RMs who are NOT qualified in investment and who didn't follow the steps as provided by the law.
They were dishonest and greedy and had NOT considered the interest of the customers especially the old and uneducated.
3. MAS, the regulator didn't regulate.It didn't check and audit the the FIs and RMs regularly and too easily satisfied with fabricated reports by them.
MAS isn't serious and truthful about enforcing the laws it made since 2000. If MAS did, then it is negligent and incompetent to have let the RMs and FIs escape their check by breaching the laws.
The whole saga is big farce and is staged at the expense of innocent investors and all the actors are to be fully blamed for what has happened. They must be punished.; November 01, 2008 5:16 PM
siewkhim said...: You can stand united and stand focus. But can you all stand the might of the FIs which have unlimited financial resourses, better and much stronger defend team and strong political muscle?

I once saw a movie "Rape of Nanking". There were a huge crowd of a few thousand Chinese with kitchen knives, spike, hammer, stick, kungfu etc facing four Japanese tanks. The moment the tanks fire their guns and cannons the huge crowd were totally disorganised and disarray as each guy was trying to seek refuge from the Japanese bullets and explosive cannons.

Yes we should be united but with the same explosive power.; November 01, 2008 5:35 PM
Anonymous said...: Hi, Mr. Tan

I refer to the HN5 issued by DBS. By which one Alan Corkish from Constellation Investment Ltd. said is now worth zero.

Please let me use your blog to ask all VICTIMS to call up the various BANKS' CEO to count how many coffins will be required for us!

When they sell those 'toxic things' they really speak like good friends of many years. Assuring the safety and beneficial way they help. Look what happened now? They just point to the prospectus and tell us that, all along, they are right to sell to us but, we are wrong to sign them!! The RM/BANK that we trust has now turn around and say that we are fools and their worst enemy.

Imagine our national bank washing their hands at this moment of anguish.

Imagine that we the citizens of Singapore fall victim to our own Banks. The one that many of us trusted with money that used up more than half of our lives to gather. When we just want to put our sweat and blood into a simple FD for save keeping.

Imagine that Singapore is supposed to become a Financial Hub and the first victim is its own citizens.

Imagine that MAS could NOT have forseen the implications and allow BANKS to peddle such products to many of us.

'Fools' we might be, but the BANKS and MAS should bear in mind, our loss are not only us but the reputation of the Nation and their Citizens!

Are we a Nation that seemly protect citizens in good times and abandoned in bad times?

Is it the case that after we lost our money, we are now let to die out there?; November 02, 2008 4:38 PM
Anonymous said...: When did our gahmen protect the citizens even in good time ? ALl we see is prices getting higher and higher and their salaries getting more and more !; November 02, 2008 7:53 PM
Anonymous said...: Anonymous Anonymous said...

When did our gahmen protect the citizens even in good time ? ALl we see is prices getting higher and higher and their salaries getting more and more !

7:53 PM

If i am angmoh, i might say..

Hey hold on, i thought YOU voted them in?...; November 03, 2008 6:50 PM
Anonymous said...: Hi, Mr. Tan

This is my second comment to the HN5 from DBS and it is because I heard from the News that they will hold the final dialog regarding their stand with us VICTIMS of this 'toxic' product.

Hope you can also allow this to be shown to One and All who are now hapless because of the cleverness of this Organisation in our Society in dividing us into two halves 'the vulnerable' and 'the gullible'

Using their own 'expertise', they play games to those they considered 'vulnerable' by playing their triumph card (because WE did'nt force you to signed it.)

And by virtue of the hands-off attitude of MAS in this instance, they are being embolden. They could now pick and choose the rules of the game. Oh yes the CASE BY CASE THINGY (and fully endorsed by people with authority.)

Guess who is going to be the winner???

They pay the 'gullible' to show that they are magnanimous.

So the former will be 'played to death?'

After all the waiting, we are just given a piece of paper with some writing and a signature from one we do not even heard off. And that is 'game over?' (I bet DBS bunch of 'expertise' could not even begin explain why it becomes zero.) So how can WE accept that!!

Please! This last meeting is going to be telling you that 'DO NOT BOTHER ME ANY MORE' 'GO FIND YOUR OWN COFFIN AND DIG YOUR GRAVE'

And the CEO/SPOKESMAN/RM WHATEVER will only standup till the curtains fall and they could have done their their duty and go home. A good day's job for them.

What next?? US VICTIMS???? Good and Hardworking Citizens of Singapore.........; November 04, 2008 12:40 AM

Saturday, November 01, 2008

Educate the public about the structured products

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