Tan Kin Lian's Blog: Investors should be aware about the risk: MM

Monday, November 10, 2008

Investors should be aware about the risk: MM

Hi Mr. Tan,
I am quite discouraged by the lack of action by MAS. Even MM said that the investor should be aware that they are taking risk by going for 5%, instead of 1%.

Many investors could have received 2% as they are investing a large sum of money. We thought that the higher interest rate of 5% is due to locking up our money for 5 years, which we are prepared to accept. I was not aware that the product is so highly risky. Why should I risk my total principal just to get 3% more? Does MM know the facts?

What is the best course of action now?

REPLY

I think MM should know the facts as they are contained in several petitions submitted to MAS. They are also well covered in the newspapers.

Although the lack of progress is discouraging for the investors, my suggestions are:

1. Spend $120 to make a statutory declaration to state honestly how you were misled into making this investment.
2. Submit your claim again to the financial institution with the statutory declaration
3. If it is rejected by the financial institution (or rejected again, if you have been rejected earlier), you can submit your claim to FiDREC.
4. If many cases were by other investors were rejected by FiDREC, you can take a collective legal action.

The investors can still hope that the government in Hong Kong or USA can take legal action against on the financial institution. If the financial institution are found to be acted wrongfully, then our government may have to take similar action.

46 comments:

Anonymous said...: Because our government is the biggest share holder of DBS, MM Lee has to protect DBS. Distrust DBS is just like distrust PAP government.

Zhong; November 10, 2008 10:32 AM
Anonymous said...: Do not lose heart just because MM said this. He is well known for his logical mind. He is also known for making the best choice when it comes to the crunch. Obviously the need to pander to the interests of the financial institution is more important to the country than to your interests. The way his mind works is that he cannot possibly give up the work done all these years to woo foreign financial institutions here and then now scare them away. This will then be bad for business and will hinder Singapore's development into a major financial hub. So sorry, the needs of many outweighs your need.; November 10, 2008 11:01 AM
Anonymous said...: MM should be aware about the politcal risks for not understanding the crimes: Investors; November 10, 2008 11:04 AM
Anonymous said...: Again, MAS and Sg government will be behind the curve and will act only following HK. We can only rely HK to drive Sg and hope HK can do something for their citizens, then Sg will be forced to do something for us.

Frank Tan; November 10, 2008 11:10 AM
Anonymous said...: The crux of the matter is not the additional yield for the increased risk.

It is:

1. Failure to disclose the nature of the risk by the financial institutions. It is also probable that the risk events had taken place or was about to take place even before or at the time these junk was sold.

1. Misrepresentation with culpable intent to hide material facts from investors.

3. Mis-selling by bastions of society, ie the financial institutions, in a manner no better than second hand car salesmen. At least,if you bought a rotten second hand car, you still can scrap it for the unused Parf and COe. Here, the only thing you have to show for what you paid your life's savings are a few pieces of documents with the name of Bank who sold it to you. Keep it for posterity and tell your grand children what a fool you have been and warn them that you will turn in your grave if ever any one of them buys another structured product.; November 10, 2008 11:36 AM
Anonymous said...: Will tell my grand childern that I will rise from the grave and haunt DBS and MAS building.; November 10, 2008 11:53 AM
Anonymous said...: Don't bother about what has been said. What has been spoken may not be always right.
Remember who say we are living in the golden period two years ago. Look at what happen now.
Some people may agrue on the duration of how long Golden period should last. This is subjective but two years is really too short to be considered Golden period.; November 10, 2008 12:16 PM
Anonymous said...: I think the perspective of govt and investors are different. Govt viewed it as bad investment whereas investors viewed it as mis selling.

So we are talking about different platform.; November 10, 2008 12:23 PM
Anonymous said...: No need MM Lee to tell you lah. When MAS first released their statement on this, I already knew and confirmed. Any long time citizen should also know.

For those who don't, just have to learn fast and move on. Or like what his son said of the great Mas Selamat escape , "What to do, it has happened".; November 10, 2008 12:29 PM
Chew Boon Keng said...: The offer by the distributors to compensate the elderly and those with only primary education appears to be supported by the MAS and the government. This is purely a political ploy to gain the sympathy of the populate and to down play the idea that there have been mis-sellings and mis-representations by the vendors. The fact that even Town Councils have invested in these products is clear indication that they were not aware of the potential high risks involved.

After reading MM's comment in the Straits Times today, I now understand why MAS is dragging its feet and not doing anything for the investors. MM is of the opinion that the investors should know the risks as the 5% interest they get was many times the rate for fixed deposit. In other words, you should have known better!

This confirms my suspicion that MAS is just playing lip-service for the time being and is just taking its cue from the government. They are more concerned with the bottom line of the banks and how it affects the economy.

I now wait to see what action would be taken against the Town Councils (and maybe Stat Boards) that have invested in these products and lost public money in the process.

Are they supposed to use public funds for risky investments? A public inquiry would be in order.

How could one deal with this on a “case by case” basis? The whole truth about who are being offered compensations and the rates of compensation will not be revealed on grounds of confidentiality. There will be no transparency. Those who accept the compensations will not be able to take legal action. But, of course if you are satisfied, then by all means accept the offer and close the matter.

I am following the advice of MAS and the government and have lodged my complaint with Hong Leong Finance. Subsequently, if this proved unsatisfactory, I will file my complaint with FiDREC.

This does not prevent me from subsequently taking legal action against the Financial Institution (FI) if I am still not satisfied with the offer of settlement. I am collecting enough data for this purpose. We must have the determination and resolve to undertake legal action if it becomes necessary

Chew Boon Keng; November 10, 2008 12:50 PM
bsd said...: When HN5 was issued in 2Q 2007, the 5 year govt bond was yielding 2.5%. Thus the premium for the credit risk undertaken by investors (FTD swaps + CDO collateral) is 2.5% per year.

What is misrepresented to most investors is the skewed downside risk of the investment.

Based on the pricing, a typical investor would think that the investment has equal chance of earning the full return of 27.5% for 5.5 years or 0% (i.e. principal guaranteed), because an investment into the risk free SGS would yield 13.75% over 5.5 years anyway.

What investors were not told is that based on the maket pricing then, the product has 97.5% of earning 27.5% return but 2.5% of earning -100% (i.e. total loss). This type of investment should only be for risky investors only, and should only constitute a small part of a diversified portolio.

The issue is that investor fact finding was not done properly and a significant number of investors were misled into placing a large part of their money, some previously in FDs, into these risky investments. HN5 is definitely not suitable for these folks given their risk profile, not to mention that it should not constitute a significant proportion of one's portfolio.

And that is MIS-SELLING at the bank systemic level; November 10, 2008 12:52 PM
Anonymous said...: Old Lee appears is saying on his son's behalf the govt's final position on this matter.

Fellow investors, your only chance is to keep on fighting like the HKers. Otherwise you will continue to let these people ride rough shod over your hard earned money.; November 10, 2008 1:05 PM
Anonymous said...: Investors should stay united and continue to fight for justice. Don't ever give up, it is our hard earned money.; November 10, 2008 1:19 PM
Anonymous said...: I hope our Government who does not bother to help should stop rubbing salts to our deep wound ! Look at how HK Government helping their citizens versus S'pore .... now all FIs rejecting our claims all becos our Government says is our own fault & greed. MAS, who approved these toxic products in the 1st place has nothing to be blamed ? Where is our justice here ?; November 10, 2008 2:09 PM
Anonymous said...: MM said that the "investors" bought the products "with they eyes opened". Those running the town councils have bigger eyes. Full investigation must be carried out and the results must published on why these officers are allowed to buy such products with public fund fully aware that they are high risk. These officers must be punished.; November 10, 2008 2:14 PM
Anonymous said...: Is MM aware that OCBC and HL Finance were offering 3.15 to 3.5% for a 1 yr FD at that time? Who (including town councils) will invest and get lock up for 5 years with 5% interest if he/she was told that they may lose all their money (not a fraction)? None. Because the difference is only 1.5 % to 1.85% but come with very high risks. They did not know and hence there was indeed mis-representation !; November 10, 2008 2:29 PM
adego said...: if it is mis-selling at the FI level, investors will NOT have the CASE!

WHY?
MAS approved the distribution of CLN to non-sophisticated investors, and that will also indirectly backfire the regulator.

How to have a case then, if it is proven the FI's 'fault' (wrong target investors)? u know the answer; November 10, 2008 2:41 PM
Anonymous said...: Dear all ,

Please read what Mr. Lee Kuan Yew said (as reported in The Straits Times dated 10 Nov, page A3,title: Lehman Investors Aware of Risks ): “...MAS has told the banks that they’ve to put things right. But many went in with their eyes open. They are not old or un-educated.…………if the authorities had handled the matter based on the law, the case would be closed…….”

So if the victims are not ‘ old or un-educated ‘, the only way seems to be ‘grouped together and sue the RM ‘ by applying the Section 27 of FAA i.e, an FA is liable to pay damages to an investor who suffers loss or damage arising from advise that was not supported by reasonable basis for recommending a certain product.; November 10, 2008 2:46 PM
Anonymous said...: Well said.

Its true. Down to the very last bit.

Only the foolhardy will disagree steadily.

No compensation. Period.; November 10, 2008 2:52 PM
Anonymous said...: Compared to our neighbouring countries, I feel we are fortunate and lucky to be Singaporeans. I recently canceled a holiday trip in a nearby place because of fear. Although I do not agree with many of the things the government did, I feel we must not take peace for granted in this young country.; November 10, 2008 3:18 PM
Anonymous said...: I would further add one of the things I do not agree is ministers pay. Pay should never be the main criteria to motivate a person. Just look at the recent examples of the troubled banks who pay their top management obscene sum of money. It doesn't result in the banks performing better. It only leads to greater risk taking at the expense of the public eventually. There are better motivational factors such as for the love of the country and its people.; November 10, 2008 3:37 PM
Anonymous said...: I think government need to take proactive action. See, the Hong Kong government is now doing much better. I hope the banks there get sued and then order to pay back the sum of money to investors.
Government should not think that they can squander away the money by just randomly investing in any products. See, now town councils lost millions of money. Then I am angry that they do not feel the pain of their citizens who have lost their hard-earned money. I think Mis-selling has taken place. Who would want to lose money with just 5%. I don't understand MM's logic. If there is a possibility of losing all the money, who want to invest in a product that ONLY give 5% for 5 years?; November 10, 2008 4:09 PM
Anonymous said...: Following MM Lee's logic, MAS' and the FIs' eyes were open wider than common investors because they are paid to open their eyes. Have they realized that Lehman Brothers and the CDO-based products are too risk to retail investors? How come DBS and some professors are still saying they thought Lehman Brothers was unlikely to collapse last year, even after the burst of
subprime crisis? Are't they sucking commoners' blood and talking blindly with their eyes open?

XH; November 10, 2008 4:28 PM
Anonymous said...: I am very disturbed by the comments made by MM about how investors should have known better that when someone pays you 5% interest, whilst Fixed deposits were paying 1% to 2%, that the risk is greater i.e. we went in with our eyes open.

Should we citizens then be concern that the CPF Board is paying a higher interest (4.5% or thereabout) for the Special Account balances? Are these balances more at risk than the Ordinary Account balances? Should our eyes be open with regards to the balances kept in our Special Account?

Converned Investor; November 10, 2008 5:05 PM
Anonymous said...: The root cause of this fiasco is MAS who allowed these toxic complex products to be sold to the ordinary man in the street.

In making these comments, MM Lee is covering up for his son, cos LHL was the Finance Minister when MAS decided to let loose regulations.

Insensitive comments by our gahmen again and again are leaving the victims with no choice but to go the legal route !; November 10, 2008 5:14 PM
Anonymous said...: After MAS, GCT, LHK, now I have also lost respect for LKY.; November 10, 2008 6:54 PM
Anonymous said...: Frankly speaking, I have always respect our founder father of Singapore MM Lee. I think he gave insensitive comment which hurt Singaporeans, especially those investors hurt by the mis-selling. Though I did not invest, I can feel the pain of these investors. I do believe them, because if the risk is made known, no one would want to lose all the hard-earned money for just 4% more interest. I think MM Lee should not speak up for his son. I am worried, if MM Lee is gone, will PM Lee be a good leader. We'll see, if the US successfully sue the Lehman, than their statement that it is buyer beware is not applicable. Now, we can see that US government leadership is growing stronger. They are making the effort to help the investors. Here, our government is preaching buyer beware and financial education and not regulating investment products properly.; November 10, 2008 7:57 PM
Anonymous said...: Just ask the MM these qustions: how the Town Councils got involve in the minibonds? Did they buy the toxic product with their eyes open? Since they are not old and also well educated, they should aware of the risks, and how can they use the public fund to invest this toxic product? If MM can answer this well, I will still vote PAP for the next election.; November 10, 2008 8:44 PM
Anonymous said...: Frigive the OLD Man.; November 10, 2008 9:13 PM
Anonymous said...: They WERE Good Leaders and People...but having live too long in Heaven ("$Heaven$ is a place on Earth")...they have been totally detached from the True Humble Earthly life that normal sINGAPOREANS live...; November 10, 2008 9:27 PM
Anonymous said...: Grow up. Please don't due to financial gains or losses spite other respectable folks.; November 10, 2008 9:37 PM
Unknown said...: Ask yourself .

if u meet Mr Satan who disguised & dressed like Miss Fairy in heaven ,

touch your heart , sincerly , my dear IDOLS , WITH YOUR EYES WIDE WIDE OPEN :

WHO DO U SEE ?
if u are educated

WHO DO U SEE ?
if u are not old

WHO DO U SEE ?
if u are a sophisticated religion believer

m; November 10, 2008 9:41 PM
Anonymous said...: MM seems more like PM than MM.Not surprised foreign dignitaries mistake him for PM."How is your your father , Mr Lee, the PM?"; November 10, 2008 10:14 PM
Unknown said...: Part 2 Miss Fairy & Mr Satan

St Peter , as an authority regulator , has testified that it is not his duty to screen trespassers into heaven .

Er Lang Shen has gloated in his blog (www.erlangshen.com) that visitors should have read the disclaimer ; never no claim if injured during visit.

Yu Wan Ta Ti has proclaimed that the issue is peanut (as compare to the peach stolen by monkey god) . this is an honest mistake , LET MOVE ON !

m; November 10, 2008 10:27 PM
Anonymous said...: 9.37pm
The principle here is neither the question of financial gain or loss.
It is a matter of daylight cheating or robbery being committed by the FIs etc. We the victims here are voicing our rights in the wilderness here. Unlike HKong, we do not have any Justice Pao Kong here.
I presume you 9.37pm is just an observer here. You have NOT lost any of your hard earned blood and sweat savings. I am sure you don't understand our pain we are going through.; November 10, 2008 11:41 PM
Anonymous said...: This is not only the lehman and minibond issue. There are many other notes which gives return of3.75% pa that are sold to the public investors unknowingly as investment equivalent to FDs. After investigating the product termsheet, which contains 14 pages, 8 pages are focusing on the various risks involved.

There has to be a systemic way which the FIs have trained their RMs, FAs to sell these high risk products as equivalant investment to FDs.

Do not depend on the PAP govt or MAS to help Singaporeans. It should now be crystal clear to all Singaporeans that the authorities will NOT intervene. The govt is more interested in the development of Singapore rather that its people. In any case, there can always be more FTs who are more than willing to take over a Singaporean job at a lower pay. Why should the PAP govt care, since the PAP is 100% confident that it will be voted again in the next election.

It is now time for Singaporeans to open their eyes big big.; November 11, 2008 1:53 AM
Anonymous said...: Singaporeans deserve this treatment by government for turning a blind eye to various injustices suffered by other Singaporeans in the past.

If you had lent a helping hand then, government won't be so daring to ignore your complaints now.; November 11, 2008 9:52 AM
Anonymous said...: I have just found out my product that 4.9% tied up 7 years bought from insurance company is also CDO based and tied to a large number of underlying securites that some have defaulted. The whole market is filled with these toxic products, even those sold by insurance companies!

If the government don't act and help citizens seek justice for their many years of hard earned money, then they are not fit to be my government. I will do my part in voting you out sinve you are not protecting me and my family. I need someone that care, not keep driving progress that benefit only some while the rest are left to drown; November 11, 2008 10:22 AM
adego said...: well said, Kevin!

unless there is a 'change in regime', which could be a higher price to pay.; November 11, 2008 12:18 PM
Anonymous said...: Typical grand posturing by MM. The extent of the banks' (especially DBS)culpability could be in direct proportion to the severity of MM's insensitive rebuttal.

Contrary to what MM claimed, I hold the view that a competent lawyer should be able to sue the living daylight out of DBS.

If DBS is truely repentant, it should at the very least review ALL the High Notes series it sold over the past few years and offer to buy them back from vulnerable or mis-sold investors.

I am sure if there was mis-selling in HN5, then there will be mis-selling in all other HN series.

Best Regards
Golden Era; November 11, 2008 1:33 PM
Xtrocious said...: What they are doing is pro-business mah...

Unlike HK, so unbusiness-friendly - everything also cannot do...

Hence it is for the greater good my fellow citizens - be thankful that our dear leaders are always looking out for us...

PS - Post tongue-in-cheek but admittedly, more like butt-cheek :p; November 11, 2008 2:22 PM
Anonymous said...: "I am sure if there was mis-selling in HN5, then there will be mis-selling in all other HN series."

THATS precisely the Pandora Box that the accused parties have been trying to avoid running into!; November 12, 2008 2:42 PM
Anonymous said...: i'm a simple person, having read and trying to understand all the posts, can we just hv a simple closure - banks and angry investors take a 50:50 blame. why waste so much time n energy, we need to move on! A very very--- expensive lesson for all of us!; November 15, 2008 2:43 PM
Anonymous said...: 2:43...u r not only simple...but ignorant...pls read up the facts b4 u comments....u r behaving exactly like many other naive singaporeans (even law professor)...not involved & not knowing the whole pictures and proper facts....Yet commenting like "experts" & jumping into false conclusions...; November 16, 2008 11:04 PM
Anonymous said...: 5.05pm

You bring up an important point. Is MM hinting that our CPF money invested in Barclays, UBS, Merryl Lynch, Citibank and losing billions, so we better be prepared when the news breaks? I am getting worried my CPF money also lost to these foreigners.; November 17, 2008 10:16 AM
Anonymous said...: my dear anonymouos 11:04, I said I'm simple cos I'm no expert, neither r u. I'll stand to lose quite a lot too. Of course we want our money back, but that will take lots of time, money and energy. Like Mr Tan KL said, investors must bear some responsiblities too. Can understand our good govt may hv made some mistakes too in allowing all these toxic products. but who cd hv known? Your reply reflects on u. If u r not happy, u try to sue n see what u get. Pls read one very good suggestion - we get 50-50, those unhappy can continue to sue. Pls read carefully b4 u think u r so smart!; November 20, 2008 11:57 AM

Monday, November 10, 2008

Investors should be aware about the risk: MM

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