Wednesday, November 12, 2008

Letter to Prime Minister on Credit Linked Notes

10 November 2008

Mr. Lee Hsien Loong
Prime Minister
Republic of Singapore

Dear Prime Minister

1. I appeal to you to look into the plight and financial losses suffered by about 10,000 investors from the Mini-bonds, High notes, Pinnacle Notes, Jubilee Notes and other credit-linked notes that have been sold to them by the financial institutions.

2. This appeal is made in accordance with the following statements made by you as chairman of the Monetary Authority of Singapore at a staff seminar held on 29 October 2002 on the topic of “Market Discipline and Caveat Emptor”:

QUOTE
22. Our efforts to promote market discipline and a caveat emptor regime have focussed on enhancing the amount, quality and timeliness of information disclosed by institutions. We have shifted from a merit-based supervisory approach to a disclosure-based approach that emphasises market discipline to incentivise financial institutions to conduct their business in a sound, efficient, and professional manner. The local banks in particular have significantly improved their disclosure practices.

23. We must continue to update our disclosure standards in line with industry developments and international best practice. Furthermore, the mindset change is not yet complete. The public still expects to be protected from downside risks, for example when playing the stock market, but more so when depositing their money in banks. Hence one major motivation for introducing deposit insurance is to change this mindset, and get people to understand that only a limited first tranche of their deposits with a bank is protected should the bank run into trouble.

24. But disclosure by itself is not enough. It must be accompanied by investor education. Investors have to understand and use the information provided to them. They must learn to make sense of this information and use it to look after their own interests. We also need a pool of knowledgeable analysts and journalists who will shine the spotlight on any obscure fine print that the lay investor fails to notice. A more informed and sophisticated investor base will reinforce market discipline and form the basis for a more vibrant and mature financial sector. In all these respects, we have a long way to go.

25. Market discipline also requires an effective enforcement regime. To preserve investor confidence, penalties for transgressions must be swift and appropriate. MAS now has the power to investigate and bring a court action for market misconduct under the new civil penalty regime. This will complement the existing criminal penalty regime administered by CAD.”
UNQUOTE

3. On 10 October 2008, I submitted a Petition signed by 983 people addressed to the Singapore Government. It was handed over to Dr. Andrew Khoo, Executive Director of the Monetary Authority of Singapore, who received it on behalf of the chairman, Mr. Goh Chok Tong. This Petition said:

QUOTE
We, the undersigned, write to petition the Singapore Government, particularly the
Commercial Affairs Department (Singapore Police Force) and/or the Monetary
Authority of Singapore, to conduct a full and independent inquiry in relation to the
credit linked securities sold by various financial institutions in Singapore. These
structured products include the Lehman Minibonds, DBS High Notes, Morgan
Stanley Pinnacle Notes and Merrill Lynch Jubilee Notes.

Singaporeans, including the persons who have signed this petition, lost their hard-
earned savings by investing in these financial products. Such products clearly did not suit the risk profiles of these consumers. The consumers were not made aware of the high risks involved in the financial product when buying the product. They became innocent victims of misrepresentation by the financial institutions that distributed the structured products.

We now wish to be assured that those who invested in such financial products have
not been victims of negligent and/or dishonest conduct and/or fraud by these financial institutions.

The Government has a duty to ensure that investment products are marketed and sold
appropriately in our jurisdiction. Such products must be sold in a manner compliant
with the laws of Singapore. Financial institutions, including their respective key
management, that do not follow the laws or regulations applicable to them must be
held accountable for such breaches.

Please commence a full and independent inquiry into the sale of structured products
by various financial institutions in Singapore. If the inquiry deems necessary, the
Attorney-General of Singapore should act against these financial institutions.

We also ask the Government to help these investors to claim fair and adequate
compensation from these financial institutions for their losses which are caused by the misconduct of these financial institutions.

We ask the Government to act now and restore the peoples' faith in our financial
System.
UNQUOTE

4. In a supporting letter to the Monetary Authority of Singapore, I have mentioned some of the possible areas where the laws of Singapore might have been breached. They are set out in annex 1.

5. I have received an acknowledgement from MAS of the Petition. Nearly one month has passed. I have not heard from MAS if they intend to act on the requests contained in the Petition, namely to commence a full and independent inquiry into the sale of structured products by various financial institutions in Singapore and, if the inquiry deems necessary, to act against these financial institutions.

6. I appeal to you, Prime Minister, to ask the MAS to act more swiftly and appropriately, in line with this vision:

QUOTE
Market discipline also requires an effective enforcement regime. To preserve investor confidence, penalties for transgressions must be swift and appropriate. MAS now has the power to investigate and bring a court action for market misconduct under the new civil penalty regime. This will complement the existing criminal penalty regime administered by CAD.”
UNQUOTE

7. Annex 2 contains an article written from the perspective of an investor.

8. Thank you.

Tan Kin Lian

RESPONSE FROM MAS
MAS has replied to my letter to the Prime Minister. They said that MAS will give its reply in press statements. They are not able to talk to any individual investor or group of investors.


12 comments:

  1. Did Temasek invested $400 million in ABC Learning with eyes open ?

    If yes, case closed. Also, signed on dotted line already. Also, caveat emptor. Also, .....

    ReplyDelete
  2. No use one lah. No point engaging them. They are too important to be talking to mere peasants. They even want to prepare to hold elections early so they can have more good years.

    ReplyDelete
  3. "...They are not able to talk to any individual investor or group of investors."

    I suppose individual investor or group of investors are not of concern to the MAS and its Chairman,

    Will it help if we translate it into "individual voter or group of voters" ???

    Chew Boon Keng

    ReplyDelete
  4. "Anonymous Anonymous said...

    U can get either of 2 replies

    One. Thank you for your feedback.

    Two. Thank you very mauch for your generous feedback once again.

    2:46 PM"

    ReplyDelete
  5. If you feel this government is not serving you well, do the right thing when the time comes!

    ReplyDelete
  6. "Anonymous Anonymous said...

    If you feel this government is not serving you well, do the right thing when the time comes!

    3:26 PM"



    YES!


    Vote for them again so they can have another chance to prove the first time WASNT a mistake

    ReplyDelete
  7. I am not an affected investor.

    But I am upset because the MAS reply is totally unacceptable. The petitioners are the complainants and hence they are definitely stakeholders in this debacle. MAS must at least respect that. I am seeing classic stone-walling.

    There are statutes in the book for obstruction of justice.

    Keep up the pressure!!

    ReplyDelete
  8. is this the PM's way of telling you to buzz off?

    ReplyDelete
  9. "There are statutes in the book for obstruction of justice."


    Agreed


    So, could someone fetch that book from the Lion's den

    ReplyDelete
  10. "Anonymous Anonymous said...

    is this the PM's way of telling you to buzz off?

    10:10 PM"



    I wanted to shout DAH!

    then i thought again, and decided to retract what i was about to shout.

    ReplyDelete
  11. Dear PM,

    You have to respond to Mr Tan proper. At least give him a chance to hear him.

    You cannot just simply eat your own words and act blur.

    ReplyDelete
  12. MAS has really disappointed all Singaporean in their sidelining and taking sides with the banks. Original investors are suffering while the authority simply sits there watch as the situation worsen. If we have a great leader, please stand up to defend your citizens.

    ReplyDelete