Friday, November 07, 2008

Proposed terms of settlement

Submitted by Richard Woo

Maybe the refund, in full, by distributors, can be made on the condition, and mutually agreed with the investors, that it is put back on fixed deposit with the distributor, for example:

Refund by ABN [RBS] to go back on fixed deposit with RBS, refund by Maybank to go back on fixed deposit with Maybank, and so on.

Since investors had agreed to a waiting period of about 5 years to get their principal back, under the original terms of the investment, it may not sound unreasonable for distributors to suggest that the term of the deposits should be somewhere from, say, 3 to 5 years. The rate of interest payable on such deposits can be something “reasonable” and mutually agreed between the investors and the distributor/bank concerned. Such an arrangement may be beneficial to some extent to both sides.

For the banks/financial institutions, no cash outlay is involved, at least not before the maturity date of the deposits [and this also does not mean the holders of the deposits will withdraw all the funds on maturity], and it should be borne in mind that perhaps a large part of the funds used by investors in the purchase of the product could have emanated from external sources, e.g. accounts maintained with other banks/institutions.

Litigation may end up with bigger losses for one side or the other and in such a scenario any goodwill there is will be lost, presumably, for good. Investors should be accorded a settlement that would restore confidence in the banking/financial industry; any proposal for settlement that leaves a bitter taste in the mouth is, obviously, not something to be considered. Banks and the other institutions have to think long term and their reputation and future business interests may largely depend on the actions they take now.

Maybe, as an exception, these banks/financial institutions deserve special treatment in accounting procedures; maybe they should be accorded, by the authorities concerned, the option as to how they intend to write off the losses, for example, whether in one fell swoop or over a period of several years, starting, say, from the time when these deposits start to mature or when funds from them are being released. As can be seen, and if I am not wrong, such an arrangement would entail mainly book entries and “cash” is involved only much later. Their balance sheets may in fact take on a healthy glow. But I have to admit I could be wrong. If so, please point out.

Richard Woo

38 comments:

Anonymous said...

I fully support the proposal but dont think I have a say in it!

Anonymous said...

This is v.gd suggestion! Win-win and no face loss. In fact, to sweeten the deal a little bit, can add 0.5% on top of regular FD rates. Good thinking, RW!

CH

Anonymous said...

For far, it seems to be the best win-win settlement. I don't mind go for it.

Anonymous said...

As i read and read and read, i stopped myself dead.

I felt the problem lies in the very first opening line.

Why the heck does the whole thing go on and on about SOME SORT OR FORM OF COMPENSATION, REFUND

Wake up. Stop going on and on. Stop by first stop dreaming up ways to help them help you return your investments..in whatever manner! Stop justifying that justifications are a given.


Stop the romance with your lost investments. They are gone. Face reality.

Anonymous said...

I do not agree. Why would I want to place my money back with the institution that mis-sold me the product in the first place?

The first thing I want to do is to shift all my assets out of the bank and not tying my money with them or have anything more to do with them.

When I am mis-sold a product, I expect to get back 100% of my principal with no strings attached! To compromise is to deny that they have mis-sold us the products!

Anonymous said...

SORE INVESTORS, YOU MAY DREAM ON!
YOU NEED TO HAVE CDP ACCOUNT TO BUY STRUCTURED NOTES, HOW CAN YOU CLAIM THAT YOU THOUGHT YOU WERE OPENING A FIXED DEPOSIT ACCOUNT???
EVERY INVESTOR IS LOSING MONEY BIG TIME, DOES IT MEAN OUR GOVT MUST REIMBURSE US FOR OUR LOSSES?????

Anonymous said...

Not a bad proposal. I am even prepaared to take a 10% cut from the principal if the banks agree to such arrangement, but no offset against interest paid to us because for the past interest periods, the banks have also compensated themselves with the earnings from our investments in the products.

Anonymous said...

I have no doubt that this is indeed a good proposal. The only thing that worries me is the the FIs cannot do this just for the "vulnerable" investors. In fact, I think this proposal is more appropriate for the not-so-straightforward cases, since the FIs have already announced that they will do full refund for the "vulnerable" group with no conditions.

WS

Anonymous said...

If the FI propose this compensation, it is acceptable to me. In first place, I am looking for a low risk investment that may tie my cash for up to 5 years but with above savings interest

Minibond investor

Tan Kin Lian said...

The distributor will not offer this proposal, as they have to bear 100% of the loss. Right now, they are not even prepared to offer any compensation at all.

Investors should not expect to receive 100% of the money back (unless you are prepared to take an expensive court case and stand the risk of losing the case).

It is sad, but it is the reality.

Anonymous said...

RW

As you are writing a lot, could you tell us if you are an investor or just a "concerned citizen"?

Anonymous said...

Wake up sore investors,

I wish Richard Woo is one of the investors, if not , pls do not give us hope.

I spoke to RM from xxx securities , finding any progress at their end. He said xxx securities is unlike DBS , issuer of the toxic product. DBS, to a certain extend , it has to show "SOMETHING" to calm some investors.moreover, DBS is "GOVERNMENT BANK"

xxx securities is just a distributor, not liable or obligated to compensate a single cts.

If Richard 's suggestion is accepted and FI retore only 50% of principal to FD , writing off balance of 50% , I am VERY satisfied already.

The only hope now as what GOH CHOK TONG says, MAS is doing something , waiting for his "SOMETHING" to be announced.

But I wonder prior to MSA's announcement ,How Fidrec handles the case with a fair judgement .

Anonymous said...

The proposal must be plausible & serves the interests of all parties. The devil is in the details. Perhaps MAS can be persuaded to broker such a deal in which all parties emerge as winners!!

Koh.

CC said...

I understand we must be ralistic but haven't they compensated 100% less interest to the vulnearable group?
If so, why not the rest?

CC

Parka said...

If you guys can give any reasons as to why FI will be motivated to compensate investors, there might be a chance.

So far, I can't think of any reasons why.

It's a basic concept of value. Give first before you receive. The FI's not going to receive anything back. Goodwill doesn't count for anything in this case, it's worthless.

Anonymous said...

7.08pm is one of those IGNORANT people and therefore his comments have no value. You DO NOT need to open a CDP account to buy High Notes. That was why so many people who wanted to put their money in FD got hookwinked to put the money into High Notes! They did not know it was Structured notes or CDS or CDO or whatever you call them. Misselling of high risk products as something akin to FD is obvious.

Anonymous said...

I am afraid the FI are not worried if we boycott them, after all the minibonds investors form only a small % of their customers. Also, its human nature for even those who sympathise with our loss now, to forget about the FI misconduct in time to come.

chew

Anonymous said...

Hi Mr Tan Kin Lian,

Could you please give us a quick update on the status of the fourth petition? Have you got a chance to speak with the authority and what is your take from the conversation?
I cannot thank you more for leading us up to this point.

Anonymous said...

Perhaps it is good for DBS HN series as DBS is both issuer & distributor.

DBS's 3Q result reveals the huge loss in Lehman Bro CDOs & DBS HNs be they for the purposes of speculation, hedging or on arbitrage are used now particulary for hedging against its CDOs exposure; and as in the case of HN5 for Lehman Bro's collaspe.

DBS set the fire and have to put out the fire now or else the fire will burn down the whole house instead of just part of the house courtyard.

Do not think that distributors in Lehman Bro's Mininbond all series, ML's Jubilee 3 & Pinnacle CLN all series will agree as they are simply stunned by the DESTROYING power of the CDOs to the whole world's economy.

Anonymous said...

Mr Tan has hit the nail ! This may be a wish thinking and perhaps we should all not dream about it and be more realistic though we will continue to fight on to take back a fair share.

ym said...

i read todays straits times article "DBS will do the right thing :CEO" by francis chan...

my opinion of that article is that it was incredibly loopsided.. it made the ceo look so righteous and just..

but francis chan being a journalist, failed to gather the real facts abt the real situation facing investors.. - sad and hopeless state...

i am pretty sure ST and journalists are monitoring this blog - so there you go.. you guys are doing a bad job showing the public the facts and reality...

what a waste of my $1...

Anonymous said...

Do the investors need to refund the 5% returns they have been earning all this while? If convert to FD, need to reflect FD rates instead?

Anonymous said...

Very good proposal indeed and very good argument from Mr. Tan.

I am talking about myself now, even though I am mis sold the product (HN5), but from what I am told, the money will be place on the 8 RI, now 1 of the RI has failed, I have to take the loss gentlemanly, but the amount of loss should not be 100%, but 12.5% as I have been told that it is a diversified product. I think this argument applies to many people, except all those, especially ah peh and ah mah who were told that this is just like FD. Put in all the charges involved, I will be happy if the DBS could return 80% of the investment.
Again the proposal to put back the compensation into FD is a very good win-win idea as the FI do not need to write down the sum in one go, but over a period of time, which might impact the P&L beside affecting the cash flow problem.
We are angry that we have been mis sold but we have to have a clear head to resolve the problem.

Anonymous said...

If what mr. tan said is right, then what is the reasonable settlement, less than 50%? Or more than 50%? The FIs are facing a difficult time now. DBS sufferred 38% drop of net profit and has to axe 900 staffs. If we continue to pester the FIs, giving lots of bad publicity, they will feel more pain. They may not yield to our demand, but I feel shiok.

Anonymous said...

Dear Mr. Tan,

I thought some of the FI's were going to settle with the so called vulnerable group a full refund. RW's proposal sounds like a good starting point. Hope the rest would have a reasonable settlement soon.

Unknown said...

IF the invester invest 100k and he and all other invester pay 1k to fight the case is not expensive, the most expensive is losing 100% when you are getting back 4.25% per year. No invester at the right mind will sit there like a stupid fool and move on with any losses if they have evidence that they were mislead.

Anonymous said...

ST or ZB are quite biase towards the vitcims. Sometimes it can be frustrating to read such articles.
Is it worthwhile spending $1 to buy & read such reports???

Anonymous said...

I invested in HN2. I have lodged my complaints to DBS and have taken part in 2 rounds of teleconference with the bank's staffs. My case has been escalated to higher level as I do not agreed with what they told me during the first 2 conference. So my next meeting with the bank nest week should throw some light on how the bank views the issues of mis-selling and misrepresentation, and whether it is just wasting our time talking to them. Will keep you update. I am not one of the "vulnerable" people.

Anonymous said...

Mass retrenchment has started, or may start soon.
Older people (45 & above), many of them hv been jobless or doing odd jobs for many years thought they cld suvive with their savings, bec they hv saved hard in the past.
Now that their savings are gone. How to survive??
Especially when there are so many younger sporeans & FTs hungry for jobs????

Anonymous said...

Blogger Johnson said...

IF the invester invest 100k and he and all other invester pay 1k to fight the case is not expensive, the most expensive is losing 100% when you are getting back 4.25% per year. No invester at the right mind will sit there like a stupid fool and move on with any losses if they have evidence that they were mislead.

2:37 PM


Then I solve the riddle for you.

There is NO evidence.

Concerned said...

The problem is that we have too few local (only three) banks here. All three banks are involved one way or another with Credit Linked Products. Otherwise, when we are not happy with one bank we can easily switched to another bank and this will put pressure on the FIs to settle. Singapore being one of the financial centre has only three local banks???

Anonymous said...

12.41pm,
u can always move to foreign banks

Anonymous said...

Richard,
Have the FIs accepted your proposal?

Anonymous said...

I am not caught in any of these so-called structured products but I have people who are close to me who have invested in one of them.

My idea of writing is to throw up ideas for consideration, for people to think and evaluate and to see whether there is scope for further development or compromise. If anybody can come up with a proposition that is acceptable to both investors and distributors, that would surely be seen as a bonanza, or a masterpiece.

But we can only try our best to offer ideas which we think would contribute to the cause of the investors. From what I can see, I am of the view that mis-selling or misrepresentation has occurred.

On the other hand the distributors, or some of them, may not admit to having mis-sold or misrepresented, notwithstanding the evidence. What then? Litigation? Costly of course and nothing certain. Litigation may mean having to go right up to the highest court in the land - the Court of Appeal - for a decision. And no one [investors and distributors included] can tell what would be the benefits or otherwise of embarking on this route.

One thing is clear: to expect all the banks/FIs to cough up the funds immediately, in the present situation, is not realistic.

Therefore people should be encouraged to offer their ideas for consideration, in the hope that someone can come up with something that sounds reasonable, in the circumstances, to MAS, investors and distributors.

If a distributor thinks that being taken to court is definitely a big risk, the distributor might welcome a proposition that it can work on or develop with some variation. And everyone should strive for such a scenario - a sort of win-win situation.

To investors, if I were someone representing a distributor and I say, "we would return your money, but in stages, stretched over several years", would you be open to discussion?

Anonymous said...

To Concerned:
I will range OCBC as the most reliable Bank in Singapore because the CEO see the potential danger in the product and offer them through the securities. If somebody can open securities account, he/she should know some/limited experience in investment/risk. The CEO said the product is not offered through the bank because bank customer are normally less willing to take risk.

The worst bank, that cannot be trusted is DBS. Sensing Lehmen/Minibond type of business can make money, instead of warning the customer or stopping the offer of the product in the bank, they come up with HN2 and HN5 which is similar DBS to Lehman, Constellation to Minibond. By doing this, DBS earn even more money than Lehmen because they are the distribitor and designer of the product.

HS

Anonymous said...

HS you are right. I read in ST that OCBC CEO could sense how dangerous these investments products and thus did not offer to depositers. I am seriously thinking of shifting my deposits from POSB/DBS to OCBC. Their monthly saving rate is much higher. However, I would prefer if they make it flexible for depositer to change the monthly deposit amount and also give flexibility in withdrawing money.

CK said...

RW, as we can see where you're coming from, but the proposal is technically flawed.

Paying out in stages or retaining the money in FDs w/o the need to cough out money upfront has the SAME effect on their balance sheets had the FIs repay upfront 100% in cash.

Deposits (FDs inclusives) is a liability acct, not an asset. The same with repaying in stages where a same entry has to be entered in a liability acct.

ie As Mr Tan mentioned, the FIs will not agree to it as it's no different to agreeing 100% compensation

Anonymous said...

CK, when a deposit is payable in say 5 years' time it is treated as a future liability. The bank does not have to worry about its liquidity or cash position vis-a-vis the deposit-liability, at least for the time being. If it does not have the cash now, it can always try to operate profitably to build up reserves to meet the contingency of the deposit-liability. To expect the bank to pay up 100% now, instead of in the future, is to assume the bank is flushed with funds to do so. There is a big difference between a current and a future liability.

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