Reply to "Risk listed in bold"

Dear Kin Lian,

This is in response to the article captioned “Risks listed in bold, but ….Investors went ahead despite clear warnings”, by Lorna Tan [The Straits Times, Oct 31].

The nub of the issue here, Lorna, is about misrepresentation of risks, not about the risks stated in the Pricing Statement [PE]. You appear to be someone with a fecund imagination; you imagined all these investors were given the PE in advance or at the point of sale and after reading the PE and despite understanding the risks involved they still went ahead and invested. Right, Lorna, that was what you were saying or trying to project? Have you researched in these areas?

1. How many of these investors are what is now being termed as “vulnerable people” [illiterate people who cannot read or understand English]?

2. How many of these investors are elderly people who may not be illiterate but who nevertheless cannot understand the complexity of the text given in the PE?

3. How many of these investors were actually presented with the PE and asked to read it before the decision to invest or not to invest was even considered?

4. How many of these investors, if any - assuming the PE was not produced during the discussion with the RM - were cautioned by the RM that they would risk losing all their principal?

5. Do you still seriously think that if investors had been specifically told that they would risk losing all their money they would still have parted with their money, which for many was their life’s savings, their retirement kitty?

6. Have you not heard talk that some investors visited their banks wholly ignorant of the sale of these supposedly high-yield structured products but they were persuaded nevertheless by the RM to uplift the funds from their fixed deposits and invest them in these products?

7. Have you considered the possibility of the RM putting the cart before the horse, by performing a risk-tolerance analysis after he and/or his distributor-organization had made misrepresentations about the nature of the product they were flogging, and after the investor had already been persuaded by such misrepresentations [or lies] to invest?

8. Have you wondered whether the risk-tolerance analysis undertaken by the RM can be taken at face value? Some investors can recall that in their case the assessment was done hastily and carelessly by the RM, and they can prove it.

9. And why, despite seeing the investor as having an aversion to risk of loss of capital, the RM still went ahead and closed the deal, instead of telling the investor: “This product is not suitable for you”?

10. Have you taken a look at the advertising materials of the distributors, particularly the one for Minibonds Series 3 with these enticing statements: “Invest on solid foundations” and “With our Minibond Series 3 credit-linked to six major financial institutions, you can enjoy the returns you deserve with peace of mind.”

11. You pointed out the inherent risks of DBS Bank’s High Notes and Lehman’s Minibond series and it is obvious you are equipped with an imaginative mind for understanding such risks and would not have been caught with your pants [maybe, skirt is more appropriate] down through investing in either of these products – but would you argue that it was not irresponsible for any distributor to sell these products to illiterate, hence vulnerable people, let alone distribute misleading advertising materials? Or

12. Would you agree that it was a gross dereliction of responsibility on the part of the distributors or their RMs in failing to make clear to investors that by investing they would be assuming a big risk – of losing their entire principal?

13. Would you agree that the promotion gimmicks employed by distributors were profoundly at odds with the high risks inherent in these structured products? If your answer is yes, then it is regrettable that you have made no mention of this in your article.

14. Would you agree that your article is nothing but half-truths, prejudiced in a certain way, and jarring, and a hindrance to investors, numbering about ten thousand, who are now trying to recover from the distributors?

15. Would you agree that investors who have been mis-sold are now eminently reasonable in seeking restitution from the distributors?
Dear Lorna, please let us have your response to these questions, and without any equivocation, please?

Richard Woo