Tan Kin Lian's Blog: Distributor can recover the compensation from the issurer of the credit linked notes

Monday, December 15, 2008

Distributor can recover the compensation from the issurer of the credit linked notes

Some investors asked me if they can expect the distributor to compensate for 50% of the loss, when they only earn 3% to 5% as commission to distribute the product. Perhaps 30% is adequate.

I suggest that the distributor should compensate 50% and get the subrogation rights to recover their loss from the issuer of the credit notes. Apart from Lehman Brothers, the other issurers are still in business and are able to compensate the distributors. The distributors can also seek to recover their loss from the receiver of Lehman Brothers.

By acting in this manner, the distributors will be able to win back the trust of their customers, and also reduce their actual loss.

6 comments:

Unknown said...: immediately coming to mind are two possible responses to that scenario

1st, there are no ONE single insurer (in the right frame of financial stability AND MIND) whos able to cover that large scale of sums, just like the distributors situation now, EVERYONE IS WAITING FOR EVERYONE TO MAKE THE FIRST MOVE (refer to those cross replies from the different distributors you'd know)

2nd, even if there IS one big insurer and a few others 'co-sponsors', they will TAKE FOREVER to 'investigate' claims proceedings, IF THEY ARE EVEN ADMISSIBLE, at worst they will claim they are awaitng the outcome of the bankruptcy proceedings by Big Brother whoever that is, as long as there is.

You get the picture.; December 15, 2008 10:51 PM
Anonymous said...: They will not do this.
They will take the easy way out bec we are easy to bully.

Many hv rec'd wriiten notice that no compensation, not even a single cent at all!!!!!!!!!!!!!!!!!!!!!!

Why shd they take the trouble when we are so easy to bully?????
Dream on!!! Wait long long!!!; December 15, 2008 10:52 PM
Parka said...: Trust is cheap.; December 15, 2008 11:35 PM
Anonymous said...: 50% compensation is fair. The FIs should now work with MAS to seek legal redress to recover the loss from the receivers of Lehman. The FIs & the Gate-keepers need to nail those chow angmo swindlers/scammers!!; December 16, 2008 12:28 AM
Anonymous said...: What Mr. Tan said is right.
Such "Toxic" product only constitute a small % of the distributor's portfolio.
Like Town C, such investment is less than 1% of their total investment. So such prpducts may constitute less than 1% of distributor's total portfolio. They may loss a bit here since they decided to sell such risky product, but they wld hv made much more from other products.
They could make even more from other products in future if consumer hv trust in them.

So it is a win-win situation here. Some investors may hv put in 10%, 30%, 50% or even 80% of their total asset in these products. They can't afford to loss, but to distributors, is is just a very small %. They also hv the legal capacity to claim back from issuers.; December 16, 2008 8:33 PM
Anonymous said...: Better take the 30% and move on.

The recent DBS retrenchment was related to possible legal action by investors who lost money.

Almost all of those asked to go were RMs.

In the event of a lawsuit, you will find most of the key witnessess missing.

Given the burden of proof is on the claimant(s), the case has been weakened substantially.

Also given the time which has lapsed, any incriminating evidence at the FIs would now almost be totally gone.; December 17, 2008 2:41 PM