Invest in the stock market

Dear Mr. Tan,

Should I invest in a capital guaranteed product that pays 2% for 2 years?

REPLY

If you have spare cash, you can invest in shares to earn the following:

a)  STI ETF can earn a dividend yield of around 5%. Even if the dividend drops, you can still earn 3% or more.

b)  REITs (real estate trust) can earn you a dividend yield of 10%.  Even if the rental drop, you can still earn 5% or more.

Do not worry about the share price (ETF or REIT). If it drops, you can still wait and collect the dividend of 3% or 5%. Wait for the stockmarket to recover in 2 or 3 years or longer, in a worse case. You can get a gain of 20% to 50%. Be prepared to take risk and get a better return.

Do not invest in capital guaranteed product that earns 2% and locks you for 2 years.

Tip: Avoid performance chasing based on short-term returns

In a book entitled "Common Sense Investing", the author Jack Bogle said, "In selecting mutual funds, most fund investors seem to rely .... on exciting performance over the short term. Studies showed that over 95% of all investor dollars flow to funds rated four or five stars by Morningstar, the statistical service most broadly used by investors in evaluating fund returns".

These star ratings are based on a composite of a fund's record over the previous 3-, 5- and 10-year periods. It has a heavy bias in favor of recent short-term returns.

A study showed that a mutual fund portfolio continuously adjusted to hold only Morningstar's five-star funds earned an annual return of 6.9 percent between 1994 and 2004, nearly 40% below the 11.0 percent return on the Total Stock Market Index.

Jack Bogle selected the top 10 performers among the 851 equity funds during the "new economy market bubble of 1997 to 1999. These funds performed badly during the bursting of the bubble in 2000 to 2002. For the six year period, these funds earned a cumulate return of 13% for the full six-year period, compared to the cumulative return of 30 percent for the S&P 500.

For the shareholders of these funds, it was a disaster. While the funds achieved a net gain of 13 percent, the shareholders incurred a loss of 57 percent. Most shareholders invested in these funds when they were close to the peak and suffered the full effect of the downfall.

Jack Bogle's message is: avoid performance chasing based on short-term returns, especially during great bull markets.

Results - Mis-selling of credit linked notes

Based on 58 replies

2. Which notes did you invest in?
Minibond       29
High note      12
Pinnacle note  11
Jubilee note   3
Other note     3

3. Which distributors did you buy the notes from?
Hong Leong     23
DBS            13
Maybank        9
OCBC           3
Philip Sec     2
ABN Amro       1
Other          7

4. How much did you invest?
Less than $25,000     10
$25,000 to $50,000    18
$50,001 to $100,000   16
$100,001 to $200,000  11
More than $200,000    3

5. Have you lodged a complaint with the distributor?
Yes                  55
No                   3

6. Have they made you an offer for compensation?
No offer yet           35
Rejected my complaint  20
Offer 0 to 30%          0
Offer 31 to 50%         1
Offer more than 50%     1

7. How long did they take to make their decision, from the time that you lodged the complaint?
Less then 4 weeks      8
4 to 8 weeks           17
More than 8 weeks      21

8. Was the distributor fair in attending to your complaint?
Yes      15
No       30

Survey - Mis-selling of Credit Linked Notes

This is a new survey, to collect statistical information by product and distributor. Please participate:

http://www.surveymonkey.com/s.aspx?sm=bH_2feqjLGwIcvaYbpcbXdRA_3d_3d

MAS reply on Pinnacle Notes

Hi Kin Lian,

Now a piece of positive news. MAS has finally responded to the PLEA I had sent last month on behalf of some 80 PN holders in November. I will like to share this with you and the other PN holders, hopefully before the year is out. 

I will therefore like to impose once again on your kindness to post MAS's letter (attached below) on your website for their awareness.

Dear Mr Quek

We refer to your letter dated 19 November 2008 to Mr Heng Swee Keat, Managing Director, MAS.

2. On 18 December 2008, Morgan Stanley Asia (Singapore) Pte, the arranger of Pinnacle notes published a number of Frequently Asked Questions (FAQs) that address the issues you raised, among others. The FAQs are available athttp://www.morganstanley.com/pinnaclenotes/pdf/series9-10/FAQs_18-12-08.pdf

3. You enquired about the root causes for the devaluation of Pinnacle credit linked notes. Please refer to questions 5 and 11 of the FAQs which explain the reasons for the fall in value of the Notes. You also raised the question on whether any steps could be taken to protect the value of the Pinnacle notes. The petition alluded to steps being taken for the Lehman minibond notes and that these steps if viable should similarly be extended to Pinnacle notes. Please refer to Questions 8 and 9 of the above FAQs where the differences in the circumstances giving rise to early redemption of Minibond notes and the Pinnacle notes are explained, and on the restructuring of Pinnacle notes. You may also refer to MAS' press release of 2 Dec 2008 where we informed investors that due to legal complexities that have arisen, the trustees and receivers are of the view that restructuring of the Minibond notes is not currently viable.
Link to MAS press release on 2 Dec 2008:

http://www.mas.gov.sg/news_room/press_releases/2008/Update_on_Lehman_Minibond_Notes_Programme.html

4. For consumers who consider that the Pinnacle notes were mis-sold to them, we would advise them to first lodge their complaint directly with the financial institution (FI) that sold them the products. MAS requires FIs to have a rigorous process to look into every complaint of mis-selling and resolve them fairly. In the event that consumers are not satisfied with the FI’s reply, they may consider approaching the Financial Industry Disputes Resolution Centre (FIDReC). FIDReC is an independent institution which aims to provide consumers with a one-stop avenue for resolving disputes in the banking, insurance and capital market sectors. Separately, where we have clear evidence that a FI has breached our laws or regulations, we will hold the FI to account.

5. If you have any queries, please feel free to contact me.

Christina Tan
Consumer Issues Division
Monetary Authority of Singapore

Pinnacle Notes: Website should be more free with info

Published in Straits Times, Dec 30, 2008

I WAS directed to the Morgan Stanley website for Pinnacles Notes by the Monetary Authority of Singapore (MAS) website. When I entered the Morgan Stanley website, I was welcomed by a long legal disclaimer that required the answer 'yes' before I was granted further access. As a result, I was discouraged from entering the website for more information.

May I ask Morgan Stanley to consider removing this legalistic disclaimer and making access free for the following reasons:

- Pinnacle Notes is of public interest, and basic information such as redemption value should be freely available.For example, a bank website provides information on fixed deposits and exchange rates. In another example, unit trust investments are quoted daily via normal marketing channels.

- Morgan Stanley should not impose such a legalistic disclaimer because it is merely allowing access and not providing professional advice. Its exposure is next to zero. Members of the public who want access are looking for information and not professional advice.

It would be fair for Morgan Stanley to allow public access to general information without agreeing to a disclaimer. However, if professional advice is solicited, it is free to give it.

Leong Kok Ho

HK Standard: Lehman minibond values up in air

30 Dec 2008

The Hong Kong Association of Banks announced yesterday that leftover values of Lehman Brothers minibonds are as much as 78.31 percent.

However, a source from the banking sector said the pricing, set as at November 21, is no longer applicable because of fundamental uncertainties following a legal challenge from Lehman liquidators.

"There have been no attempts to update the valuation," the source said.

The pricing of the minibonds will continue once the legal issue is settled, the source said.

However, "there will be potentially additional costs to be incurred as a result of the legal challenge.''

The banking association also said: ``If this claim [from Lehman's liquidators] is upheld, the value of the minibonds will significantly decrease.''

According to a Legislative Council document submitted by the association's Lehman task force yesterday, prices, as at November 21, of the minibonds ranged from 0.82 percent to 64.03 percent on average.

Series 11, tranche A, was worth the most among all the series and its price was 78.31 percent, after calculating the value of the underlying collateral. Those who bought the product for US$100 (HK$780) would get US$78.31. Remaining values of series five to nine of the minibonds were only 0.82 percent.

The pricing information no longer represents the current market value of the minibonds and the banks cannot assess how much a minibond investor may recover from the proceeds of the collateral underlying the minibonds, the association added.

A Legco meeting relating to the government buyback proposal for the minibonds will be held this morning.

Late last month, the minibond trustee, a US unit of HSBC (0005), received a letter from legal advisers to Lehman in the United States that the proceeds from any sale of the underlying collateral for the minibonds should be paid to the collapsed US investment bank before the issuer of the minibonds and in turn the investors.

The banks are still circulating the documents for the provision of up to HK$100 million to the trustee and expect it will not only be used for paying legal fees.

"The precise terms of the proposed funding have not yet been agreed between the banks and the trustee," the association said.

Hong Kong: Lehman dozen feeling bullied

http://www.thestandard.com.hk/news_detail.asp?pp_cat=11&art_id=76374&con_type=1&d_str=20081230

Tuesday, December 30, 2008

A dozen investors in Lehman Brothers products suffered a further setback yesterday when the Small Claims Tribunal adjourned until March a hearing on their demands for refunds. Adjudicator Anthony Chow Siu- wo told the tribunal that a further 100 claims needed to be processed, while one of the banks being sued, DBS, as well as an employee of Chong Hing Bank, had asked for their cases to be transferred to the District Court since they needed legal representation.
Legal representatives are not permitted at a hearing by the tribunal, which is limited to dealing with claims not exceeding HK$50,000.

Investors suing DBS complained of being bullied, saying they could not afford the fees in the District Court.

Chow told the 12 individual claimants seeking refunds from six banks that they will have to wait for another three months before the hearing can be continued.
Four claimants who bought DBS' Constellation products were told by a representative of the bank at the tribunal that their products had zero value.

Chow said the problem with some of the cases was that no one, including the banks, knew the value of the financial products that had been sold, though they may have been valued at zero for a certain period. Thus, one could not calculate the amount of money lost by investors, Chow said. ADELE WONG

Thought for the day - make an exception of myself

Contributed by Ho Cheow Seng

 

"The essence of immorality is the tendency to make an exception of myself: Jane Addams

(An example is a ruler who passes laws for his people and exempts himself from those very laws)

 

SCMP:Mis-selling of minibonds had 1980s precedent in Britain

http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=20Y5PIVUMQU5&linkid=593eb6f4-f2d5-4fa5-b42a-9ab1cf136f74&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d

29 Dec 2008
Jimmy Chow, Cheung Sha Wan

The controversy over the minibond saga does not only relate to compensation. It is about [alleged] mis-selling.

Instead of paying investors of Lehman’s minibonds back, local banks have come up with a complex way by providing a pool of HK$100 million to help the minibond trustee to perform its duty to protect the “interest of minibond investors” (“Deduction decision in legal fight irks Lehman investors”, December 19).

If a retired taxi driver did not seem to understand the minibond in which he had invested his life savings, he can hardly be expected to grasp this legal game [unfolding in the US]. Neither can I.

So far, only a limited number of people have received compensation from the banks, a small percentage of total claimants.

The mis-selling of securities in Hong Kong, which mostly occurred over the last two years, is reminiscent of the mis-selling in Britain between 1988 and 1994.

In 1988 the British government encouraged people to make private provision for retirement in addition to the state pension by purchasing personal pension plans.

It turned out that fast-talking salesmen misled people into buying retirement pension products they did not really need.

Realising there had been mis-selling on a huge scale, in 1994 the British financial services regulator “instructed” banks and insurers to stop these practices and review all cases.

By 1997 only 5 per cent of the cases were cleared up.

That year, the newly-elected Labour government decided to “name and shame” and to fine the laggards.

Disciplinary action was taken against 349 firms which resulted in fines totalling £11million (HK$126.3 million). Nearly £12 billion was paid in compensation to policyholders.

I hope I am wrong, but if our government remains reluctant to conduct a radical review on both the minibond scandal and the city’s regulatory framework, the saga will drag on indefinitely.

HK: More frustration for minibond investors at tribunal

http://www.thestandard.com.hk/breaking_news_detail.asp?id=11349&icid=3&d_str=20081229

Lehman Brothers minibond investors have had their hearing at the Small Claims Tribunal in Wan Chai adjourned to March 23.

More than 10 investors who had bought products from banks such as DBS, Bank of China and CITIC Ka Wah filed cases with the tribunal, which has the power to claim compensation up to a ceiling of HK$50,000.

At the hearing, DBS representatives applied for cases against their bank to be heard in the District Court, citing complications in the case and the bank's need for legal representation. Cases needing legal representation cannot be heard at the tribunal.

Satisfaction with Life Index

http://en.wikipedia.org/wiki/Satisfaction_with_Life_Index#International_Ranking_.282006.29

Rank Country            SWL

1    Denmark             273.4
2    Switzerland         273.3
8    Canada              253.3
16   Malaysia,
    New Zealand
    United States       246.7
25   Australia           243.3
33   Germany             240.0
41   United Kingdom      236.7
48   Singapore           230.0
61   France
    Hong Kong
    Indonesia           220.0
71   Thailand            216.7
77   Philippines         213.3
81   China               210.0
88   Japan               206.7
100  South Korea         193.3
122  India               180.0
177  Zimbabwe            110.0

Singapore rank below Malaysia (surprising!), USA and UK but ahead of  Hong Kong, Japan (surprising!) and France.

Speaker's Corner, 27 Dec 2008 - Speech

Speaker’s Corner 27 Dec 2008

1. Meetings at Hong Lim Park
The first meeting for investors of the credit linked notes was held on 11 October 2008. This was followed by another 9 meetings. The first 8 meetings were held at weekly intervals while the last two meeting was held at fortnightly intervals. Today’s meeting is the 10th and final meeting to be held at Hong Lim Park for the credit linked notes.

You may wonder why Hong Lim Park was chosen to be the venue for the meeting. The most important reason is that it is free and is available at any time. However, it is not quite convenient, due to the lack of facilities. There is no sound system and everyone had to stand. On a few occasions, we had to share the use of the park with other activities. It rained on one meeting.

Still, it is a wonderful experience for us to meet at Hong Lim Park and to get to know each other.

2. Petitions
During the past three months, a total of four petitions sent organised, of which three petitions were presented to the Monetary Authority of Singapore.

The first petition dated 10 October and signed by 983 people, asked the Government to look into any possible wrong doings by the financial institutions that created and marketed the credit linked notes.

The second petition dated 17 October and signed by 277 people, asked the MAS to investigate the sales training given by the financial institutions to their representatives who sold the credit linked notes.

The fourth petition dated 31 October and signed by 1,073 people, asked the MAS to review the complaint handling process of the financial institutions, to set up an independent unit to receive the complaints and to encourage the financial institutions to adopt a collective approach in offering fair compensation to the investors.

These petitions were presented to the chairman and executive director of MAS and were acknowledged. My requests to meet with the chairman or senior management of MAS were declined. I received replies that any development would be communicated to the public through media releases.

Up to now, we have not received any communication on whether the specific requests contained in the petitions had been considered or implemented.

3. Complaint Handling Process
We have received reports that about 5,000 complaints had been received by the financial institutions that sold the credit linked notes. The MAS had issued a statement that the complaint handling processes of these institutions had generally met their expected standard.

We have not been provided with information on the number of people that have received full or partial compensation for the alleged mis-selling of the product. A small number of the so-called vulnerable investors had been compensated. Although the actual number is not disclosed, this is estimated to account for less than 2 percent of the investors.

The perception of the investors is quite different from the MAS. Many investors found the complaint handling process to be carried out in an unfair and unsatisfactory manner.

The anecdotal reports from any investors are that their complaints of alleged mis-selling were rejected by the financial institutions.

MAS had required the financial institutions to give their decision on each complaint within four weeks. This deadline appeared to have been not met. There are many reports from investors that they had not received any decision after six weeks or longer.

The next step for the investors is to lodge a complaint with the dispute resolution center, called FIDREC. From our survey, a small number of investors had taken this second step to lodge their complaints. Most of the investors intend to take this second step, but the process has been extremely slow and difficult.

4. Collective legal action
Many investors had indicated that they will join in a collective legal action against the financial institutions. It will be correct for me to say, on their behalf, they had taken this decision with great reluctance and difficulty. They would have preferred a more amicable way to get fair compensation for their financial loss.

I like to ask the investors to join the different groups representing the different types of credit linked notes, namely the Minibonds, High Notes, Jubilee Notes and the Pinnacle Notes.

The leaders of these groups will be holding separate meetings next year for the investors. As each group is smaller, it is easier to arrange a more conducive place to hold an indoor meeting.

Each investor group is also setting up a website and an e-mail list to communicate with their members. The key activities of these groups are to educate their members, provide assistance and advice, and to organise the collective legal action.

I shall be in touch with the leaders of these groups and to co-ordinate the activities of the various groups, if required.

5. My blog
I will continue to keep all investors updated through my blog, www.tankinlian.blogspot.com.

I wish to thank a few volunteers who had been providing me with daily updates of news and articles from other sources. I have put the relevant articles in my blog. I encourage the investors to the postings in my blog to keep in touch with the developments.

6. Conclusion
I am sorry that there was little progress in getting fair compensation for your financial losses, in spite of the great efforts that were put in by many people. We have tried many different approaches, but keep hitting a stone wall – even tough we keep our eyes “wide open”.

During the past three months, we have made many friends from among the investors and volunteers. Let us continue our friendship and continue our efforts to seek fair compensation for the investors, although the future efforts will be done outside of Hong Lim Park.

Let me wish all of you, all the best for 2009.

Tan Kin Lian

Survey - based on 25 responses

I studied many years ago, that an unbiased survey based on 25 replies give quite reliable results.

I now have the chance of seeing this theory put into action. I have analyzed the survey results based on2 5 replies, and compare the results with 50 and 100 replies. The results given are quite close. It means that the results based on the first 25 replies are quite reliable.

I shall be showing the results for 25, 50 and 100 replies to various surveys here, if the survey did reach 100 replies.

Seminar for Minibond Investors

A seminar, titled " Minibond Victims: The Way Forward In 2009 " will be held soon. The details are:
   
                                      Date:  Tuesday 30th December 2008
                                      Time: 7 to 9 .30 pm (registration starts at 6 pm )
                                      Venue: Singapore Polytechnic Graduates Guild House
                                                      1010 Dover Road Singapore 139658
                                      Admission: Free (Register online here)
                                       (Click here for a map to locate the SP Guild House ) 

The agenda for the evening:

                                        - Welcome 
                                        - Introduction (Mr Tan Kin Lian)
                                        - The Way Forward: The Plans For 2009 
                                        - The National Minibond Data Collection Exercise 
                                        - The Start Of Legal Efforts: Leonard Loo
                                        - Q & A

Don't miss this important seminar as the legal efforts to protect the interests of Minibond customers get into full swing! Mr. Loo has confirmed that he will have a Senior Counsel (SC) on board his legal team so come down and listen to his deliberations. 

Register early for the free seminar  as there are only 250 seats !(please ensure you have registered with the Minibond Group before you participate in the seminar).

Thought for the day - the world is a dangerous place

Contributed by Ho Cheow Seng

"The world is a dangerous place to live; not because of the people who are evil, but because of the people who don't do anything about it." -- Albert Einstein

 

The fallen giants of finance

http://www.ft.com/cms/s/0/b2247e62-d02f-11dd-ae00-000077b07658.html?nclick_check=1

By Fang Wang, Steven Bernard, Joanna Chung, Saskia Scholtes, Greg Farrell and Francesco Guerrera
Published: December 22 2008 19:21 | Last updated: December 24 2008 18:10

The search for scapegoats in the worst financial crisis since the Great Depression is under way. As one financial group after another has collapsed, wiping out thousands of billions worth of value for investors, a plethora of investigations by prosecutors and regulators has been launched.

Federal officials have opened investigations into at least 25 large companies, including Lehman Brothers, the collapsed investment bank; Fannie Mae and Freddie Mac, the mortgage financiers taken over by the government; and Washington Mutual, the biggest bank to go under in US history.

Investment banking league table 2008 - Dec-22

Subpoenas have been handed down in some cases, including Lehman and Fannie and Freddie. Prosecutors, along with officials at the Securities and Exchange Commission, are trying to determine whether managers misled the public about the financial condition of their companies. Defence attorneys are likely to argue that companies, as well as their individual directors and executives, cannot be blamed for the unprecedented market turmoil. “One thing we know for certain is that stupid choices were made by hundreds of businessmen but that is not a crime. Some executives may have been overly optimistic but so were a lot of people,” said Daniel Richman, a former federal prosecutor in New York’s southern district and now a Columbia University professor.

The subjects of these profiles, or their spokespeople, were contacted for this article but declined to comment. Compensation includes cashed-in share options.

Attention: Pinnacle Note Investors

THE PRO TEM COMMITTEE OF THE PINNACLE ACTION GROUP WISH TO MEET ALL PINNACLE NOTES HOLDERS THIS SAT 5PM AT HONG LIM PARK.

 

WE WISH TO SEEK YOUR SUPPORTS TO EXPLORE ALTERNATIVE WAYS TO SEEK RELIEF FOR LOSES

INCURRED BY THIS FAILED PRODUCT.

 

THE CO-OPERATION AND UNDERSTANDING OF ALL INVESTORS CONCERNED WOULD BE MOST APPRECIATED.

 

FOR THOSE WHO ARE UNABLE TO ATTEND, KINDLY EMAIL YOUR PARTICULARS (NAME, NRIC, EMAIL ADDRESS, AND TELEPHONE) TO:-

 

pinnacle.action.group@gmail.com

 

Chan JC

Meeting at Speaker's Corner, Sat 27 Dec, 5 pm

A meeting of investors of the credit linked notes will be held as follows:

Date: Saturday 27 December 2008
Time: 5 to 7 pm
Place: Speaker's Corner, Hong Lim Park

Agenda
1. Update of complaints to financial institution, FIDREC
2. Update on collective legal action
3. Speech by lawyer organising the class action

This will be the last meeting to be held at Speaker's Corner. Subsequent meetings will be organised by the group leaders for the various notes, and will be held at other venues.

Please turn up for this last meeting.

Survey - Do we need a new property portal

Take part in this survey:

Survey

Here are the results:

Survey results

Details of 150 CDOs still not available after 3 months

Dear Mr. Tan

I don't understand why after more than 3 months of Lehman Brothers bankruptcy, the following basic, but important information are still not available to the minibond holders :

1) the identities of the 150 CDOs
2) how many credit events already happened out of the 150 CDOs ?
3) how many of the 150 CDOs are on the danger list (about to fail) ?
4) an estimate of the current values of the minibond notes.

If a group of financial experts (from HSBC & MAS) cannot provide these basic information after more than 3 months of Lehman Brothers bankruptcy, it is hard to believe that the ordinary investors could have invested with their eyes open.

P

REPLY
I agree with you, but it is better for you to write to the media or to MAS. MAS should be the party that reply to this type of question.

Hong Kong Arbitration Body Mediates First Lehman-Linked Dispute

December 22, 2008: 04:55 AM ET

HONG KONG -(Dow Jones)- The Hong Kong International Arbitration Centre said Monday it concluded its first mediation of a dispute over the selling of structured products related to Lehman Brothers Holdings Inc.
The independent body said in a statement it mediated a dispute on Dec. 10 in which investors and a bank reached a settlement after five hours of talks. It didn't give details.

The Hong Kong Monetary Authority said in late October it would refer mediation requests to the arbitration center in cases where both sides agreed to it, to try to reach voluntary settlements on the disputes.

The HKMA said earlier the costs of mediation and arbitration would be split, with banks paying half and the HKMA paying the rest on behalf of investors.

Thousands of investors claim they were misled about the risks when they purchased 'mini-bonds' backed by Lehman, only to see the value plunge after the former Wall Street giant declared bankruptcy in September.

The Hong Kong International Arbitration Centre was set up in 1985. It receives funds from the business community and the Hong Kong Government but says it is totally independent of both and financially self-sufficient.

http://money.cnn.com/news/newsfeeds/articles/djf500/200812220455DOWJONESDJONLINE000122_FORTUNE5.htm

Avoid retrenchment

Straits Times did not publish this letter.
22 December 2008

Editor
Forum Page
Straits Times

There are discussions about the best way for companies to cope with decreased demand in a recession. The following options were considered:

> retrench foreign workers
> retrench local workers
> reduce pay across the board, to avoid retrenchments

I prefer the method used by the Governor of California State. He asked the state employees to take 2 days of no-pay leave, to reduce the state budget deficit.

Here is my reason. If there is reduced demand, there is reduced work. The company can ask all employees to take a few days of no-pay leave to reduce the wage cost and avoid retrenchment. In return, the employees extra days of leave (in proportion to the reduction in wages). They can spend the time with their family and friends or attend classes to upgrade their knowledge and skills.

To cope with the reduced wages, the employees can draw down on past savings or cut down on the discretionary expenses. For employee with fixed commitments that cannot be reduced, I suggest that they be provided with a low-interest rate loan for the reduction in their wages. This loan can be provided by the employer or the state at an interest rate of 2.5% p.a. (same as CPF interest rate).

I hope that this suggestion can be considered.

Tan Kin Lian

Be careful about free service for a trial period

Some banks offer credit cards to you free of subscription for one or two years. They will impose a hefty annual fee automatically at the end of the free period, without telling you. If you are not aware about it, you have to pay this fee.

Some card holders call the bank and threaten to cancel the card. The bank may waive the fee out of goodwill. They may not.

The same technique is adopted by mobile phone operators and cable television services. They give you a free period of use for some services, and will quietly levy the charge at the end of the period. They hope that the customers will pay for the services out of ignorance.

Here are some tips to avoid paying for these additional charges, if you do not use the services:

1. Decline the service, if you do not need. it. Do not accept it just because it is free.

2. If you want to try the service, put a reminder in your calendar (on the mobilephone or PC). It will remind you to reivew the service at the end of the free period. If you do not need it, you should call and cancel it.

I hope that the Consumer Association (CASE) will make it compulsory for the business to get the customers to agree on paying for the service at the end of the free period. It should not be on an "assumed opt-in" basis. We need to have stronger business ethics.

Online Citizen blog

The Online Citizen blog went down due to heavy traffic. They are running on a hosted site which sets a limit on the number of traffic. In recent months, the traffic went up five times. Yesterday, on Christmas Eve, the traffic must have been exceptionally heavy.

I spoke to the managing editor of The Online Citizen yesterday, after the site came down. He has contacted his volunteer webmaster, who would try to resolve the problem in the evening, after he had completed his full time work.

Regular visitors to The Online Citizen should know that the work is done by volunteers, who have to spend a lot of their personal time and incur travelling and other out of pocket expenses. The expenses to maintain the website are kept to the minimal, due to lack of funds.

SMS booking of taxis

Under the system for SMS booking of taxis, the taxi driver can wait on a side road after sending the SMS that the taxi is available. When a SMS is received, the taxi driver can call and talk to the customer while the taxi is still stationary.

If the taxi was moving when the SMS was received, the taxi driver can stop at a side road to make the call to the customer. The taxi driver does not need to make the call when the taxi is moving.

Strong interest in the Property Indicators (AMP, AQI)

17 people responded to the survey on the new property portal.

100% said that they are interested in the AMP (adjusted market price) which is calculated based on the latest 10 transactions for the project, adjusted to reflect the the current market price (i.e. taking into account the change in market since the date of transaction). 94% said that this is a useful indication of the market price for the property.

81% are interested in the AQI (amenities quality index) that shows the amenities within 0.5 km (i.e. walking distance) of the property.

100% said that a comparision of the AQI and AMP for similar properties in the same location is useful. 81% said that they are willing to pay $20 for a property report that shows, among others, the details of the recent transactions and the nearby amenities.

I wish to explain that the AMP is an average for the property. It needs to be adjusted to reflect the height, facing and size of a particular property. I hope that buyers and sellers will find this indicator to be useful, with the limitations as disclosed. As this is just an indicator, it should not replace the judgement of a professional valuer in deciding on the value of the property.

http://www.surveymonkey.com/s.aspx?sm=_2blkqCtac6iiy_2bzlKaDEfYw_3d_3d

Why MAS should handle complaints

Letter in Straits Times Forum

I REFER to the article last Thursday, 'Lehman-linked investors to get news in Jan', which reported that almost 5,000 formal complaints had been filed and that the Monetary Authority of Singapore (MAS) was satisfied that all 10 institutions involved were reviewing complaints based on principles of fairness.

I appeal to MAS to consider taking over the handling of complaints. There are already a large number of formal complaints as the report stated. Furthermore, the final number may be higher because non-Lehman-linked complaints were not part of the 5,000 stated and many other complaints may be expected. Hence, MAS may want to take a more cautious approach when a large number of ordinary citizens are affected.

Secondly, the complaint handling process should be undertaken not only to determine fairness but also the integrity of the financial institution.

Thirdly, the process should be handled directly by an independent party. Having such a party to oversee the complaint-handling process may not be sufficient.

It should be handled by an independent party from the start. This may involve a significant investment in resources by MAS.

It is also true that MAS is not in a position to guarantee the profitability of financial products.
But, it is MAS which Singaporeans trust most to uphold the integrity of a financial institution.

Leong Kok Ho

Quote - President Elect Obama

Two years from now, I want the American people to be able to say,

"Government's not perfect; there are some things Obama does that get on my nerves.
But you know what?

I feel like the government's working for me.
I feel like it's accountable.
I feel like it's transparent.
I feel that I am well informed about what government actions are being taken.

I feel that this is a President and an Administration that admits when it makes mistakes and adapts itself to new information, that believes in making decisions based on facts and on science as opposed to what is politically expedient."

Those are some of the intangibles that I hope people two years from now can claim," -
Barack Obama, president-elect.

http://en.wikipedia.org/wiki/Barack
http://andrewsullivan.theatlantic.com/the_daily_dish/2008/12/the-year-of-oba.html
http://www.time.com/time/world/article/0,8599,1865069,00.html

COMMENT BY TAN KIN L IAN
I find this approach by President Elect Obama to be quite refreshing. He is willing to admit mistakes and to make decisions based on new facts, and not on political expediency. This is quite different from the approach adopted by most governments.

I find the flexible approach preferred by Obama to be more suitable to cope with uncertainty. I hope that he will succeed in his approach.

Survey - choosing a place to live, closeness to facilities

If you have to choose a place to live, which facilities and amenities are most important to you, to be within walking distance or a short drive?

Take part in this survey:
http://www.surveymonkey.com/s.aspx?sm=oUSMVBqRTOeg4jVdJJ6qfA_3d_3d

Survey - complaint to FIDREC

If you have made a complaint to FIDREC and have received their reply, please participate in this survey:

http://www.surveymonkey.com/s.aspx?sm=lVHW2L6lkBoIvH23Z_2bk_2fcQ_3d_3d

Survey - Complaint to Financial Institution

If you have made a complaint and received a decision from the financial institution, please participate in this survey:



http://www.surveymonkey.com/s.aspx?sm=h0vhpMqXdd3WyD1uxqz7Jw_3d_3d

70% willing to join FISCA

140 people participated in the poll. 70% are willing to join FISCA and pay an annual subscription of $36. The remaining 30% do not wish to join FISCA. I consider that there is good support for FISCA.

Thought for the Day - Democracy

Contributed by Ho Cheow Seng

My notion of democracy is that under it the weakest shall have the same opportunities as the strongest...no country in the world today shows any but patronizing regard for the weak... Western democracy, as it functions today, is diluted fascism...true democracy cannot be worked by twenty men sitting at the center. It has to be worked from below, by the people of every village." : Gandhi

FISCA - the steps ahead

The protem committee has to finalise the work plan for the association and to submit the constitution for registration as a society. This will take one or two months to be completed.

A website will be set up during the next few weeks. You can get more information from the website when it is ready.

Join FISCA for $36

82 people replied to the poll. 65% are willing to join FISCA for an annual subscription of $36. Some people think that this rate is too low and are willing to contribute up to $60 or $120 to get better services.

35% do not wish to join FISCA. Among them are the insurance agents and relationship managers who feel that FISCA may affect the way that they do business now. The other respondents prefer to have the services for free, if possible.

I wish to encourage Singaporeans to be willing to pay a modest fee for service and advice. By spending some money, you can save a lot of money that is taken away through hidden charges (e.g. $2,000 or more on a typical financial contract) or can cause you to lose your entire principle (e.g. high risk credit linked notes).

Be willing to invest time and money to be educated. You can be much better off!

Simulation Game - trading of stocks, etc

Practice
http://tankinlian.blogspot.com/2008/12/protrader-learn-trading-in-simulated.html

Surveys

Participate in the surveys shown at the top of the right panel.

Customer feedback on plan V

Hi,

I wish to share my experience on plan V. I suffered a severe penalty for severing the plan after 24 months. I lost over $30,000 from an investment of close to $50000!

I gave up on the plan principally because of the rigidity i.e. you must pay continuously for over 20 years otherwise you will lose the bonus or incur hefty penalty. For a plan that costs over $2000 per month, this is extremely expensive.

I am also frustrated over the lack of transparency, the financial product is very complex with many inherent fees and charges. I am certainly not aware of the generous commissions that my financial adviser was getting at the time this plan was introduced to me, certainly no disclosure of any sort. The product was sold to me as an exclusive financial investment instrument with extremely good returns (including the so-called bonus). The issue of the hefty fines and penalties was not highlighted, even if they may be in the fine print somewhere.

At the end of the day, it is my fault for not carefully scrutinising these policies and to be taken in by financial advisers that I once trusted. But I fully agree that people should be educated and warned about financial instruments that have many conditions and contractual rules that bind and severely disadvantage a client.

When I cancelled my policy, I was told that the only time I can get the money before the matuity date, without any penalty was when I die. Even critical illness was not accepted! Unfortunately, these penalties, commissions and heft charges, are something that is difficult to glean because they are hidden, obscured by fine print and perhaps, simply not fully understood or appreciated by non financial people like me! I am tertiary educated person and I simply don't have the time and resources to go through these complicated rules!

I hope more people should be aware of this and to be very careful of expensive and complex financial investment plans. Don't be fooled by the sweet promises of unscrupulous advisers!

FISCA - the proposed approach

65% of respondents like FISCA to get most of its funding from its members, to remain independent and act in the interest of consumers. 75% prefer to avoid getting advertisement and sponsorship from financial institutions. 20% welcome funding from Government for general expenses, and 35% for special projects.

90% feel that FISCA should encourage members to spend time to learn about financial matters.
56% like the subscription to be $36 per year; the remainder are willing to pay a higher subscription.

Proposed approach
We will set up FISCA with an annual subscription of $36.

Members are encouraged to log in each week and read the newsletter, educational and research materials. and assessment test.

Additional services will be provided to members at a modest fee:

a) Handle complaint on mis-selling
b) Handle complaints on insurance claims
c) Attend educational talk
d) Simple financial planning advice
e) Buying of recommended financial products

FISCA will encourage members to pay a modest fee for advice and service. This will save them several thousand dollars in paying the hidden charges embedded in financial products, such as life insurance and structured products. More importantly, members can avoid losing their capital in risky products that are not properly disclosed to them.

An important task for FISCA members is to spend time and be educated about financial matters and to make the correct decisions. FISCA will help members to achieve this goal by providing the relevant materials for members. FISCA will use as much volunteers as possible, but some full time staff have to be engaged for the research and administration.

It is important that FISCA should have funds to carry out their work. I hope that more members will come forward and be willing to pay a subscription to make it possible for FISCA to be effective in its work. Do not expect it for free.

FISCA Survey Results (2)

20 people responded to the survey.

> The expressed interest in the following services:
> Educate members on financial products through website 100.0%
> Advice members on mis-selling and unethical products 100.0%
> Recommend suitable financial products 84.2%
> Advice members on insurance claims 73.7%
> Hold educational talks (at a modest charge) 68.4%
> Advice members on service contracts, e.g. telcos 63.2%
> Provide advice through a hotline 57.9%

Barclay CEO apologies

http://news.bbc.co.uk/2/hi/business/7793035.stm

Mr Varley also told the BBC that the banking industry was going through what he called a "public relations crisis" and must apologise for what went wrong. "We have to have a banking industry in which consumers have trust and in some cases that trust has broken down," he said.

"If I ask myself, 'Do I feel the industry should be self-confident about recreating that trust through time?' I do feel that, but it starts by saying sorry. "It starts by admitting things went wrong."

He said he hoped his own bank was one of those in which customers still had trust. But he went on: "If you look at the industry as a whole, if I speak as a member of the industry rather than as chief executive of Barclays, I absolutely have to say we should share our portion of responsibility."

Our correspondent said Mr Varley was not the first senior banker to admit failings. In November, Royal Bank of Scotland chairman Sir Tom McKillop said he was "profoundly sorry" for his company's financial difficulties.

The Disadvantages of an Elite Education

Contributed by Ho Cheow Seng

Our best universities have forgotten that the reason they exist is to make minds, not careers.
By William Deresiewicz

Survey: DBS Schroder LiveSure 2025 fund

If you wish to join Colin Ho in opposing the change to the fund and to reject the three options, take part in this survey:

http://www.surveymonkey.com/s.aspx?sm=7adJB4Ub4k7OqUE8YLkzkg_3d_3d

Survey: Vista Plan from Zurich

If you have bought the Vista plan from Zurich and have not been properly advised about this investment plan, please take part in this survey:
http://www.surveymonkey.com/s.aspx?sm=CAseR9wBBoKnR9o_2bzWa8PQ_3d_3d

An adviser's view about the V plan

Dear Mr. Tan,

Our company allows commission to be paid annualised upfront. For instance, if the client pays a cheque for the first month's premium of $3,200, our company will receive around $40,000 in commission. It's then split between company and advisor. That's why many advisors are selling this plan.

They sell it as investment. But the clients never realise that they for a contract of say 25 years, they are not able to surrender it in 3, 5 or 7 years. They will be penalised heavily.

But I believe the biggest con job of this is that they prey on the greed of people. The reason why advisors can sell big premiums and long tenure is because of the so-called 'bonus' allocation. The longer the term, the higher the 'bonus'. Last time the 'bonus' was 62.5%, now they even up it to 87.5%.

The clients got carried away by their greed. No doubt the 'bonus' is 87.5%, but it's only nominal. The clients thought they could immediately cash out 87.5% of gain from their first year of investment. But they forgot that this is an insurance contract, and they need to 'finish' the whole term to avoid heavy penalty. But sadly, once they got into this plan, they are already in for a huge loss and a bleak future.

Many people who bought this won't be able to 'finish' the plan, The insurer understands this. This is a win-win for the insurer and the advisors, but a BIG lose-lose for the clients and their families.

As this plan is only being distributed in Singapore for 3 years or so, I can expect more news of people surrendering, especially in this tough economic environment.

The insurer even allows premium to be paid using credit card. I heard of quite a number of people surrendering, but chose to keep quite.

Unilateral changes to DBS Schroder LiveSure 2025 fund

Dear Mr. Tan,

I have recently received a notice from DBS on behalf of Schroder Investment Management (Singapore) Ltd that they plan to alter the product characteristics of the DBS Schroder LiveSure 2025 fund to the disadvantage of the consumers. The changes contravene the purpose and the way the fund was marketed to us, as ordinary small investors.

We are given 3 choices moving ahead and I feel none of them are reasonable to any sane human. I want to share this news and urge those who are facing similar situation not concede to any of their 3 proposed options, which might not be in your interest.

If you feel this is of worthy mention, please help post this on your blog.

Colin Ho

Background
This fund is marketed in their brochures as “a unique retirement solution that aims to achieve superior long term risk-adjusted returns through an actively-managed multi-asset portfolio of mutual funds.”.

The brochure clearly states these key benefits:
1. Principal protection upon maturity
2. Exposure to a well-balanced portfolio managed by Schroders Multi-Asset Team
3. Profit lock-in mechanism.
This is designed to raise your level of principal protection at maturity. Any gains achieved by the Fund will be locked in each week, ensuring that the fund’s highest NAV will be locked in as target min NAV level for your investment upon maturity in year 2025.
4. Automatic re-balancing mechanism.
The portfolio will automatically become more conservative with lower expected volatility and risk as the target date draws near.

What we understood
From the way DBS and Schroder has marketed it, was that the fund is for retirement purpose with maturity in 2025. The NAV will swing along the way but over the next 20+ years, it’s likely the NAV will go beyond 1.00 and this higher NAV will be locked in and if we hold the fund till maturity in 2025, we’ll enjoy this “locked-in” NAV.

What has happened
Just 8 months after I subscribed to the fund, Schroder, through DBS, sent us a letter saying the fund was monetised stating that: “The last 6 months have seen dramatic falls in asset values caused primarily by the credit crunch. In addition, we have witnessed a fall in long term SGD interest rates from 4.50% to the 2.6% we see today.”....”we reached the point where the assets of the Fund were sufficient only to purchase instruments (safe portfolio) that would be expected to deliver the target protection level on the Maturity Date. We therefore invested the Funds assets into such instruments on Monday 24th November 2008”.

We are now given 3 choices:
1. Stay invested in the Fund. Unit trust investors can choose to stay invested in the Fund which is primarily invested in SGD government bonds. At maturity, investors are expected to receive the NAV of $1.0004, subject to the risks abovementioned in section 7.
2. Switch into another Schroder fund distributed by DBS. Investors can choose to switch their existing units into any other Schroder fund distributed by DBS, The switching fee will be waived. 3. Redeem their units at the prevailing NAV. Please note that the Manage will continue to publish weekly NAVs for the Fund, which may be different from the current NAV of S$0.6932 (as at 19 November 2008).

Investor is subject to option #1 as the default option if they do not decide.

What’s Wrong?
In my opinion, they’re now trying to unilaterally alter the product behaviour and go against what they have sold to consumers. Being a retirement fund with maturity date in 2025, how can they, within just 8 months of launch, say the profit lock-in mechanism can no longer support a NAV beyond $1.0004. As a long term investor, I understand the volatility of the markets and am willing to ride the downs and look forward to the ups in the next 26 years. But these people are telling me sorry, at best they can pay me a NAV of $1.0004 (with no guarantee) in year 2025! Essentially, they are trying to modify key benefits #3 and #4 listed above to their advantage.

With these changes, the product is substantially different from how it was marketed to me.

The options to consumers are equally ridiculous. The 1st option is asking the investor to remain status quo till maturity in 26 years time. And for that, the investor will be rewarded with NAV $0.0004 return but with all their caveats that tells you it’s not guaranteed. The 2nd option is asking the investor to sell it at current NAV (i.e. make loss of close to 50%) and buy another Schroder fund. The 3rd option is the worst: asking investor to sell it at current NAV, make a loss, and we part ways.

I feel DBS and Schroder could have put in greater efforts to protect consumers’ interest. And unlike the case of the mini bonds, the DBS Schroder LiveSure 2025 fund doesn’t involve default. But yet, they are asking consumers to accept unreasonable draconian actions which would mostly inflict financial losses.

I am seeking refund, from the bank, the full amount I’ve invested. I urge other investors to exercise your rights and not opt in to any of their 3 proposed options.

Colin Ho

Survey:
http://www.surveymonkey.com/s.aspx?sm=7adJB4Ub4k7OqUE8YLkzkg_3d_3d

Madoff Clients - New York Times

Hi Tan,

Appreciate you publish in your blog.
http://projects.nytimes.com/creditcrisis/madoff_clients/table

Larry

FISCA Survey Results (1)

Here is a preliminary summary of the first 20 responses to the FISCA Survey.

1. FISCA should get most of its fundings from members to remain independent and act in the interest of members: Agree 65%, Disagree 20% Neutral 15%

2. FISCA should avoid advertisements and sponsorships from financial institutions: Agree 75%, Disagree 15%, Neutral 10%

3. Should FISCA get funding from Government? Yes 20%, Special projects only 35%, Avoid 25%, No opinion 20%

4. Should FISCA encourage members to spend time and be educated about financial matters? Yes 90%, No 10%

5. How much should the annual subscription be? $36 56%, $48 22%, $60 or $120 22%

Surveys

Please take part in these surveys:

1. FISCA - Funancial Services Consumer Assocation
2. Compensation for Credit Linked Notes
3. Regular visitors to Tan Kin Lian's Blog
4. Collect 100,000 signatures

Mis-selling of ILPs in the UK

From TKL: I have not been able to accuracy of this information yet.

Dear Mr. Tan

According to one writer, these type of products (ILPs) were designed and sold in the UK in the 1980's & 1990's. A super regulator was brought in called the FSA to clean up an industry that to date has paid compensation to investors in the UK who have lost money in the region of GBP 15,000,000,000 (billion) using these exact same products. That is why they are now 'offshore' so insurance companies can continue to sell these very profitable products in poorly regulated markets in Asia.

Now that they cannot sell in UK or US, they come to Asia and other developing markets like UAE to sell. A foreign insurer sells this plan in Singapore as an offshore product, and MAS is clearing not supervising these offshore insurers. They will bring great harm to our people.

Thanks for your help.

GT

Letter of confidentiality

Dear Mr. Tan,

The bank wishes to meet me on my complaint and asked me to sign the following letter of confidentiality. What is your view?

CONFIDENTIALITY UNDERTAKING

We refer to the meeting scheduled to take place today (“the Meeting”).
We agree that the Meeting will be held on a Without Prejudice basis.
By our signature of a copy of this letter we agree as follows:

1. We undertake:
a. not to record the proceedings or discussions during the Meeting (however we may take our own written notes during the meeting);
b. except as otherwise required by law, to keep the Confidential Information confidential and not to disclose it to anyone or use it for any purpose without our express written consent;
c. to ensure that the Confidential Information is protected from unauthorised disclosure or use.

2. We agree to inform you (to the extent permitted by law) of the full circumstances of any disclosure or upon becoming aware that Confidential Information has been disclosed.

3. The obligations in this letter shall survive the termination of any discussions or negotiations between the Bank and us.

4. We acknowledge and agree that each of the Bank and/or Related Person (defined to mean Bank’s officers, directors, employees, professional advisers or any of the Bank’s affiliates) may be granted an injunction or specific performance for any threatened or actual breach of the provisions of this letter by you.

5. No failure or delay in exercising any right, power or privilege under this letter will operate as a waiver.

6. The undertakings given by us under this letter are given to the Bank and also for the benefit of each Related Person. We shall keep the Bank and each Related Person fully and effectively indemnified on demand against each and every claim, loss, liability and cost which the Bank and/or a Related Person may suffer or incur as a result of any breach of the provisions of this Letter.

7. If the Account is held in the name of more than one person, our obligations under this letter are joint and several.

8. In this letter "Confidential Information" means without limitation, all discussions, statements, materials, information, document and records in whatever form and any material derived or copied therefrom concerning the Customer, Account, services by the Bank, transactions with the Bank, and any other matters in relation thereto disclosed or furnished to us before, during or after the Meeting, as well as the fact discussions are taking place, that the Meeting is held, that further discussions may be contemplated, and that this confidentiality letter has been entered into.

REPLY
I suggest that you ask the bank to agree that the same conditions stated in the letter of confidentiality should apply to their side as well. It reflects fairness and natural justice. If not, you should not sign this undertaking.

California Governor order 2 day Unpaid Leave

www.bloomberg.com

By Michael B. Marois
Dec. 19 (Bloomberg) -- California Governor Arnold Schwarzenegger may force all state workers to take two days of unpaid leave each month to conserve money amid a record budget deficit and a legislative impasse over how to fix it.

The furloughs would begin in February and would last through June 1010, according to labor union officials who said they were briefed by the administration earlier today.

MY VIEW
This is an excellent way to deal with a downturn. Take unpaid leave, which applies to all employees!

Cost of banks

One year ago, Royal Bank of Scotland paid US$100 billion for ABN Amro.

Today, this sum could buy:
Citibank $22.5 billion (74% down)
Morgan Stanley $10.5 billion (-72%)
Goldman Sachs $21 billion (-67%)
Merril Lynch $12.3 billion (-77%)
Deutsche Bank $13 billion (-71%)
Barclays $12.7 billion (-71%)
... and leave a balance of $8 billion:

Survey by FISCA - Financial Services Consumer Association

A pro-tem committee has been formed to plan the launch of FISCA (Financial Services Consumer Association).

The aims of FISCA are to eduate consumers on financial matters, help them to find the suitable financial products and to assist them on seeking redress on mis-selling and other complaints.

Are you interested to join FISCA? What are the services that you like to use? How much are you willing to pay towards the cost of running FISCA? Should FISCA be independent of funding by the business and Government?

Give your views in this survey:
http://www.surveymonkey.com/s.aspx?sm=NDbqLl_2bU_2bb6xxaIjGarfOw_3d_3d

No claim discount on motor insurance

Dear Mr. Tan,
Can you please advise me under what conditions can I request my motor insurance company to review their decision on my NCD. My NCD after one accident has been reduced to 20%

JW

REPLY
You can ask the General Insurance Association of Singapore or your own insurance company.

If you are not happy with the decision taken by your insurance company, you should find another insurance company.

Here are some telephone numbers you can call.
http://www.tankinlian.com/faq/motord.html

Financial product has high penalty

Hi

I am a financial adviser represenative. Being in the industry, I do not need to look too far for malpractice, misselling, misrepresentation. There are many greedy so-called advisors. They are not interested to recommend Enhanced Incomeshield or Myshield to you because the commissions are really pathetic. It's sad to see that this industry has degenerated to the current state.

It's really sickening to see some cheaters who just sell this V plan and earn $1m a year. The V plan is basically a regular premium investment-linked policy. It's an insurance contract. Everything is contractual - you need to follow the insurer's rules and terms. If you violate them, you will be penalised heavily. For instance, if you stop paying premium in the first 18 months, you will lose all your premiums paid.

The advisers tell you that you can exercise premium holiday after 18 months, bonus allocation. If you alter the terms & conditions of the insurance contract, there's a hefty penalty for you.

Do you know how much you pay for this product? For a premium of $3,200/month for 25-year term, the FA firms or banks will straight away receive about $40,000 in commission, then the adviser would get 60 - 80% of the amount. For 10-year term, the comm is about $16,000. the longer the term, the higher the commission. you see, money comes from somewhere. If the commission to the advisor is so good, no prize for guessing who pays for it. it's YOU my friend.

At $3,200/month, the total premium for 25 years is $960,000 my friend! How many people in singapore can afford this kind of premium, and can comfortably say that they are able to 'finish' it.

I had heard of people being sold $20,000 a month. those so-called advisers are beyond help. Eventually they will pay for their evil deed. they must be jailed for their sins.

You may ask why the they could sell so high a premium to their clients? The clients are equally greedy, about the 'bonus' allocation and the 'high' returns. The 'bonus' is something that you can see but cannot touch. Many people thought that they can cash out the gains after 18 months, but they will lose everything if you surrender in the first year.

This plan has been in the market for 2 years. We shall hear more news of people surrendering, especially in the current economic condition. i predict that this V plan and other similar plan from some offshore insurers will be the CDOs for the FA industry. I am eagerly awaiting more complaints or newspaper reports about this con job.

For those who surrendered and suffered big losses, please share your story, expose those who conned you and your hard-earned money. If you continue to remain silence, the misselling will become more rampant. More unsuspected people like the elderly will be sucked into.

Please help educate people by sharing your stories. or you may write to mr tan kin lian at kinlian@gmail.com, or visit his blog www.tankinlian.blogspot.com, or write to reporters like Lorna Tan of the Straits Times or Genevieve Cua of the Business Times, or Mr. Shane Tregillis of MAS' market conduct deputy MD.

I thank you for your contribution in building a better society.

High charges in this investment-linked plan

Hi,

I have just given up on my V investment plan which lasted for 2 years. The investment return is poor (i.e. I lost over 30% of capital and the EURO adventurous fund performed very poorly) and the surrender penalty is very heavy.

What I really dislike about this plan is the lack of transparency and inflexibility, and particularly the lack of control of your funds. There are these expensive management fees and numerous charges. It is an expensive plan (i.e. at least $1,200 per month on a premium of $2,500 per month).

It would be better if you invest in an exchanged traded or index funds for long term investment. ETFs work like a stock and can be traded with minimal management fees unlike unit trusts or managed funds. You can dollar average your payment (when the stock price is low). The advantage is that you can buy and sell the fund (depending on the market) as YOU ARE in control. Right now equities are very low particularly for some blue chips shares. Do some research, be your own fund manager.

Just cut your losses and get rid of the plan. Remember you have to pay 10 years of this plan (otherwise you may incur penalty etc)! Your returns may be very unpredictable. 10 years of bondage to a fund which may not.

VL

ProTrader - learn trading in a simulated environment

Read about this simulated game here:
www.tankinlian.com/forms/protrader.pdf

You can play the game here:
www.tankinlian.com/trader

Steps:
1. create an account will your user name and password
2. login
3. click on play
4. select the game
5. enjoy (the game comprise of 10 virtual days .. wait until end of the game)

This game teaches you the skill on day trading, based on the economic news. You can practice many times to get a feel of how the news impact on the price movements of various financial products.

This is for FUN. It is not suitable for long term investors.

Survey - visitors to my blog

72 people replied to the survey.

Occupation

Professional, manager 39%

Sales, support, admin 34%

Retired 18%

Homemaker, student 9%

Age group

Up to 30: 25%

31 to 50: 39%

Above 50: 36%

How frequently do you visit:

Daily: 56%

Several times a week: 34%

Several times a month: 5%

Occasionally 4%

Survey - Compensation on CLN

148 investors participated in the survey.

What is the minimum percentage of compensation that you will accept"

30% 7.6%

50% 47.2%

70% 45.1%

Are you prepared to take part in a class action and spend up to $5,000

Yes 59.3%

No 40.7%

Volunteers to help get 100,000 signatures

A group of volunteers have set up this blog to help collect 100,000 signatures for me.

Hi everyone!

We have set up a blog to generate interest in getting the 100k signatures for Mr Tan Kin Lian. We would like to invite everyone to come visit our blog here:
http://tkl100kpetition.blogspot.com/

Please feel free to drop your comments on the articles posted at our blog. We welcome all contributions.
Also, if you would like to signup as one of our volunteers , please do drop us an email at tkl.volunteers@gmail.com
Do tell all your friends about it too! Thanks!

Volunteers

Regular visitors to Tan Kin Lian's Blog

I wish to collect particulars of regular visitors to my blog. Please provide the information requested here (all fields are optional). You can also tell me what you like best and what new information you like to see.

http://www.surveymonkey.com/s.aspx?sm=hh2uUZuh5AL0ZOA2c77dhg_3d_3d

US Lawyers Visiting Hong Kong

Patrick Daniels, the leading counsel of the proposed class action towards HSBC, has come to HK in the last two days. He explained several important points for the case:

1) HSBC is not considered to be the defendant simply because it is the trustee. Actually, according to the minibond programme prospectus, it's shown that issuer of the minibonds (i.e. Pacific International Finance Limited), is WHOLLY owned by HSBC Cayman, and its directors are also supplied by HSBC.

2) Mr. Daniels is therefore looking into the role and responsibility of HSBC in designing, creating and operating the product, which should not be called as "bonds" as they are highly complicated deriviatives and not suitable for retail investors.

3) Class action can be commenced whenever potential clients agree on it. HK investors are still meeting and discussing whether to launch it or not, and seeking for leading plaintiffs at the same time.

HK Banks set up legal fund

Dec 18, 2008

http://www.straitstimes.com/Breaking%2BNews/Money/Story/STIStory_315885.html

HONG KONG - HONG KONG banks that sold financial products backed by collapsed firm Lehman Brothers will provide HK$100 million (S$18.6 million) for a potential US legal battle on behalf of investors.

The 18 banks will put up the cash to challenge claims by Lehman's US lawyers that any proceeds from a proposed buy-back scheme would have to be first turned over to liquidators and not investors, the Hong Kong Association of Banks said.

'The distributors (banks) are prepared to provide finance to the trustee of up to US$100 million to assist it in the performance of its duty to protect the interests of investors,' the association said in a statement released late on Wednesday.

The move is the latest twist in the saga over compensation for thousands of Hong Kong investors who bought the so-called minibonds on the understanding their money was safe.

The collapse of Lehman Brothers in September meant the value of their investments dropped dramatically, which sparked protests across the city from investors who say they were missold the products.

The financial hub's government and the banks who sold the products then proposed for the banks to buy back the minibonds at market value, a process that was meant to begin this month.

But a unit of HSBC in the United States, which is acting as the trustee for the Hong Kong banks in the liquidation, has been told the move to compensate the investors here could be illegal under US law, the statement said.

The local banks have therefore 'decided to continue the buyback only after these legal issues have been clarified and addressed and the market value can be determined unless, in the meantime, the minibonds are redeemed early as a result of action taken by the trustee,' the statement said.

More than 40,000 Hong Kong investors - including many retirees - had put a total of HK$15.7 billion of their savings into minibonds and other complex products backed by Lehman Brothers. 

Buying a property - get a property report

I went to StreetSine (http://www.streetsine.com/) to search for a new property in the city area (district 1, 2, and 3) for a friend. I found a few suitable condominiums with reasonable prices. I was able to see the price trend and identify a few properties listed for sale. I transferred the details into MyOrganiser (provided by StreetSine).

I send messages to the agent handling these properties. Two agents called me. They were only interested to ask for my offer price. They were not able to provide details about the properties.

StreetSine told me that they will be providing a comprehensive report about a specific property for a modest fee (maybe $35). It contains a lot of detailed information about recent transactions, price trends, nearby comparable properties, amenities, etc. This is worth investing, so that I can make the right decision.

I wish to encourage property agents to make use of this comprehensive property report. When you respond to a potential buyer, ask for the e-mail address and mail the report to the buyer. This will put you ahead of all the other property agents and show that you are able to handle the potential buyer in a professional manner. You will get more business by acting in the right professional way.

http://www.streetsine.com/

Investors of failed structured products to know outcome of complaints by mid—Jan

Channel NewsAsia - Thursday, December 18
http://sg.news.yahoo.com/cna/20081217/tap-963-lehman-minibond-investors-know-o-231650b.html

SINGAPORE : The Monetary Authority of Singapore (MAS) on Wednesday said investors who have bought failed structured products will know the outcome of their complaints by the middle of January.
Investors had alleged that distributors had mis—sold the products and misrepresented the risks.

Minibond investor Ismail Deen was told last week that his complaint is still being looked into. He is one of nearly 5,000 investors who have complained to 10 financial institutions (FIs).

Like Mr Ismail, most investors of DBS High Notes 5, Lehman Minibonds and the Jubilee Series notes will get some answers by mid—January. Final checks are being done on some complaints.

Shane Tregillis, deputy managing director, Market Conduct Group, MAS, said: "That is to take into account the recommendations of the independent persons and to make sure they have taken into account any investigation findings, and also to check for consistency."

MAS said 9—in—10 complainants have been interviewed.

FIs have also decided on 80 per cent of the cases, but have yet to inform investors. For clear—cut cases though, investors have already been told of the outcome.
The central bank has been working with financial institutions in the past 10 weeks.
Mr Tregillis said: "We have been visiting, checking ourselves just to ensure the process, looking at the teams... the FIs have put in place in recent weeks, some of them are up to 100 people."

MAS said the FIs will review the complaints in a non—legalistic manner and it will be based on principles of fairness. However, they are expected to take legal defence if the investors decide to take them to court.

The central bank also said investors should be prepared to bear responsibility for their investment decisions. — CNA/ms

Encourage bank relationship managers to do the right thing by confessing to mis-selling

Written by Ng E-Jay (sent by e-mail to Tan Kin Lian)
18 Dec 2008

Mr Tan Kin Lian has revealed on his blog that he was approached by a bank relationship manager who wishes to confess to giving wrong information to investors of failed credit linked notes due to his ignorance about the risks of the product.

According to Mr Tan, this relationship manager has agreed to sign a statement, and will be approaching other relationship managers who are in a similar position to do likewise.

This relationship manager should be applauded for doing the right thing.

However, Mr Tan Kin Lian also revealed that the bank had, in Mr Tan’s words, “put pressure on him (the RM) by stating that he would be held personally responsible to compensate the customers, if he admitted to giving the wrong information.”
Such a threat by the bank is in clear contravention of the Financial Adviser’s Act (Chapter 110).

Under the Financial Adviser’s Act, the Financial Adviser (in this case, the bank) is responsible for the conduct of the Representative (the relationship manager) in respect of providing financial advisory services. If the Representative has mis-sold a product, whether out of ignorance or willfully, the Financial Adviser must take responsibility for it, and also decide whether or not to take action against the Representative. In the case of criminal activity, the Financial Adviser is obliged to lodge a police report, or give an explanation to MAS why a police report is not lodged. These rules are found in the Financial Adviser’s Regulations, which is subsidiary legislation enacted by MAS in support of the Financial Adviser’s Act.
A wrongful act cannot be covered up by telling the Representative to keep quiet about it. That would be outright fraud, the most serious offence under the Financial Adviser’s Act.

Furthermore, Section 68(1) of the Financial Adviser’s Act states that “A person is not excused from disclosing information to the (Monetary Authority of Singapore), pursuant to a requirement made of him under this Part, on the ground that the disclosure of the information might tend to incriminate him.”
Hence, it is not only morally right for the relationship manager to disclose that he has mis-sold a product, he is in fact required to do so under the Act.
We should encourage all Represenatives in similar situations to do the right thing by confessing to mis-selling the structured products and credit linked notes.
In my opinion, MAS should issue a blanket amnesty for all Representatives who mis-sold the credit linked notes due to ignorance. This would encourage more of them to come forward.

It is also very clear to anyone who is an industry practitioner that banks have high sales quotas for their relationship managers and exert tremendous pressure on them to meet those sales quotas.

Furthermore, the Financial Adviser’s Regulations make it clear that Representatives should only sell products in which they have competence. Since the Lehman-linked structured products deal heavily in arcane instruments like Credit Default Swaps (CDS) and Collaterialized Debt Obligations (CDO), it is not likely that the majority of Representatives would have the competence of explaining these underlying instruments to clients and appropriately advising them on the risks involved.
It is the banks and other financial institutions which should take full responsibility for the structured products fiasco.

MAS Ensures Progress in Complaints Resolution

Singapore, 17 December 2008...

http://www.mas.gov.sg/news_room/press_releases/2008/MAS_ensures_progress_in_complaints_resolution.html

MAS today provided an update on steps taken to ensure that the 10 financial institutions (FIs) that sold DBS High Notes 5, Lehman Minibond programme notes and Merrill Lynch Jubilee Series 3 LinkEarner notes deal with investors’ complaints in a rigorous and fair manner.

2 Over the last 10 weeks, MAS has been working closely with the independent persons (IPs) who were appointed to oversee the complaints handling and resolution process to ensure that the FIs make good progress in handling and resolving their customers’ complaints. MAS’ investigations are also progressing.

MAS review of process and assessment framework
3 In consultation with the IPs, MAS conducted on-site visits to assess the handling and review of complaints, including observing the internal review panels in action. Following these visits, a few FIs were asked to increase their resources, including engaging external firms to supplement internal staff where necessary.

4 We are working with the IPs to ensure that each FI has a robust assessment framework to identify indicators of potential mis-selling and offer fair financial settlement where appropriate. The IPs have provided feedback to MAS on how the FIs have applied the framework across a sample of actual cases. We are also ensuring that the assessment framework is consistent across FIs.

MAS’ investigations and regulatory actions
5 MAS is also looking at FI-wide issues, such as the selling practices and policies within each FI, as part of its formal investigations. The investigations cover, among other matters, the FI’s due diligence into the structured notes, the procedures used at the point of sale, including how the FI ensured that the notes were sold to clients whose investment objectives and risk tolerance matched the risk profile of the notes, and the training and supervision of relationship managers. As part of these investigations, MAS is requiring each FI to produce documents relevant to these matters and is interviewing senior management.

6 MAS has worked with the IPs to ensure that any potential FI-wide issues identified in the course of investigations have been incorporated into the assessment of individual complaints. Where issues have been identified, we will take into account the extent to which the FI accepts responsibility and deals with complaints rigorously and fairly before deciding on the appropriate regulatory measures or sanctions to be taken.

Progress of complaints’ handling and compensation
7 As of 14 December 2008, the 10 FIs have received 4,978 formal complaints: 815 for the DBS High Notes 5, 4001 for the Lehman Brothers Minibond programme notes, and 162 for the Merrill Lynch Jubilee Series 3 LinkEarner notes. All the FIs now have teams working long hours to meet the MAS’ review targets. In some cases, these teams comprise 100 to 120 case officers. Consistent with MAS’ expressed views, the FIs have agreed to review complaints based on principles of fairness rather than taking the strict legal position that they would if the matter went to court.

8 Over 90% of the complainants have been interviewed and FIs’ internal review panels have come to provisional decisions on approximately 80% of these cases. Most FIs are resolving complaints according to MAS’ timeline. Others need to put in more effort to catch up. MAS and the relevant IPs are monitoring their progress closely.

9 Based on the current case load, the FIs have informed MAS that they aim to complete the reviews for all except the more complex cases by no later than end January 2009. Some clear-cut decisions have already been communicated to investors.

10 Shane Tregillis, Deputy Managing Director, Market Conduct Group, MAS, said, “We have asked the FIs to conduct some final due diligence on the remaining complaints to ensure that they have taken into account the IPs’ recommendations, likely issues arising from any MAS’ investigation findings and to check for general consistency in the application of the complaints resolution framework. This is expected to take a few more weeks. Although these steps will extend the current timetable for communication to investors by a few weeks, we believe that the final outcome will better serve investors’ interests. Accordingly, most investors can expect to hear from their FI on the outcome of the review of their complaint starting mid January 2009.”

11 However, from a review of a sample of cases, it seems clear that some complainants should be prepared to take responsibility for their investment decisions. MAS will provide a further update on the complaints resolution process at the end of January. Mr Tregillis added, ”We are working closely with the independent parties to ensure that all of them meet our requirements in reviewing and resolving complaints. MAS will continue to oversee the process to ensure all customers’ complaints are resolved rigorously and fairly.”