Saturday, September 27, 2008

Prospectus for the Credit Linked Securities

When you invested in the credit linked securities (i.e. mini bond, high notes, pinnacle notes), did the distributor give you the prospectus and pricing statement?

Please share your experience in this blog.

Regulation by the Dubai International Financial Center

I met my Singapore friend who now works in Dubai. He wanted to create a new product and get the approval of the Dubai International Financial Center (DIFC) to market the product to retail investors.

The DIFC asked many questions. They are hesitant about allowing the product to be sold to the retail investors, as the investors may not understand the risk. My friend decided to withdraw the application.

I believe that the DIFC approach is correct. It is difficult for retail investors to understand complex products that are designed by "financial enginners" with the aim to make profit for the financial institutions. The retail investors are likely to be "taken for a ride" by these "financial engineers".

This is a different approach from that taken by the Monetary Authority of Singapore.

A view: Investors should bear bigger responsibility

Dear Kin Lian,

How's the going? I just heard you are leading the charge on the minibond issue. Its a good issue to take up.

However, there is a catch in this whole issue which I may draw your attention to. Although the instruments' name such as High Note or minibond are pretty misleading (well, even for an financial economics trained person like me got the wrong idea at the first look), but investors who are invited to invest in such instruments should be sophisticated enough to look beyond the high return without questioning the risks involved. Thus in my view, the investors should bear bigger responsibility for their investment decisions. I mean, when they are making money, they would not share with others right? They would not even bother about how complicated the instruments are. But when the instruments go bust, on what basis could they demand compensation?

Misselling? Hmm... there would be a big debate here. I believe the financial institutions that sold these instruments should have their backsides all covered by disclaimers and such.

The only direction to go is investor education as well as taking MAS to task. MAS as a regulator, should know the risks involved. It should, as a regulator, makes specific demand on the financial instituition to highlight the all risks and implications involved in all the marketing tools and documented agreements, in BOLD and not in fine prints.

Maybe it would be good for you to raise these few points along with your present direction of fighting for the investors' interests at hand.



Avoid incurring a large debt

Hi Sir
I'm a student currently studying in college. I am keen on going overseas to the UK to read law after my A levels but I have qualms about the cost.

I understand that the fees would cost about S$100 000. But with the cost of living considered, the amount would probably triple to S$300 000. I was hoping you could shed some light on bank loans or other possible avenues that would allow me to realize this ambition. Hope to hear from you soon.

I usually advise people not to incur big debts, even for education. I did not go to university and can still do well in my career. If not, I am happy to have a more modest career.

Difficulty in Travel Insurance Claim

Dear Mr Tan,
Recently my parents bought travel insurance from a big local firm to cover themselves for a tour to China. Unfortunately, during the tour, my father contracted food poisoning and had to be warded in the hospital there. The doctor told him that he is not fit to continue with the tour and my mum to accompany him home immediately to seek treatment.

The tour agent there told him that his air tickets from his tour package are 'fixed' dates and hence cannot be change and were told to buy new air tickets for his flight home. He called long distance to the insurance company helpline and was told to ask the tour agent to pay first.

Coming back home, he was able to claim the balance of his tour package but his claim for his air ticket was rejected. The insurance company exercised a clause that state that the ticket bought after the insurance policy is in effect cannot be claimed.

My point here is that we bought travel insurance for such contingencies. Secondly, does that mean that travel insurance only cover when the situation is really dire such as in a SOS case and not in cases whereby the claimant is not fit to continue to travel and told to come home on his own?


I believe that you are entitled to claim for the cost of the airfare, as it is caused by the medical emergency. It comes under the cost of evacuation, which I supposed is covered under the policy.

I suggest that you ask for the claimto be rejected in writing. You can lodge a complaint with FiDREC (

I find the practice of this insurance company to be deplorable. They like to find reason to reqject a legitimate claim, instead of treating the policyholder fairly.

Mis-representation in High Notes 2

Hi Mr. Tan,
Much has been discussed among distraught investors about how to seek redress from the FIs which sold them the structured notes that are now in troubled water. Among other things, I think it is important for us to provide evidence of misrepresentation of the FIs when we lodge our complaints.

Going through the pricing statement of High Notes 2, the following points may be deemed misrepresentation and I would like to share my views here with those who are interested:

1. The ghost credit default clause - I call it “ghost” because this clause is not visible anywhere in the pricing statement and it suddenly jumps up from nowhere when the RMs called to informed us that another 2 defaults in the basket of securities would constitute a credit event.

According to the pricing statement, risk factors highlighted therein are:
Liquidity risk, market risk, FX risk and credit risks which includes the 8 reference entities (with a first-to-default clause), the arranger/issuer and Constellation which is described as a special-purpose vehicle collateralized with a basket of AA- rated bonds and securities. Constellation is the counterparty which entered into various derivative contracts with the arranger under the structure of High Notes 2. This description of Constellation gives investors the impression that High Notes 2 is secured with a basket of good rated securities through Constellation.

Nowhere in the pricing statement can one find anything that says the default of 5 entities in the basket will trigger a credit event. All the while many investors were given the impression that High Notes 2 is adequately secured by a basket of diversified AA rated bonds, believing that even a few defaults in the basket of securities would not seriously impact on the value of the investment.

It is only after the occurrence of 3 defaults in the security basket are the investors informed by their RMs that it takes only another 2 defaults to have the value of their investment totally wiped out, despite that the other 90 over names in the basket remain intact. This default clause which is not defined in the pricing statement suddenly makes High Notes 2 a highly risky investment. This clause was never explained to investors before by the bank and nobody knows how and where default clause comes from and how the default of 5 parties out of about 100 names can wipe out the entire value of the securities basket? Is this non-disclosure of a critical default clause in the pricing statement tantamount to misrepresentation?

Further, I feel that the bank has not acted to protect the interest of High Notes 2 investors. Knowing that the value of the Notes can be significantly affected by a small number of defaults in the security basket, the bank should have provided the investors with the names in the basket of securities when the sub-prime mortgage problems started last years, and investors should be warned of the danger of possible defaults. This is very important because investors can then monitor the market closely and if necessary cut loss by cashing out from the Notes. But nothing was done, not even when some big names in US and Europe were hit by the toxic sub-prime debts. This is rather disappointing. It was too late when the RMs called us after the occurrence of 3 defaults.

2. “Spread your risk with a basket of bank credits, each rated A- or better by Standard & Poor’s.” - This is a misleading statement given in the bank's marketing material. This marketing material is also printed with glossy paper on the lst page of the pricing statement.

This statement gives investors the impression that the credit risk of High Notes 2 is well diversified among the 8 reference banks. But in actual fact, investors are facing a higher probability of default risk. Because, with the first-to-default clause (which was omitted in this marketing material, probably intentionally) the default of any one reference bank will trigger a credit event. This is different from buying a unit trust where the funds are invested in many companies and if one of them goes bust, the value of the units will not be substantially affected. So the spread of risk as claimed by the bank is not true. I would rather have 1 or 2 reference entities than 8, because with 8 my chances of getting hit are higher. The omission of the first-to-default clause with reference to the 8 reference banks in the marketing material looks very tricky. So is this tantamount to misrepresentation?

3. High Notes 2 only suitable for experienced investors - On page 5 of the pricing statement under the sub-heading "Suitability of the Notes", it is stated that "Structured products such as the Notes issued under the Programme are not suitable for inexperienced investors."

What we know from various sources is that many of such structured products have been sold to old uncles, aunties and retirees who parted with their retirement money believing High Notes 2 to be safe investments that could enhance their nest eggs.

We all know that at the point of sales, a financial profile analysis of the investors will be carried out by the sales staff of the bank. With such precautionary exercise, I wonder how these gullible old folks can still be classified as experienced investors and considered suitable for investing into risky High Notes as some of them can't even read or speak English. I am not saying people who cannot speak or read English must be bad investors, but can they read the details given in the pricing statement and understand the risks? Surely they parted with their money after listening to the sweet talk of the sales staff. Something must be wrong in the sales process. Is there a moral issue here? The relevant authority should look into some bad sales practice in our financial market and take necessary action.

Mr. Tan, I would appreciate it if you could place this message on your blog so that I could share my views with anyone who is interested in this matter. It would be better if some one could provide legal opinion on the abovementioned issues. With more interaction, maybe we can explore some other areas of misrepresentations by the bank.

Best regards,
Wilson Tan

Friday, September 26, 2008

Fair Compensation

Dear Mr. Tan,

What is a fair amount of compensation that the distributing financial institution can offer to the investor? Can we expect them to compensate us fully for our loss of hard earned savings?

If this matter goes to Court, either on an action taken by the Government or by the investors, the decision will be made by the judge.

However, the parties may agree to make a settlement on their own, without asking the judge to decide. In that case, each investor should decide on the amount that they are willing to compromise.

If you are offered compensation at 50% of your loss, will you accept? I am sure that the investor will like to have the loss fully compensated, but it is unlikely that the distributing financial institution will agree.

Can you send an email to me at State your name, telephone number, amount invested and the amount that you will accept as a fair compensation (i.e. that you will be willing to fight in court, if you are not offered. Remember, legal expenses can be quite costly).

Do not send email on any other matter to as I shall NOT be replying to emails from this account.

Support for Petition

Hi Mr. Tan,

I am truly heartened to learn that you are championing a petition to ask the government to investigate into the substantial losses that many investors may face arising from their investments in structured notes sold by financial institutions here.

I think the investigation should not limit to those notes mentioned in your blog. I think the investigation should cover a wider scope to include all other series of those notes such as High Notes 2 and others minibonds and jubilee notes and others. This is because we have been warned that more defaults may surface in the course of the next few interest payment dates.

One thing that I do not quite understand is why there seems to be little voice coming from those who have been vocal in parliamentary debates on issues concerning public interest? Is the potential loss of hundreds of millions of dollars in dubious investment instruments by the public not an issue of concern to them?

The Petition covers many structured products, including those that are named in it.

Update (1) to investors of credit linked securities

I have received more than 800 signatures to my "petition". It is not really a "petition". I used the "petition" software to collect the particulars (i.e. name, telephone number and e-mail address) of the signatories, so that they can contact each other.

I do not wish to send the full list (of more than 800 people) to each of the signatory, as the list could be mis-used by any recipient for other purposes. To reduce the risk of mis-use, I shall be creating smaller lists of 50 signatories. The list will be sent to the people named in the list. This allows the recipients to contact and talk to the other people in the smaller list. I hope that this is suitable as a first step.

I will be arranging for a new Petition to be signed online. This Petition will call on the authority (MAS or Attorney General) to take action on behalf of the investors and bring the financial institutions to court. The aim is to get compensation for the investors for their loss due to mis-selling. The wording of this new Petition is being worked out now.

I am arranging a meeting of the investors. It is expensive to book a large auditorium and to have people to handle the registration and logistics. I am considering to hold smaller meetings of up to 100 people at a time. I shall discuss this matter with my team and update the investors separately.

Sample letter of complaint

Here is a sample letter of complaint sent to the CEO of a financial institution. I have removed the name of the financial institution and the financial adviser.

Hi Sir/Mdm,

I have invested in minibond Series 7 in your Y Branch during dec 2007 with the help of your financial adviser, Z. On the evening I met up with Z, I told her I want a risk free product because I cannot afford to lose. At first she suggested I take up another plan which is not the minibond and told me is safe and show me the graph on the investment that it has been making money for the past 10 years. I ask her is there any risk, she told me LOW RISK. I told her I am not a risk taker. She then told me if you don't want risk then go for the minibond.

I ask her what is minibond, she show the statement as attached of page 3 that these are the 6 companies you are investing in. I took a good look at the 6 companies and ask Z to explain to me who are them. She explain to me what are the companies doing and the history of them. She then told me unless any 1 of the 6 companies go bankrupt, it will not affect my investment. I even ask her what if they are not doing well, she told me it doesn't matter, you are not buying their stock. YOU ARE BUYING THEIR BONDS AND LENDING MONEY TO THEM.

She also pointed out to me IT IS APPROVED BY MAS and show me page 1 of the statement. I ask her to show me which part of statement shows the risk, she show me page 4 and told me it is written black and white your full investment amount is at risk should any one of the reference entities experience a credit event. With all her words and the statement she show me on page 4, I understand and accept the risk and I sign on the paper.

Recently, Lehman Brothers experienced a credit event, at that point of time I still do not know I got affected. Until AIG nearly go on a credit event, I called her and I was shock when she told me that was I affected. She told me all my funds are frozen, I ask her why, since AIG is not bankrupt. She then told me Lehman Brothers is the arrangers for the note. I don't even know who is Lehman Brothers and I only remember the 6 companies I invested in. Why is Lehman Brothers in the picture only when things happen and did not tell me EVEN LEHMAN BROTHERS GO BANKRUPT AND NOT JUST THE REFERENCE ENTITIES, my investment will get affected when I bought the ' BONDS '.

After which, I found out what I actually invest in, is not even bonds. It is a synthetic derivative created by lehman to insure against the default of debt to the reference entities, which is totally different from what she told me when I purchase them. She did not call me when my funds go frozen and I have to call her for the updates and all she told me is trustee have not get back to her.

I demand a compensation for being misled on the nature of the notes.

Channel News Asia - Interview of investor

Channel NewsAsia wish to interview some investors of the credit linked securities. If you wish to talk to the journalist, please contact Desmond Wong at Mobile: 96926593 or Email:

Investing in stocks - online platform

Hi Mr Tan,
My current investment is only through Unit Trust, however I would like to explore in stock.

Understand that in order to buy stock, we will need to have an CDP account? But where do I open one? Also for stock is there any platform like fundsupermart (unit trust) which I can D.I.Y?

If you wish to buy stocks, you have to open a CDP account. This can be done by the stock-broker. The brokerage is now quite low, at 0.3%, so it is better to let the stockbroker to handle it for you.

Philps Securities and DBS Vickers Securities have online platforms to allow you to buy the stocks directly. I think that some of the other security firms provide a similar platform also.

Thursday, September 25, 2008

Credit Linked Securities - Q&A

1) What is the likelihood that investors can salvage some value from the Minibonds or High Notes?

In my opinion, if the unwinding of the invesment structure is done properly, and the administrator seek the best possible value for the assets, there is the possibility of some salvage value. I cannot imagine that all the investments have no value now. I hope that the regulator will ensure that these unwinding is carried out properly and the interest of the investors are protected.

2) Should the distributors/financial advisers of these products, which include a number of banks and brokerage firms, be held accountable since Lehman has gone bankrupt? Can the investors of these structured products seek compensation from the distributors?

Section 27 of the Financial Advisers Act require the advisers to make appropriate recommendation to the client. They will fail in their duty to recommend a high risk product to an investor who is risk adverse. If the adviser is held to be negligent, the adviser is required to compensate the investor for the loss.

3) What is your advice to investors of Minibonds and DBS High Notes?

Prepare a statement about the advice that you have received from the adviser, even if it is a verbal advice. Look for written evidence, if available. Get together with other investors in similar situation. Lodge a complaint with the financial institution that sold the product to you. Be ready to take it to FiDREC ( or the MAS.

4) Any retail products in the market which, in your opinion, are at risk and can go down like the Minibonds and High Notes?

There are several other credit linked notes, similar to Minibonds. They have dropped in value already. An investor fold me that the Pinnacle Notes have depreciated by 65%.

Overwhelmed by e-mails and questions

I received more than 100 e-mails. Many contained detailed and difficult questions that I am not able to answer with my limited time. I am now in Dubai, and can only spare some time to reply to your many questions.

I hope that the investors understand the situation. Please read the postings in my blog. And remember that I cannot spend time to attend to your questions individually.

The first step that you have to do is to lodge a formal complaint with the financial institution that sold the product to you. You can state that you were misled about the product, which is actually risky.

My colleague, Peter and Andrew is trying to find a place to hold a meeting. Please be patient and wait for announcement on this blog. We are not able to answer your questions individually.

I have written to a very senior person in MAS to outline the concerns of the investors in these products. Please wait for further development.

Approach taken by Hong Kong Monetary Authority

Posted in

14)--> Lucky Tan on September 24th, 2008 11.22 am

It is interesting to watch how Hong Kong respond to the Lehman Minibond issue vs Singapore.
In HK, the authorities have set up direct hotlines to register complaints and lawmakers are preparing to take action against the banks. In Singapore, MAS issue a statement asking individual investors to go sort it out with the banks themselve - its like a “please don’t bother me attitude”.

Lodge your complaint with your financial institution

Some investors were worried that they missed out from signing the online petition that attracted over 500 signatures. There is no need to worry about missing this petition.

A petition is a request to the authority to take action. 500 signatures are more than enough. I am sure that MAS will be responding pro-actively to the petition.

You can still register your particulars here:

It is more important that each investor should write to lodge your complaint with the financial institution that sold the product to you. You can send a registered letter to make sure that there is a record of its despatch.

Read this blog:

Some investors told me that they have difficulty in writing the complaint letter. My friend Adrian Tan has agreed to help. You can send your facts to him in by e-mail. He will try to write it for you. Adrian Tan <>

MAS statement on Protecting Policyholders

Hi Kin Lian,
Thanks for your prompt reply. I just found the actual MAS statement which is more assuring. Here's the link:

Beware of ELN (Equity Link Notes)

Dear Mr. Tan,

This is the first time I visited your blog and find that they are very useful and informative. I have experience in stock market, but not in the bond market of structure product and hence fall into th plight of the recent turmoil.

I would like to post the following in your blog to draw attention from the public about the above product. It is normally ties to a single company. For example for company X which is trading at $2.00. The bank could offer you 96% ($1.92) bid price at 12%pa for a period of 4 weeks. Here is how it work, if at maturity, the stock price is at or above $1.92 you get the interest of about 1%. Should the price of the stock fall below it, you will receive the stock which will be sold to you at the bid price ($1.92) even though the price of the stock is only at $1 trading at SGX - another example of limited earning and limitless loss.


Experience in lodging a complaint with the bank

Hi Mr. Tan,

I had a tele conference with two "product experts" of DBS. This conference, arranged by my RM, was to address any concerns I might have about my investment in high notes 2.

We discussed about the several issues and told them that I strongly felt that the product was mispresented to me. I also cited a clause in the pricing statement saying that "the product was not suitable for inexperienced investor" and told them that it was unethical of the bank to have sold many of this risky high notes products to gullible old uncles and aunties.

That noted my complaints and promised that the taped conversation will be passed to an "independent team" within the bank to investigate, the results of which would be forwarded to MAS.

Do you think this is what the MAS wanted the bank to do and is this sufficient? My concerns are not every investor has a RM to ask for a tele conference and how about those who cannot converse in English?

You may want to post this email in your blog (within revealing my email address) so as to encourage as many investors as possible to voice their complaints through such tele conference.


I do not agree with the approach taken by MAS. I hope that MAS realise that it is very difficult for the public to go through this complicated process. They are likely to get an unsatisfactory outcome from the financial institution.

Wednesday, September 24, 2008

Unable to pay premium till 70 - Revosave

Dear Mr Tan
I attended a talk you conducted when you were still with NTUC income and you came across as honest and sincere.

I vaguely understand that Revosave is a combination of insurance, savings and investment. Expecting no one to support my needs in old age, I bought Revosave on impulse, putting in about $1,000 every month. If I understand correctly, I should be getting a "guaranteed cash benefit" after two years, but how much and whether it is worth it, I don't know.

I am past 55 and getting worried that I would not have the resources to put aside $1,000 a month till I'm 70 years old to benefit from the plan. Should I cut my losses and terminate the plan now and just put my money in a fixed deposit?

It is improper for the insurance adviser to sell you a policy without considering your abilty to pay the premium. If you have been badly advised, you should lodge a complaint with NTUC Income. If they do not give you a suitable redress, you can complaint to FiDREC ( You should not have to suffer a big loss from this bad advice.

Business Ethics

Can we get business to operate honestly and with integrity?
Can they earn the trust of consumers?
Read this paper:

Preparing your statement or affidavit

This blog contains a few useful tips for you to prepare your statement or affidavit to submit to the financial instition that sold the credit linked securities to you (i.e. minibond, high notes) without advising you clearly about the risk.

I suggest that investors should get the papers ready now:

MAS statement on Structured Products

22 September 2008

Comments by MAS Spokesperson on Investments in Structure Products

" MAS understands that many investors would have queries about their investments in structured products. The FIs concerned are already assessing structured products that are linked to Lehman Brothers to determine how investors will be affected. We have asked FIs to update all affected investors as soon as information becomes available. MAS is in close contact with the FIs.

Investors who consider that they were mis-sold a product or that a product was misrepresented to them should also contact their FI in the first instance. MAS expects the FIs concerned to give priority in dealing with such queries and handle complaints promptly, in accordance with existing MAS requirements. If the consumer is not satisfied with the FI's response and they have a legitimate cause of grievance, they can approach FIDReC which is the independent organisation set up to help resolve disputes in the financial sector. MAS will continue to monitor how FIs are handling complaints they are receiving.

MAS expects all financial institutions to have in place proper procedures to ensure that investment products are marketed and sold appropriately. Where we have clear evidence in the current matter that an FI has breached our laws or regulations, we will hold the FI to account. At the same time we urge consumers to be careful in their investments decisions. MAS will continue to work with our partners in MoneySense to enhance our financial education efforts so that investors understand the risks and returns of the products that they are investing in, and not to invest in products they do not fully understand." - MAS Spokesperson

Denise Gan
Asst Director (Communications)
Monetary Authority of Singapore
DID: 6229 9425

Tell your Member of Parliament

Thanks for your initiative. I hope more people will sign up. There was a protest in Hong Kong on the same issue and understandably, CNA reported, the investors are considering suing the Lehman sellers.

My series 3 was sold to me by X based low risk with the possibility of defaulting if any of the 6 banks declare bankrupt. Given the good rating and the international reputation of these banks, I was encourage to take especially when it is also a bond.

When Lehman declared bankrupt, more information was release from internet [] Then I came to know about Swap agreement, arranger and derivative packaging. Till now, I still have no idea what Lehman do with the money since X did not furnish the information. They are more like trying to say follow the contract i.e. Swap arranger defaulted, so wait for HSBC trustees to determine any $ left.

Bad selling, poor understanding of this product and finally sad for Singapore's financial hub if MAS is not going to help as the investments are hard earn money for retirement. I paid $Y and still thinking how to start saving all over again.


I suggest that you should lodge a complaint with your Member of Parliament. I hope that your MP can ask for MAS to be more pro-active in looking after the interest of the general publlic.

Tuesday, September 23, 2008

Special program on CNBC about Credit Linked Securities

CNBC is filming a special program on Credit Link Securities. It is expected to be filmed on Thursday. I do not know the exact details.

I was interviewed on CNBC to give my views about the risk of these securities and why they are not suitable for risk adverse investors. I also suggested the steps that can be taken by the Authority to investigate potential mis-selling by the financial institution and any potential wrong-doing in the structuring of these securities.

Watch out for this program on CNBC.

Group Meeting of MiniBond Investors

Message from Jan Chan: Mr. Tan, please help us to pass this message through your blog

We are a group of Lehman Minibonds investors who are organizing a meeting tomorrow to discuss collective action and to sign a petition for submission to the authorities to voice our grievances.

Interested parties are encouraged to join us.

Date/Time : Wed., 24/9/08 at 7pm
Venue : outside Hans Cafe (#01-01) at the Central Public Library, 100 Victoria Street.

Jan Chan

How to get to Central Public Library :
Nearest MRT: Bugis MRT Station or City Hall MRT Station
Bus stop (North Bridge Road ): SBS 145, 197, 32, 51, 63, 7, 80 175 and SMRT 851, 61
Bus stop (Victoria St -Allson Hotel) : SBS 2, 7, 12, 32, 33, 51, 63, 80, 175 and SMRT 61
Bus stop (Victoria St -Bras Basah Complex) : SBS 2, 12, 33, 130, 133, SMRT 960, NR7
Bus stop (Victoria St -St. Joseph's Church): SBS 130, 133, 145, 197, C3, SMRT 851, 960, NR7
Bus stop (Middle Rd - Nam Peng Building) : SBS 56, SMRT 980

Lodge a complaint with the financial institution

1. I have received the particulars of 70 investors of the credit linked securities. It will be quite difficult for me to communicate with you individually. I hope that you will refer to my blog each day to get the updated information.

2. I have arranged for two friends to help me to manage this group:

Peter Ng
Andrew Loh

3. I have asked them to arrange a meeting for the investors to get together. Wait for further details.

4. The Monetary Authority of Singapore had advised these investors to approach the financial institution who sold them the structured product. The investor could seek redress from the financial institution for the loss due to mis-selling. The financial institution is required to have a process to deal with these complaints.

5. I suggest that you should, as soon as possible, write a letter addressed to the CEO of the financial institution from whom you have bought the credit linked securities (i.e Minibond, High Notes, etc). The letter should state the following:

a) What did you invest in, i.e. name of product, amount invested and other particulars?
b) How you happened to invest in these securities, e.g. convinced by the marketing officer to make the investment
c) Any assurances (verbal or otherwise) that you received concerning the low risk nature
d) Your personal risk profile, i.e. were you risk adverse?
e) Were you informed by the adviser about the nature of the risk?
f) Why you feel that you have not been properly advised, i.e. mis-selling, by the adviser?
g) Why a risky investment is not suitable for your circumstances
h) If you have any written evidence to support your statement, you should provide it in your letter.

6. You should send the letter as early as possible, to register your complaint of mis-selling. At this time, you do not need to have a sworn statement, i.e. affidavit. If necessary, you can prepare an affidavit at a later date, using a copy of your letter.

7. You should also see your Member of Parliament and give a copy of your letter to your MP. Let your MP be aware of your feeling on this matter and how painful it is to lose the hard earned money.

Investors of Credit Linked Securities - particulars

I have used this petition to collect particulars of investors who are affected by the credit linked securities (such as Minibond or High Notes).

Investors of Credit Linked Securities

I have removed the blog containing the particulars of investors in the credit linked securities. This is to prevent the contact information from being accessed by other people who are not connected with this matter.

If you wish to join a collective action, you can send your particulars to me at

I will ask a colleague to contact you and ask for your name, contact number and e-mail address. I will try to arrange a meeting for the registered people to meet and discuss the collective action.

Hong Kong Monetary Authority

Hello Mr Tan,

Hong Kong Monetary Authority are helping to fight for all these investor. That would include a public reprimand, a fine, or both, or suspension of license," said executive director Raymond Li.But our MAS tells us to sort it out on our own.

Maintaining the cooperative spirit?

Dear Mr.Tan Kin Lian,
First of all, let us express our great appreciation to your various financial planning advice extended to members of public which we find them beneficial and informative.

We applied for Incomeshield and has been offered which will practically exclude most major illnesses, making the scheme less meaningful and less relevant to us.

Is there a way for us to appeal for a waiver or any other better alternatives for our health insurance? We have declared thoroughly our medical background to NTUC including the contact details of our regular doctor. Our doctor can help to certify that our medical condition is well within the limit and show no sign of deterioration in the last few years under present medication.

I suggest that you write to NTUC. I hope that they still retain the cooperative spirit and are willing to treat their customers differently from other commercial insurance compnay.

Affidavit for investors of Credit Linked Securities

I sent this message to a few lawyers. Several lawyers are not able to act for the consumer, as they have relationship with the banks. I hope that some lawyers can come forward.

1. Many people were advised by financial advisers to invest in Credit Linked Securities (such as Mini-bonds, High Notes) on the assurance that they are safe and can earn a better rate of interest compared to bank deposits.

2. The investors are usually ignorant of these financial instruments and are risk adverse. They invested in the CLS on the verabal assurance of the adviser that the CLS is safe.

3. The investors had to sign several forms covering the adviser. Most of them were not aware about what they were signing.

4. The CLS have now turned bad. The investors could most or all of the amount invested.

5. The Monetary Authority of Singapore had advised these investors to approach the financial institution who sold them the CLS product. The investor could seek redress from the financial institution for the loss due to mis-selling. The financial institution is required to have a process to deal with these complaints.

6. I wish to look for a lawyer to help these investors to prepare their statement to be lodged with the financial insitution. The statement should cover the following:

a) Circumstance in which the investor was recommended the CLS product
b) The investor's intention to avoid high risk product
c) The assurance recweived that the CLS was “low risk”
d) Any written document (if any) to support the affidavit
e) A statutory declaration that the statement is true.

7. This legal statement will be useful for the investor to lodge with the financial institution. If there is no redress, the statement can be taken to the next step, i.e FiDREC (financial dispute resolution center,

8. If there is still no resolution, the matter can go to court.

9. Can your firm help the investor to prepare the affidavit at a modest cost?

Tan Kin Lian

Dubai, 24-27 Sep 2008

I am travelling to Dubai for the next four days. I may not be able to access internet or my e-mail during this time.

Monday, September 22, 2008

Blog for Minibond investors

Hi Mr Tan,

I understand you have talked to a lawyer about the possibility of taking action for minibond holders. Thousands of minibond holders has been to my blog:

If you intend to organise or facilitate anything for them, let me know and I can help to inform them.


Pinnacle Notes

Here is how the Pinnacle Notes work. It is frightening to me.

Proof of misleading advice

The bank officer selling the credit linked securities tells the investor that the product has low risk. This is done verbally.

But if many investors are able to sign a statement that they receive the same verbal statement from the bank officer, the collective evidence may carry weight in court.

It is important for the investors to get together and give their statement.

Customer service on Motor Insurance

Hi Mr. Tan

I was involved in a car accident, where a Volvo slammed into the back of my vehicle.

I brought my vehicle to IDAC. After inspecition, I brought my vehicle to an NTUC authorized workshop in UBI.

I have just got my vehicle back. I would like to know:

1) Is it the usual procedure for the workshop to claim my medical expenses? The workshop I went to simply asked me to hand over all my medical bills and they will assist to "claim on my behalf".

Reply: A good insurance company will assist you to make this claim. But they prefer to have the easy way out. So, you have to depend on the workshop to do it for you.

2) Would I be able to know how much the insurer of the Volvo is liable to pay to the workshop I went to? I have heard stories from my friends that very often, the workshop will get to claim a much larger amount from the insurer and they would only pass a fraction of that money to me.

Reply: You are entitled to have your car repaired to its condition before the accident. How much the insurer pays to the workshop is a separate matter.

3) Am I also able to claim for lost allowance / hardship for the injuries caused to me? (I suffered a badly bruised right eye) What would be the procedure to do this? Can I just leave it to the workshop to claim this for me

Reply: You can make this claim by writing direct to the insurance company. But they tend to give a low amount to the claimant. So, many claimants prefer to engage a lawyer to make the claim. Try the lawyer.

4) I am upset over the transparency of the entire motor insurance claims procedure. In your expertise is there a better way to do this?

Reply: It is the duty of a good insurance company to make it easy for you to claim for your losses. You should insist on a high standard of service and assistance from the insurance company.

If they fail to do so, you should lodge a complaint. Read my blog about "Consumer complaint to MAS".

OCBC Preference Shares

I believe you have saved many people, especially those who read your blog. You always educate us not to buy complicated structure products (Mini bonds, Pinnacle notes etc)

I am fortunate that I take your advice to invest only in low cost fund(NTUC INCOME Growth Fund), STI ETF Fund & many endowment policies from NTUC Income.(I bought it 15to 20 years ago)

I have about 100K from my matured policy from NTUC Income, I do not know what to invest, so I have bought 50k of OCBC Preference shares recently(It give 5.1% dividend). Now the market is so bad, I am worried about my Preference shares will become Mini Bonds.

Please advice me whether preference shares is safe to invest & also tell us more about preference shares.

In my view, the OCBC Preference Shares are quite safe. I will be buying some of these shares for my investments. They will not be like MiniBonds - as they are entirely different types of investments.

Financial Adviser Act, Section 27

I researched the Financial Adviser Act and found section 27. It describes the responsibility of the financial adviser or its representative in giving proper advice to the consumer. The adviser is required by section 2 (a) to ensure that the recommendation (i.e. to invest in the credit linked securities) is appropriate to the consumer. I believe that the adviser has failed in this duty.

Recommendations by licensees
27. —
(1) No licensee shall make a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation if the licensee does not have a reasonable basis for making the recommendation to the person.

(2) For the purposes of subsection (1), a licensee does not have a reasonable basis for making a recommendation to a person unless —

(a) he has, for the purposes of ascertaining that the recommendation is appropriate, having regard to the information possessed by him concerning the investment objectives, financial situation and particular needs of the person, given such consideration to, and conducted such investigation of, the subject-matter of the recommendation as is reasonable in all the circumstances; and

(b) the recommendation is based on the consideration and investigation referred to in paragraph

(3) Where —
(a) a licensee, in making a recommendation to a person, contravenes subsection (1);
(b) the person, in reliance on the recommendation, does a particular act, or refrains from doing a particular act;
(c) it is reasonable, having regard to the recommendation and all other relevant circumstances, for the person to do that act, or to refrain from doing that act, as the case may be, in reliance on the recommendation; and
(d) the person suffers loss or damage as a result of doing that act, or refraining from doing that act, as the case may be,

then, without prejudice to any other remedy available to that person, the licensee is liable to pay damages to that person in respect of that loss or damage.

(4) In this section, a reference to the making of a recommendation is a reference to the making of a recommendation expressly or by implication.

(5) This section shall not apply to any licensee or class of licensees in such circumstances or under such conditions as may be prescribed.

Sad experience of a Minibond investor

Hi, Mr Tan
I have just started reading your blogs and find them very useful. I regretted not reading your blogs earlier.

I am also one of the unfortunate 'victims' in the Lehman Brothers case. I have bought some Mini Bond Series 6 from X last year. I did not know that my principal amount is not protected. I am actually quite careful with my money. I have always placed whatever money I have in the local banks' Fixed Deposits. This is the first time I bought a Mini bond and I may not have understood completely the nature of the Bond and that there are heavy risks involved. If I had known that, I will not have invested my hard earned money there.

I read your blog this morning and think your suggestion that more people like us should get together to lodge a complaint. I wonder will you be able to help us get in touch with common 'victim', maybe create a platform so that we can work together to 'fight' this battle, to get our hard earned savings back?

I just spoke to CASE and the officer was helpful to provide me this contact number to call for advice: FIDREC: tel: 6327 8878. I have just spoken to the officer in FIDREC and she advised me to lodge a formal complaint to X, with proofs of my allegations. I will have to go home and check out any documentary proofs before I can do that. I think it may be difficult because it could have been verbal only.

I have spoken to a lawyer and see if they are able to take up a case on behalf of the investors who were misled into investing in these products.

My wish is that MAS will take action on behalf of the investors, to see if the financial institutions had failed in their duty to ensure that the products are suitable for the investors.

TV program on credit linked securities

An international TV station wish to interview investors who have invested in the structured products affected by the collapse of Lehman Brothers (i.e. the credit linked securities). They wish to know if the investor had been given the right advice by the financial adviser or bank officer who sold the product.

If you are affected and wish to be interviewed on TV, send your name, telephone number to me at

Investor in Minibond can seek redress

Dear Mr. Tan,
I read your blog everyday to see if there is any good news about Minibonds. I invested in this product on the advice of the bank officer. She told me that the risk is very small. I did not want to take risk.

I am told now that the Minibond may be worth nothing. I have a lot of my savings invested in this bond. Can I ask the bank to compensate me for my loss?

There are many people in a similar situation as you are. I understand that the Financial Adviser Act require the adviser (i.e. the bank officer who sold the product to you) to ensure that the product is suitable to your needs. Clearly, a risky product of this type is not suitable.

You have a case to bring up against the bank officer. I suggest that you get many people in similar situation as you are and take up this matter collectively to the MAS or Consumer Association or other body. You can also take up a legal case.

Sunday, September 21, 2008

Lack of transparency in terminal bonus

Dear Mr. Tan,
With the problem facing AIG, is it better for me to buy insurance from NTUC? Will my savings be safe?

It is better to buy term insurance and invest the difference in a low cost fund. Read this FAQ:

NTUC now declares a low rate of annual bonus with a large part of the maturity benefit in the form of non-guaranteed terminal bonus. This is similar to the practice of the commercial insurance companies.

It is better not to rely on the non-guaranteed bonus, as there is a high chance that it will not be paid, even in good times. There is lack of transparency in the distribution of terminal bonus. The insurance company gets away with paying less than what is fair to the policyholder.

A expert view about Structured Products

Hi Mr. Tan,
Structured products are essentially investment instruments engineered by so called "financial engineers" using complex mathematical models (models which works 9 out of 10 years, and the other 1 year, it blows up spectacularly).

These products almost always results in the investor underwriting/selling an financial options or insurance in exchange for an small fixed premium, (e.g. dual currency account, mini-bonds insuring credit events). This is the main reason I have been avoiding RMs (i.e relationship managers) marketing their structured products, i.e. I don't want to underwrite a huge risk for a small premium.

Let me elaborate on why individual investors should never sell/"underwrite" financial options/insurance:

- the losses can be catastrophic to the investor in return for a small fixed return eg something happens, your losses are very high and nothing happens, your return is just 3% more.. individuals simply do not have the capacity to take on such risks (evidently even AIG don't)

- the general public simply do not have the neccesary training/finance knowledge to understand these products and the risks involved.. those that do, probably won't invest in them..

- financial markets have a very high correlation during extreme events, diminishing the effects of diversification

- banks also have an incentive to push these products, because there is a lot of demand for financial options/insurance from hedge funds, banks, investment-banks. Effectively, these financial insurances are underwritten by the unsuspecting public and subsequently passed to the bank's clients. The bank made a spread or fee from both sides and the RM made a nice commission.

MAS failed in regulating these practices, and the banks and RMs put the life savings of investors at risk because of their own fat pockets.

I urge the financial journalists to find out:
- what proportion of bankers, RMs actually invested in these structured products (putting their own money where their mouth is)?
- where has the losses gone too?

Come on, guys at ST put your journalist professionalism and critical thinking to use!!


Loss of hard earned money

Dear Mr. Tan
I am also hit by DBS High Notes 5 (ST Sept 18 news). My relationship manager persuaded me to have lunch and showed me the product. He reinterated that it was a very safe investments as all the fund principals are all A rated.

I signed for $X. As I was busy, I trusted him and signed on the form. When Lehman's bankruptcy appeared in the news, I immediately called the relationship manager and was shocked to be informed that there will be zero payout.

I was not told about this and was only shown a copy of the prospectus but not given one. I would be grateful if you could advise me where can I make a complaint.

You can lodge a complaint with MAS.Your complaint is about the conduct of the adviser (i.e relationship manager of the bank) for failing to disclose proper explanation about the product. Read my blog:

Dear Mr. Tan,
I applaud your determination to help us, the helpless and disappointed investors who have dumped in thousands of dollars of our hard earned money into High Note 5. I hope MAS will take actions against the bank and its employees.

A flawed global financial system

During the Asian Financial Crisis in 1998, the global fund managers had a great time in selling short in the equity and currency markets. They made huge profits. The leaders in the developed countries said that the Asian economies deserve to be punished for their lax economic policies.

Now, the table has turned. It is the developed countries that are now suffering from short selling. What do the leaders say now? Short selling is bad and has to be stopped.

Wow. Double standard! What a hypocritical world.

My conclusion is that the global financial system is flawed and need to be changed. I agree with the posting by "ym" on the flaws of the "fractional banking system". Banks should not be allowed to create money on their own.

Book on Financial Planning

I will try to find the time to write a book on Financial Planning. The topics in this book are:

1 Introduction
2 How much life insurance do you need?
3. What type of life insurance policy?
4. How to invest savings?
5. Investing in a unit trust
6. Investing on your own
7. Why avoid high commission products?
8. Saving for a child’s education
9. Insuring against medical expenses, disability
10. Structured investment products
11. Investment tips for a retiree
12. Life annuity
13. Government sponsored insurance schemes
14. Use of credit cards
15. Loans (mortgage, car, study)

16. Investing in property
17. Taxation
18. Leaving assets for your descendents
19. Conclusion

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