Saturday, October 04, 2008

Greed and exploitation

Twenty years ago, we can trust banks, insurance companies, doctors, lawyers and professionals to be honest and to look after the interest of ordinary people. This is called ethics.

In recent years, many people have become greedy and want to earn a lot of money, very fast. They are willing to exploit ordinary people to make more profit, so long as they do not break the letter of the law. Ethics and morals have deteriorated.

Regulators have also taken the approach of "buyer's beware". They think that it is all right for the smart and powerful peopl, to exploit the weak and the poor.

We are now in an unethical, dishonest world. It is quite sad.

How to play Pro-Trader

1. Log into the following:

2. Register to create an account.

3. Login into your account. Click on "Play Now".

4. Select the "Single Player" mode. Choose a random scenario and period (10 days). This game will take 20 mins. This is a practice game.

5. Select the "Multi Player" mode. Select a 10 day or 20 day game. Wait 15 minutes for other players to join in. (If someone created the game earlier, you can join in the game which will start before 15 minutes). You can compete with other players. At the end of the game, your score will be used to compute your Ranking.

6. If you play the Multi Player game several times, your ranking will improve from Trainee, to Apprentice and to higher levels.

7. You will learn the dynamics of trading (investing) in the markets. You can practice many times to get the feel of trading.

Pro-Trader Simulation Game

I develop Pro-Trader as a simulation game to teach students in wealth management about trading in the real world environment. I hope that it is also suitable for investors who wish to develop the skill of making the right timing in their investments.

Pro-Trader show the prices of four financial products, e.g. stock, bond, currency, gold. The prices move in respond to economic and political events. The prices are made as realistic as possible, to follow the trends in past years. This allows the player to develop an insight into how the events affect the prices of certain products.

The investor in the financial trading world knows that the market prices do not follow any definite pattern. The actual prices depend on the perception of the players at any point of time. If there are more buyers, the price moves up. If there are more sellers, the price moves down.

Generally, the players will react according to their past experience. For example, if interest rate for a currency goes up, the currency should also move up. Generally, higher interest rate leads to lower stock prices.

At any point of time, the prices are influenced by several events that occur simultaneously. Some market participants take a few hours or a day to react to a market event. These behaviors are factored into the simulated prices.

Each contract represents an investment of $100,000 X price in the financial product. The trader is allowed to enter a long or short position, similar to a trade in the futures market.

The key lessons to be learnt are:

> Study the price trends to understand how the market is reacting to the news
> Be ready to move quickly into your trading position
> Be ready to change quickly, if the trends change or your positions are wrong
> Practice many times, to get a feel of the market behavior
> Learn about the market through this game, before investing your real money

Try this game:

Players registered as at 4 October: 377 players

In honour of J B Jeyaretnam

An open letter has been sent to the Prime Minister and his Cabinet to honour Mr. J B Jeyaretnam for his sacrifices and beliefs in serving the people of Singapore.

I respect Mr. Jeyaretnam for what he has done for the people of Singapore. I have added my signature to this letter. If you wish to join me, you can sign here:

Talk at NUS on 17 Oct 2008

This talk is open to the public:

Organised by NUS CSR Student Movement: Investments, Society and You :
Smart Financial Planning by former CEO of NTUC Income Mr. Tan Kin Lian.
Friday 17th October 2008, 600-830pm.
Venue: NUS Business School LT17.
To register, go to http://
For more information, please email

Minibond in Hong Kong

4 Oct 2008
South China Morning Post
Joyce Man and Dennis Eng

Minibond issuers were told by the securities watchdog yesterday to “exercise their duty more diligently” in explaining the risk to investors.

The call came from Securities and Futures Commission chief executive Martin Wheatley, as interest payments ceased on two minibond series linked to bankrupt US investment bank Lehman Brothers, putting them at risk of liquidation.

HSBC, which is the trustee of the minibonds, is sending letters requesting distributors to determine whether clients who invested in the minibonds want to opt for early redemption, sources said.

“Recent events show that investors need to be presented with a clearer picture of product risks – they need to understand better how products will operate in extreme market conditions or in the face of bankruptcy,” Mr Wheatley said in a circular.

Issuers “must exercise their duty more diligently”, he said. Marketing materials must be clear, fair and present a balanced picture with adequate and prominent risk disclosure.

The two HSBC minibond series linked to Lehman Brothers have failed to make interest payments in an “event of default”, putting them at risk of being liquidated.

At least 20 per cent by value of the investors of the minibonds – reportedly series 21 and 27 – must agree in order for the liquidation to go ahead. Proceeds that can be distributed to investors depend on the value of the underlying assets less the cost of terminating Lehman’s involvement and other legal costs.

Although there are widespread fears other minibonds will succumb to Lehman’s troubles, action to liquidate them cannot be taken as long as interest payments continue.

Minibonds are not corporate bonds, but consist of high-risk creditlinked derivatives. They are marketed as a proxy investment in well-known companies.

Hundreds of investors in minibonds and other complex derivatives issued or backed by Lehman Brothers have been demanding refunds and accusing the banks that sold them the products of not fully disclosing the risk involved.

A Hong Kong Association of Banks taskforce met for the first time yesterday and decided to form subgroups to analyse each kind of investment product.

The taskforce will help banks handle issues related to the products, collect information from Lehman’s liquidators and trustees to pass on to investors, and communicate with regulators, the association said.

The Civic Party said the taskforce would not solve the problem and had no timetable.
“ You need a tiger with teeth,” Civic Party legislator-elect Margaret Ng Ngoi-yee. “The Hong Kong Monetary Authority has teeth.”

Audrey Eu Yuet- mee, another party legislator-elect, said the Legislative Council might form a select committee when it reopens for session if the Monetary Authority does not react faster and more forcefully.

The authority should instruct banks to fast- track their investigations and appoint independent parties that act as a one-stop service for complaints, Ms Eu and Ms Ng said.

The authority should conduct disciplinary proceedings where complaints are justified and undertake a reform based on the independent parties’ investigations, they said.

Investors who purchased minibonds from the Bank of China (Hong Kong), Mevas Bank, and Dah Sing Bank will rally again today.

Capital protection is not "capital guaranteed"

Dear Mr Tan,

I have invest in DBS Note 10 by Capitaland recently. The consultant told me this note are like bond type which are low risk and principal protected unless Capitaland file for bankruptcy.

I am worried now with all these events like DBS note 5 and minibonds. Is it true this note 10 is principal protected? Please advise.

I call my DBS consultant to check if i sell how much will I get back. She replied I can only take back 90% of the amount that i invested. Can you advise me what should I do as I have little knowledge on investment. Should I sell or hold?

I am not able to give advice on whether to hold or sell. You have to make your own decision, as it is your money.

Capital protected means that they will "try" to protect your capital and is not the same as "capital guaranteed".

Review internal complaints handling and resolution process

Dear Mr. Tan,

Do the three "well-regarded individuals" MAS has identified have sufficient resources especially manpower to do what MAS requires them to do

"review the internal complaints handling and resolution processes of the financial institutions (FIs) concerned to determine whether these processes are independent, fair and transparent. While these independent parties will not be involved in handling individual customer complaints, they will update MAS regularly on the progress of the complaints review.": and

" as part of the terms of reference of their appointment, the independent parties will highlight to MAS any shortcoming in the FIs’ processes as well as any issues that require regulatory follow up."?
If not, do they have to rely on the FIs they are overseeing to provide them manpower and other resources to ?

Will their terms of reference be made public?

Securities and Futures Act

Does the financial institute break any of the provisions below, in their marketing of the structured products?

SFA's Section 199 (False or misleading statements, etc.) reads:

No person shall make a statement, or disseminate information, that is false or misleading in a material particular and is likely —
(a) to induce other persons to subscribe for securities;
(b) to induce the sale or purchase of securities by other persons; or
(c) to have the effect of raising, lowering, maintaining or stabilising the market price of securities,
if, when he makes the statement or disseminates the information —
(i) he does not care whether the statement or information is true or false; or
(ii) he knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.
[SIA, s. 99; Aust. Corporations 2001, s. 999]

SFA's Section 200 (Fraudulently inducing persons to deal in securities) reads:
(1) No person shall —
(a) by making or publishing any statement, promise or forecast that he knows or ought reasonably to have known to be misleading, false or deceptive;
(b) by any dishonest concealment of material facts;
(c) by the reckless making or publishing of any statement, promise or forecast that is misleading, false or deceptive; or
(d) by recording or storing in, or by means of, any mechanical, electronic or other device information that he knows to be false or misleading in a material particular,
induce or attempt to induce another person to deal in securities.
(2) In any proceedings against a person for a contravention of subsection (1) constituted by recording or storing information as mentioned in subsection (1) (d), it is a defence if it is established that, at the time when the defendant so recorded or stored the information, he had no reasonable grounds for expecting that the information would be available to any other person.
(3) In any proceedings against a person for a contravention of subsection (1), the opinion of any registered or public accountant as to the financial position of any company at any time or during any period in respect of which he has made an audit or examination of the affairs of the company according to recognised audit practice shall be admissible, for any party to the proceedings, as evidence of the financial position of the company at that time or during that period, notwithstanding that the opinion is based in whole or in part on book-entries, documents or vouchers or on written or verbal statements by other persons.
[SIA, s. 100; Companies, s. 404 (4)]

By SFA's definition:
"securities" means —
(a) debentures or stocks issued or proposed to be issued by a government;
(b) debentures, stocks or shares issued or proposed to be issued by a corporation or body unincorporate;
(c) any right, option or derivative in respect of any such debentures, stocks or shares;
(d) any right under a contract for differences or under any other contract the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in —
(i) the value or price of any such debentures, stocks or shares;
(ii) the value or price of any group of any such debentures, stocks or shares; or
(iii) an index of any such debentures, stocks or shares;
(e) any unit in a collective investment scheme;
(f) any unit in a business trust; or
(g) any derivative of a unit in a business trust,

but does not include —
(i) futures contracts which are traded on a futures market;
(ii) bills of exchange;
(iii) promissory notes; or
(iv) certificates of deposit issued by a bank or finance company whether situated in Singapore or elsewhere;

Friday, October 03, 2008

Petition to Singapore Government

I have received over 900 signatures to this online Petition. It will be sent to Mr. Goh Chok Tong next week.


1. We write to petition the Singapore Government, particularly the Commercial Affairs Department (Singapore Police Force) and/or the Monetary Authority of Singapore, to conduct a full and independent inquiry in relation to the credit linked securities sold by various financial institutions in Singapore. These structured products include, but are not limited to, the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacles Notes and Merrill Lynch Jubilee Notes.

2. Singaporeans, including the persons who have signed this petition, lost their hard-earned savings by investing in these financial products. Such products clearly did not suit the risk profiles of these consumers. The consumers were not made aware of the high risks involved in the financial product when buying the product. They became innocent victims of misrepresentation by the financial institutions that distributed the structured products.

3. We now wish to be assured that those who invested in such financial products have not been victims of negligent and/or dishonest conduct and/or fraud by these financial institutions.

4. The Government has a duty to ensure that investment products are marketed and sold appropriately in our jurisdiction. Such products must be sold in a manner compliant with the laws of Singapore. Financial institutions, including their respective key management, that do not follow the laws or regulations applicable to them must be held accountable for such breaches.

5. Please commence a full and independent inquiry into the sale of structured products by various financial institutions in Singapore. If the inquiry deems necessary, the Attorney-General of Singapore should act against these financial institutions.

6. We also ask the Government to help these investors to claim fair and adequate compensation from these financial institutions for their losses which are caused by the mis-conduct of these financial institutions.

7. We ask the Government to act now and restore the peoples' faith in our financial system.

Not to be retailed in USA

Dear Mr. Tan,

In some prospectuses I came across recently, I have noticed that there are statements on various pages of the same prospectus saying that the product should not be retailed to USA citizens.

Hope that SM Goh will get MAS to study this and learn from USA to protect Singapore citizens.


Petition to Singapore Government

I have decided to lodge the Petition early next week, one week ahead of schedule. I now have over 900 signatories. The gathering at Speaker's Corner on 11 October will still be held as planned earlier.

Banks deny refund deals for minibond investors

Hong Kong banks yesterday rejected suggestions they were offering refunds to investors in minibonds backed by bankrupt US bank Lehman Brothers, after a report that one had agreed to pay back a customer.

Mevas Bank, a subsidiary of Dah Sing Bank, issued a firm denial that it had refunded a customer. Standard Chartered, Fubon Bank, DBS, Chong Hing Bank, Citibank, Wing Lung Bank, Bank of China (Hong Kong), Chiyu Banking Corporation, Nanyang Commercial Bank and Shanghai Commercial Bank all said they had not concluded any refund agreements with clients. Bank of East Asia and Citic Ka Wah Bank said only that they were handling complaints. Other banks did not respond.

Since Lehman Brothers, the fourth-largest US investment bank, filed for bankruptcy on September 15, hundreds of investors have been demanding refunds from the banks and brokerages that sold them the minibonds – high-risk credit-linked derivatives marketed as proxy investments in well-known companies – and similar complex derivatives.

Hong Kong investors have bought HK$15.6 billion in minibonds and similar derivatives backed by Lehman Brothers. They stand to lose most, if not all, their money. A Chinese-language newspaper this week reported that Mevas Bank had agreed to a refund for a minibond investor. It quoted Democratic Party legislator-elect Kam Nai-wai, who is helping a group of the investors, as saying that the investor had asked that their name be withdrawn from a list of those seeking help. Mr Kam would neither confirm nor deny the report.

In response to Mevas Bank’s denial, he said: “It’s no surprise … They don’t want the other investors to know.” The Mevas investor declined comment. No other investors have withdrawn their requests to the Democratic Party for help. Some investors drew hope from the rumours. “

There’s justice in this world,” said Grace Lau Ngar-pui, organiser of a group of investors who bought Lehmanbacked investment products from ABN Amro, She also believes Mevas’ denial is a tactic to ward off other investors who want a refund.

Yesterday, for the first time, Secretary for Financial Services and the Treasury Chan Ka-keung discussed the complaints with representatives of the banks, brokerages, trustees, the Monetary Authority and the Securities and Futures Commission. The two watchdogs are, respectively, investigating the banks and brokerages which sold the investments. “I specifically urged the banks to seriously and quickly handle the complaints about the methods used for selling the minibonds,” he said.

The Hong Kong Association of Banks has decided to form a taskforce to deal with the minibonds issue. The authority has received 3,555 complaints about minibonds.

Question for Member of Parliament

One question investors may want to ask MPs is What is the point of a regulatory system that does not lead to investor compensation?"

MAS has said "However, investors should understand that while regulatory actions are important to deter breaches and uphold the integrity of the system, they do not lead to compensation for investors"

Immense pressure to sell the structured products

Dear Mr Tan KL,

In today's TodayOnline a certain L H Tang, who is a personal financial consultant gave a first person perspective, of his job in the forum letter. Below is an excerpt:
"......Consumers should understand that consultants are under immense pressure to think of ways such products can be“beneficial” to them."

The content is quite similar to that posted in the Straits Time Online Forum on 01/10/08 by Ms Geraldine Teng. If we are able to gather more of such statements from Relationship Managers /

Financial Consultants it would be evidentially beneficial in proving that these RM / FC were under immense pressure to push or hard sell such high risk products as 'low risk' products backed by the reputable banks.

Your kind assistance in this matter is highly commendable.


Financial advisers or relationship managers who face similar pressure to achieve sales results can send an e-mail to me at

Meet your Members of Parliament

I am compiling a list of investors (who signed the Petition) according to their residential postal code. This allows them to contact other investors in the same constituency and meet the members of Parliament.

Call for volunteers: If you are willing to call other investors to meet the MP, please send an email to me at giving your name, mobile phone, and postal code now.

It is better for the investors to meet the MP during the weekly "Meet the People" session and tell your MP how you were misled into investing in the high risk structured products.

If the MP meets several of the investors personally, they will better appreciate the problem. They may ask MAS to be pro-active in helping the investors to deal with the financial institution that sold the structured products.

You can find out your Member of Parliament and the venue, day and time of the "Meet the People" session from this website:

Send feedback to NTUC Income

Dear Mr Tan,

Do you have the NTUC Income CEO's email address for me to file a complaint to? Their call centre and email service are useless and they do nothing to help me.

My wife's total hospitalisation bill is $9k. She has an operation on (date). Till now, the claims department only paid out $250 Medishield claims. My wife has a Income Shield Insurance Preferred Plan with Rider Plan and they only paid out $250 in claims so far. I have called the claim department and they keep saying they will get back to us as they are processing it or wait for their letters. I have already paid $3k in cash upfront before her operation. Now the hospital has deducted $3k from my wife's medisave and now the hospital is demanding us to pay the remaining 3K. What is happening to NTUC now?

The irony is right now they have just sent me a letter to ask me to renew my incomeshield policy stating the benefits and advantages of signing up with them.


I suggest that you send a registered letter addressed to the CEO of NTUC Income:

Bras Basah Branch
75 Bras Basah Road,
NTUC Income Centre
Singapore 189557

Or you can send a fax to 67883777

If there is delay in settling your claim, you can file a complaint to FiDREC,

Proposed Commission on Life Insurance Products

Dear Mr. Tan,

I have a proposal. In future the products will have a low cost(commission and expenses) and reasonable profit margin for the company.

Commission will range between 5-10%
1. whole life and endowment products will pay 10% for 1st year and 5% next 2 years.
2.Term products will pay 5% for 2 years.
3.Other products 5% for 1 year.

The commissions above are to be paid to agents who sell and push products and do nothing but soliciting and form filling.

Those who are qualified and competent and who can prove professional competence in specific area to provide financial planning advice can charge a NEGOTIABLE FEE (hourly or piece rate)with customers.

This will keep the cost low for the consumers and the company. The products can charge low premium for larger coverage and higher return of about 4% after 10 years.
This model will attract those advisers who are serious about helping people to upgrade themselves and to be paid according to service and work done for the customers.

For agents who sell only, they get the commission as in the products.
This will be akin to other professions where fee commensurate with professional advice and work and not for form filling, legwork or solicitation and some other non financial services.

This is the most equitable and agents who think of 'get rich quick' are nor suitable for this trade.This will stop mis-selling and misrepresentation, unethical selling , conflict of interest and malpractices.

This will weed out agents who are in the business just for the money and who not interested in helping the customers. This will elevate the profession .

Fair Dealing

Under the current market price, the commission paid to agents is 5 to 10 times of the above proposed rates. I agree that the current commission rates are too high and unfair to consumers. I advice consumers to look at the commission rates stated in the Benefit Illustration and avoid life insurance products that pay comissions of $1,000 or more to the insurance agent.

Posting comments in my blog

I like to ask readers who post comments in my blog to observe the following:

1. Write your full name at the bottom of your comment
2. Avoid defamatory statements against any person
3. Avoid political statements

I will disallow any comment that fail to observe the above requests.

Failure to observe the risk assessment

Dear Mr. Tan,

Under the Financial Adviser Act, financial advisers are required to collect information about a client's financial objective, risk tolerance, employment status and financial situation, among othe things, before they can make a recommendation on an investment product.

In my case, I bought the Minibond product in Feb 07. My intention was to open a fixed deposit account. After recommendation and confirmation to buy the product, the relationship manager then collected the infomations as stated in the Act.

Please let the others victims who also bought from the financial institution, especially aunties and uncles, know whether they were in the same scenerio as me.

Ask your Member of Parliament

Questions that burnt investors of structured products can put to their Member of Parliament:

Avoid going to court

Three banks are secretly negotiating with angry investors to prevent being taken to court over the distribution of Lehman Brothers minibonds, according to sources. They are among 21 banks and financial institutions with exposure to Lehman Brothers investment products but which are said to have only a few investors and prefer a settlement rather than a court case. According to the source, the banks involved are Dah Sing Bank, DBS Bank (Hong Kong) and Mevas Bank, which is part of the Dah Sing Banking Group

Merill Lynch Jubilee 3

Dear Mr Tan,

Below is the official notice from Merrill Lynch on the Jubilee 3. It's devastating to for those who have invested in this instrument.

I have read your blogs and the various reasons for people to seek better yielding products because of the extremely low savings and fixed deposit rates.

People who sought after fixed income products are normally adverse to high risk. It's not because of greed. Any sane person would want their savings to have higher returns to hedge against the mounting inflation. Products like Mini Bonds, Jubilee 3,
High Notes 2/5 & Pinaccle notes all come under the fixed income instruments. If there were to be other fixed income products which are straight forward to understand, I believe these risk adverse investors would rather park their money there, including myself. Government bonds are beyond reach of the ordinary because of the high minimum amount required.

Sophisticated structured products inevitably filled the vacuum. Keeping our money under the pillow or savings banks will be foolish if we were to take a leaf from the
famous Rich-Dad-Poor-Dad's aurhor, Robert K. What alternatives do we have when these glossy products roll out of the creative mills of banks?
Not surprisingly, many of us will take the bite.

Please help publish the ML Jubilee 3 in your blog for comments. It seems that there is no recourse at all based on the way it's worded.

Thank You Very Much!

Best Regards

Dear All

Please see the latest official word from Merrill with regards to Jubilee 3.

Q1. What is the status of the Notes?
Lehman Brothers Holdings Inc., (“Lehman”) being one of the Reference Entities, filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code on 15 September 2008. This filing constitutes a Credit Event under the terms and conditions of the Notes. The Swap Counterparty has submitted a Credit Event Notice to the Issuer on or about 23 September 2008.

Q2. What happens next to the Notes?
The Issuer will redeem the Notes early on the Credit Event Redemption Date which shall occur no later than the 30th London, Singapore and New York Business Day after the date on which the Credit Event Notice was delivered by the Swap Counterparty to the Issuer. In addition, the Notes will cease to bear interest with effect from the 23 June 2008, being the Interest Payment Date immediately preceding the date of delivery of the Credit Event Notice

Q3. How will the Credit Event Redemption Amount be calculated?
The Credit Event Redemption Amount to be determined by the Calculation Agent for and on behalf of the Issuer will be an amount equal to the sum of:
a) the amount which would be realised on the sale of certain debt obligations of Lehman selected by the Calculation Agent in a nominal amount equal to the then outstanding principal amount of the Notes, less costs and expenses associated with the said sale;
b) the Liquidation Proceeds of the Securities minus the then outstanding principal amount of the Notes which shall be
(i) expressed as a positive amount if the Liquidation Proceeds of the Securities are greater than the then outstanding principal amount of the Notes,
(ii) expressed as a negative amount if the Liquidation Proceeds of the Securities are less than the then outstanding principal amount of the Notes and (iii) zero if the Liquidation Proceeds of the Securities are equal to the then outstanding principal amount of the Notes; and
c) the amount of any early termination amount or close out payment receivable (expressed as a positive amount) or payable (expressed as a negative amount) by the Issuer under the Swap Agreement to the Swap Counterparty.

Q4. What is the likely Credit Event Redemption Amount?
The Credit Event Redemption Amount will be determined by the Calculation Agent in accordance with the procedures described in the Pricing Statement. Based on current market conditions, the Credit Event Redemption Amount is likely to be zero or an amount close to zero. It is likely that Noteholders will lose all or substantially all of their principal invested in the Notes. The Calculation Agent will notify you of the Credit Event Redemption Amount as soon as reasonably practicable after its determination.

Q5. What actions do Noteholders need to take and who should they contact if they have questions?
Noteholders who have any questions on this Notice or are unsure as to the action they should take should contact the Distributor through whom they have subscribed for the Notes.

Q6. How will I be notified of the status of the Notes?
Investors should receive notices in one of two ways:
(i) either through one of the distributors or
(ii) directly from the Issuer (Jubilee).

The Issuer has prepared a “Notice to Noteholders” stating that a Credit Event has occurred in respect of Lehman. This Notice was delivered by the Issuer to the various distributors on or about September 25, 2008. The Issuer is preparing to directly mail notices to investors once it receives relevant mailing information from CDP. The Issuer also expects to prepare and distribute a valuation notice informing the Noteholders of the Credit Event Redemption Amount once such amount is determined.

Q7. Can you provide more information on how the Credit Event Redemption Amount is calculated?
The Credit Event Redemption Amount is calculated in accordance with the formula described in the Pricing Statement. See also Q3 above. The Credit Event Redemption Amount is based (among other things) on the amount realized on the sale of certain debt obligations of Lehman. Because Lehman has filed for bankruptcy, these Lehman obligations are trading significantly below their face value. Generally speaking,
these Lehman obligations are currently valued below 20% of their face value. This amount will be further adjusted by
(i) any loss in the liquidation of the Securities (see also Q8 below), and
(ii) any termination amounts due or payable under the swap, to arrive at the Credit Event Redemption Amount. Based on current market conditions we expect the Credit Event Redemption Amount to be zero.

Q8. Can you explain what the Securities represent and whether there is a loss in value in respect of the Securities?
The Securities are notes whose performance is credit-linked to a pool of 120 Underlying Reference Entities.
The current U.S. financial crisis has led to unfavorable market conditions in the broad credit markets which has led to a significant decline in the value of the Securities. The liquidation proceeds of the Securities will likely be significantly less than the face value of the Securities.

AIS is in constant communication with Merrill to bring you the latest updates.

People to be blamed

Comment posted in my blog

Blame MAS for not enforcing the rules it set stringently like section 27 of the FAA governing the behaviour and the way advisers should approach the needs of their clients.

Blame MAS for not vetting stringently the products before allowing for release into the market.

Blame the company for being greedy and overly profit oriented and overlooked the need of the consumers.

Blame the company for being lax in the compliance by their salespeople, the RMs and agents.

Blame the salespeople or RMs or agents for being greedy and NEGLECTING and ignoring WILLFULLY the needs of the consumers.

Blame the RMs and the agents for being unqualified and incompetent to dispense this advice.

The banks must bear the full responsibility for their errors and their salespeople's incompetence and mis-selling. The aggrieved investors must be compensated minimally the return of their capital.

Loss of life savings

Dear Mr. Tan

My mother in law is 70 years old also a victim of the recent Lehman Brothers collapse. She worked hard as a cleaner and now still working at school canteen to maintain her income. She has been working almost her entire life and children gave her to save $100,000 put in hong leong mini bond series 9 on Aug (interest 4.3% not much difference from 3% insurance saving). She just invested 1 mth ago and did not even has a chance to receive 1st interest and whole saving collapsed.

I really felt sorry for her that she walked into wrong place at wrong time. The money was in FD with HLF till FM introduced mini bond to her and her daughter. FM told both of them that it based on only 6 entities which are fundamental well established (all singapore companies). She(FM) told them if any of the companies collapsed they will pay based percentage paid out.

How is Lehman brothers involved in this mini bond series 9they still unknown? because they do not understand overseas investment status at all. My mother in law only knew HLF, she always trust HLF because HLF always helping senior citizen folks to get better and high interest than other banks. My mother in law always praised HLF boss is a good boss. Till today her daughter did not tell her mother the true. She praying and hoping for good news to come. She hope MAS will help to get back the money. She not hoping for full pay out but at least 80% will be fine. The rest she will top up for her and let the whole issue rest.


You should help your mother in lodge to lodge a complaint with the financial institution that sold the product to her.

Stop pushing financial products

Posted in my blog

MAS, please stop and disallow financial consultants, whoever or whatever title these salesmen use, from selling and pushing financial products. Mis-selling and misrepresentation and conflict of interest are inevitable in selling.

Please stop them before more people get hurt. Financial products range from insurance, to banking and investment products, except motorcars.

Hong Kong helping distressed people

Hi Mr. Tan,
I just want to share my thoughts. All the best to you in fighting a good cause for us!!!

It is good to see that Hong Kong's financial services chief is stepping out to help distressed people, but what about our own MAS?

If DBS can help people in Hong Kong to settle for reasonable compensation deals, what about helping their own fellow singaporeans?

Much has been said at many forums, I just hope that justice has eyes & also cause and effect happening to the 'masterminds' If their conscience is clear, then they won't have to be afraid.

High commission and profits

View posted in my blog

To all the victims.
Have you ever wondered why the RMs or salesmen at the banks or the insurance agents are pushing hard on products?

At the banks product sale means high commission from the products as profit to the company and to pay the RMs' high salary.

What about fixed deposit?
The bank got to pay interest to the customers.

Why push products?
If need analysis is used they may not be able to sell anyhting because the products may not be suitable because of risk, the financial circumstances of the clients, their needs. Products pushing ignores all these perimeters.

At Insurance companies.
Pushing expensive and high commission products means high annual premium income(API) to the company. API is used as production figure for ranking and market share and good profit for the company.

Why insurance agents push products?
No need to look into the needs of the client.If they do they may NOT be able to sell a high commission product. They cannot justify.
Without the need analysis any product can do and normally the product is whole life with high commission.

What does it mean to the agents.
High earning and can qualify for mdrt. cot or tot.
What does it mean to the customers?
Wrong product, insufficient coverage ; allocate too much money in this area at the expense of other needs, ie other needs suffer.

What does it tell us?
Products pushing is bad and shortchanges the customers.
Mis-selling, misrepresentation and conflict of interest and other other unethical practices can arise.
Bad and rotten products need a lot of pushing, right? They need greedy and unscrupulous salespeople to use unethical means
to do for the company with promise of high rewards.

Do you hard push a good product?
The current debacle is due to this.

Eradicate selling for financial products. Stop bad products to be sold in the market.

The Concerned Singaporean

High risk investments

Dear Mr. Tan,
We the investors can not thank you enough for investing your time and effort in helping us to organise ourselves as nobody else in Singapore would so far.

I am not optimistic that we will achieve anything as we are facing very large financial institutions that have a lot of fire power.

The key to me is in two areas that

1)The sales aid materials and the "misleading prospectus". These are the written evidence. Otherwise the selling process is all verbal between the bank employees and the investors and it is difficult to prove one way or the other.

2) The other is the nature of the products which are extremely high risk now that we are aware of. Even a straight forward product like a local company bond, the retail investor has no access as you need to have S$250,000 as a minimum to invest in. So all other structure products that are available to the retail investors should have a lower risk level that a straight company bond. The financial institutions should not have sold these structured products to the retail investors.

I have read the sales materials and the prospectus before investing and I thought I was investing in the bonds of the referenced entities and the bonds are safely kept by the trustee bank HSBC. Now I know better.

I was prepared to take some risk as I believed that since there are several referenced entities, one failure will only hit the investment proportionately. I never expected that Lehman who is an arranger can wipe off my investment!

The financial institution that sold the structured product to you has the responsibility to know the nature of the risk and to advice you appropriately. If they fail in their duty, they should make suitable compensation.

Compensation to affected investors

Dear Mr. Tan,

According to the announcement, the MAS can only re-examine regulatory and supervisory roles and regulatory actions include "public reprimand" and "files".

Regulatory action could include fines and public reprimands but cannot include requiring FIs to pay compensation to affected investors.

This is too light a sentence for the FIs. Especially those who make the decisions to sell the products fraudulently and the lawyers who draft the prospectus into meaningless jargon!

Their FI will address their complaint quickly and fairly. Where a customer is still not satisfied, he can have the matter referred to FIDReC, which was specifically set up to handle such issues."

The FIDREC can only handle upto a claim of $50,000. So many of us put into far more than that! This "$50,000" limit must be removed! Also, we need the government to give us a fair legal judgement of this mis-selling saga!


The Petition calls for MAS to make an investigation if there were any wrong doings done by the Financial Institution and to take appropriate action in Court on behalf of the investors. The Court can decide on how the investors are to be compensated.

In a similar case involving the "auction rate securities", the financial institutions decide to buy back the securities from the investors, rather than face the Court decision.

MAS announcements

Hi Mr. Tan,
The MAS has posted two announcements about MAS today. Could you post it in your blog? Hope they are useful for your speech at HONG LIM.

For defensive investors

Hi Mr. Tan,

I refer to the letter "High Notes 2 Not a Low-risk product" from Ms Janet Mohan, a V.P. of DBS. This letter was published today (2.10.08) on the forum page of the straits times.

In her letter, Ms Mohan stated that "DBS High Notes 2 (HN2) is a five-year, structured, credit -linked note designed for investor seeking enhanced yield by providing exposure to a basket of highly rated entities....."

She went on to state that "HN2 is not a low-risk product nor principal-protected".

However, according to the Pricing Statement (page 14), High Notes 2 is described as “…5-year structured first-to-default credit linked notes designed for defensive investors seeking enhanced yield by providing exposure to a basket of highly rated regional and international banks……”. The description implies that High Notes 2 is a safe investment for "defensive" investor. The word “defensive” was omitted in Ms Mohan’s letter, probably intentionally.

This shows how the bank is twisting its words to defend itself from alleged misrepresentation.

Kindly post this email in your blog as I wish to share my observation with others who could lose their money in HN2.

Thank you.

Wilson Tan .

Thursday, October 02, 2008

Hong Kong Government Meets Banks Accused Of Mis-selling Lehman Bonds

HONG KONG (AFP)--Hong Kong's financial services chief on Thursday weighed in on the dispute over the possible mis-selling of investment products backed by failed U.S. bank Lehman Brothers (LEH).

Chan Ka-cheung, secretary for financial services, met representatives of 21 banks, who are accused by disgruntled investors of mis-selling "mini-bonds" that could now be worthless.

"The secretary met with representatives from the Hong Kong Monetary Authority, the Securities and Futures Commission, and the banks today," said a government spokeswoman.

"The meeting was held with the hope that the banks can find ways to step up their communication with the retail investors and increase their transparency."

Some of the banks, including DBS (D05.SG) and DahSing (2356.HK), had agreed to settle through mediation and have been negotiating with individual investors on compensation deals, according to a report in the Apple Daily.

The move has put pressure on other banks to find a solution, prompting Chan to hold the meeting, the report said.

The investors, who bought HKD12.7 billion ($1.63 billion) of the complex financial products, had earlier threatened to sue the banks for not explaining the risks involved before selling them the bonds.

Many of the investors are retired and had put all their savings into the investment because they trusted their banks.

The Securities and Futures Commission said previously it has launched an investigation into some of the institutions on alleged mis-selling.

Lehman Brothers, one of Wall Street's most established banks, collapsed last month, sparking turmoil on financial markets across the world.

Dow Jones Newswires

Loss of hard earned money (2)

Dear Mr Tan,

My 71-year old mother is a victim of the recent Lehman Brothers collapse. She worked hard in the civil service for more than 30-years of her life, skimped and saved to provide for her family. Now, her life savings and retirement funds are suddenly lost. All because she invested $100,000 in the mini-bonds sold by Hong Leong Finance just a year ago.

The money was originally in a Fixed Deposit account with HLF until the relationship manager promoted the Lehman product to her last year, saying it would offer her a much higher interest rate of 5%. My mother is not investment-savvy, neither would she be able to read, much-less understand, the fine prints of the 'Agreement' (if there was any at all) that she ignorantly signed on the spot. She did not know that HLF was merely an 'agent' for selling those bonds. She trusted HLF as a secure local banking institution with which she has placed her savings all this while. Therefore, when the bank's executive promoted the mini-bonds to her, she felt safe enough to take it. Afterall, this past one year, she has been receiving the interest as promised. There were no warning signs whatsoever that the minibonds were about to come to zero value and her money might be gone.

Our burning questions as layman in this tumultous financial market are these :

1. Was Lehman Brothers already in dire straits when they sold these mini-bonds? Were these one of their life-lines?

2. Did our local banks know what they were selling to their clients? Did they exercise due diligence by checking up on Lehman's financial standing before they acted as agents for the bank? Were our banks aware of the huge risks that their clients bear vis-a-vis the interest they get?

3. When our agent banks promoted the product to Singaporeans, did they explain in detail the risks and implications especially to the elderly folk knowing that they are putting their entire life savings into this very risky venture, before they enticed them with the attractive interest rates? Did they inform clearly that they were not underwriting any risks since they were just agents for Lehman? Were the sales people just interested in getting the agent's commission?

4. Where does MAS come into the picture here? Is there any auditing on what our banks are selling? Is there auditing on the bank's process and practices? Is there control at all, akin to what insurance companies like AIA are claiming as stringent controls by MAS such that they are now able to stand firm amid AIG's struggles?

Mr Tan, we badly need some answers. You will be well aware how the man-in-the-street, old folks, non-investors, non-speculators, have lost their hard-earned money overnight. The outlook appears grim as there seems to be no legal recourse in sight, and MAS has not taken a stand perhaps because this has not reached industry proportions.

We feel our mother's pain, as well as the suffering of all those who are depending on these funds for their retirement years, medical needs etc. I am sure they are lack of sleep and unable to eat during this period. It hurts terribly to think that life savings have gone to feed the highly-paid executives of Lehman who have probably mis-managed the company and still sitting rich now. Do we just blame it on hard luck?

As if their anxiety counts for nothing, the victims were given a letter by the bank and told to wait for further decision and announcement.

Mr Tan, we appreciate your help in championing this, and are hoping against hope that something reasonable will come out of it to mitigate the suffering of all those affected by this sudden turn of events.


In memory of Mr. J B Jeyaretnam

Investigation into potential wrong-doings by financial institutions

Revised (1)

1. Introduction

Many people invested a large sum of money, or their life savings, in the credit linked securities, in the mistaken belief that these securities have low risk and are safe. These securities include the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacle Notes and Merill Lynch Jubilee Notes.

These investors lost a large part or all of their investments due to the financial crisis. They were shocked that these structured products had high risk, which they were not properly informed.

I suggest that the Government to investigate if there were any wrong-doing on the part of the financial institutions that created or marketed these structured products.

These wrong doings could be in the form of negligence, dishonesty or fraud.

2. Potential wrong-doings

I suggest that the Government should appoint competent people to look into the following areas:
2.1 Were the products created with the aim of defrauding the investing public? Were the drafting of the prospectus, advertisements and other documents carried out with the intent of hiding the true facts from the investing public?

2.2 Were the financial institutions that marketed the product aware about the real risks of the products? Did they train their front line advisers to hide the true facts? Were they negligent in not understanding the true risk? Did they monitor the conduct of their front line advisers to ensure that the products are sold to the right people, based on their risk profile and preference?

2.3 What were the actual charges taken out of the structured products to pay the distributor and the product creator? Were these charges disclosed in the prospectus? Were the charges at a reasonable level, in comparison with the work that has to be done and the risk taken by the parties?

2.4 Were there conflicts of interest involved in the transactions between the various parties? Were the conflicts of interest adequately disclosed? Were the decisions on the pricing of the products made fairly in the interest of the investors? Was there any arrangement to ensure that the pricing is made based on fair market values?

2.5 Does this arrangement fall under certain laws, such as the Trust Act or more specific laws? Was there any breach of any of the provisions of these laws?

2.6 Does the fund manager break any law, if it takes out money from the structured product that are not authorised by the trust deed?

2.7 Were the financial institutions acting in a negligent or irresponsible manner when they continued to market the structured products after the mortgage market crisis unfolded in the summer of 2007?

2.8 Is there a case of misrepresentation when the financial institutions marketed these products as capital protected or capital guaranteed or as “minibonds” when they were not bonds?

3. Call for action

I hope that the Government look into these areas, to see if there were any wrong doing that led to such large losses among the investing public.

If there were wrong doing, the Government can take the appropriate action to bring the offenders to Court and to seek suitable compensation for the losses suffered by the investors.

I hope that the Government can play an active role to minimise the losses of the investors and ensure that the underlying securities are NOT un-wound at fire sale prices.

ANZ pays out $200,000 to elderly investor

Link :

ANZ pays out $200,000 to elderly investor
4:00AM Thursday Oct 02, 2008
By Maria Slade

ANZ bank has paid out more than $200,000 to an elderly woman whose life savings are tied up in a credit crunch-affected ING fund.

The 87-year-old, who is in poor health and whose only other income is her pension, put the money into the ING Diversified Yield Fund on the advice of her ANZ financial planner.

The fund, and its companion Regular Income Fund, had exposure to the US sub-prime mortgage market and were indefinitely frozen in March because of the effects of the global credit crisis.
The deal is one of a number of settlements the Herald is aware the bank has reached with people who invested through their ANZ financial advisers. ANZ owns 49 per cent of ING New Zealand. In another case, a family has been paid out a substantial portion of the $90,000 investment their late father made in the Diversified Yield Fund.

With the funds frozen, the family had been unable to settle their father's estate.

Both deals came after the involvement of the Banking Ombudsman.

The deceased man's son-in-law believes without his help the settlement with the bank would not have occurred.

The ombudsman's office says complaints about the ING funds currently make up more than half of its caseload. ANZ was a heavy seller of the investments, and other banks also sold them.
The ombudsman has identified bank customers suffering financial hardship as a result of the freeze on their funds, and helped arrange some relief on a goodwill basis.

In some cases this has come in the form of interest-free loans from the banks in question.
Numerous cases are yet to be settled. Auckland man Murray McNabb and his partner have $80,000 tied up in the Regular Income Fund, and are waiting to hear back from the ombudsman. "We wanted this money to pay off a mortgage. Now we're going to have to refinance the mortgage at 2 per cent higher than what it was."

In its assessment of her investment needs, ANZ characterised the 87-year-old as a "defensive" or conservative investor. In May Steven Giannoulis, general manager of marketing at ING, told the Herald the two funds were at the higher-risk, higher-return end of the ING range of investments.

Financial planner Jeff Matthews, of Spicers Wealth Management, said the advice ANZ gave was poor. "They weren't trying to solve someone's [investment] problem, they were just pushing product."

The ING funds invested in CDOs and CLOs, now notorious financial products which bundle various types of debt into a tradeable security.

With the credit crunch the market for these products all but disappeared and ING was forced to suspend redemptions from its two funds, leaving 8000 investors unable to access a collective $521 million.

When ING announced the freeze in March the unit price for the DYF was 81.05c and the RIF was at 70.5c, down from their $1 issue price.

Last week the unit prices were down to 62.35c and 55.45c respectively - almost half the original price.

Wednesday, October 01, 2008

NTUC Income Money Market Fund (Flexi-cash)

Dear Mr. Tan,
I have been a close follower of your blog site for the past 1.5 years. Based on the blog postings, I have invested a significant portion of my savings in NTUC Income's Flexi Cash Policy.

The NTUC Income website describes the Flexi Cash Policy as being "As Safe as a Bank Deposit" and "virtually impossible to lose your capital." I understand that the underlying investments are the Money Market fund, and the top holdings of the fund are in Government Bonds and High Quality Corporate Bonds.

However recently I have seen the fund price drop from 1.091 to 1.090 to 1.089. I am concerned because the fund's past trend has been to slowly increase upwards in small increments. This is the first time the fund has been dropping continuously, and with current events, I guess there is a lot of fear and uncertainty in the market.

I would like to ask for your advice on whether I should hold on to my investment or to liquidate and convert to cash as I am worried about further losses

The drop is small. It is probably due to an increase in interest rate. I think that there is no need to worry about it.

If you are still unsure, I suggest that you write to ask NTUC Income to tell you the reason for the drop in price. You can also ask them to confirm that the fund is still invested in high quality assets.

European Central Bank - an excellent approach

Hi, Mr. Tan,
I just heard BBC News (Radio88.9) at 8 pm: European Central Bank said banks selling risky products to investors must share risks. Don't know whether SM Goh and MAS officials heard this news.

This is an excellent approach. More details are found here:

Unfortunately, this proposal does not help investors who already bought the risky products in the past from getting compensation. The compensation has to be obtained through existing channels.

Signing of Pettion

I need your full name for the Petition. The full name is, for example, Tan Kin Lian. If you give a partial name, it will be rejected.

If you did not give your full name, we will call you and ask for your full name. There is no need to re-sign the petition at this time.

Pressure on sales representatives to market certain products


I REFER to the current market situation of Lehman Brothers' bankruptcy which led to the DBS High Notes burst recently. I am a personal financial consultant in a local bank. There are some factors I feel must be revealed to protect consumers' rights.

First, banks usually state that there is seldom or no misrepresentation of products sold, and products are usually recommended based on consumers' needs. A financial needs analysis and fact find are usually done to ensure consumers have sufficient funds and a real need for the product. The fact is that we often face pressure to sell certain products so as to hit our sales target.

Take me, for instance. I am a fresh graduate from the National University of Singapore. I have a nine-month contract with a local bank, but I was told, if I did not pass probation in six months (hitting sales target), I would be asked to leave and pay the $3,000 bond.

So far, I have sold $500,000 in insurance based on consumers' needs, so why is my sales record so poor? This is due to product discrimination. We have to sell mainly investment-linked insurance products. To sell 10 of these is equivalent to 60 products I have sold. Thus a fresh graduate like me who can't afford to pay the $3,000 bond faces a real dilemma.

Therefore, consumers should understand the immense pressure we are facing. Most of the time, we are trained to promote that particular product and try to think of ways it benefits consumers. Welcome to the real commercial world.

Geraldine Teng (Ms)

Fixed deposit with Singapore banks

Hi Mr Tan

With the recent spats of numerous closures and bankrupts, how safe is it to put cash money in Fixed Deposits with local banks? I have retired 10 years ago, and most of my cash have been
in fixed deposit.

I think that it should be quite safe. You can break up with savings into several banks. There is an insurance scheme that guarantees deposits of up to $20,000 in each bank. It covers full licence banks in Singapore, whether local or foreign owned.

Saved by sound advice

Dear Mr. Tan,

My friends and I enjoy reading your blog. Just to say thank you for your sound opinions on Financial planning and products.

With your sound opinion in Pinnacle note, I put my money in FD instead of "mislead" by the RM of the bank last year. I save my retirement amount because of a kind hearted person like you.

Thank you.
Mr and Mrs Goh

Pinnacle Series 11

Hi Mr Tan,

Thank you for helping the uncles and aunties in the above matter.

I was so foolish to be attracted by Citibank's fixed deposit offer and went to their branch at Ang Mo Kio. The relationship manager X told me people who invested in Pinnacle made much more in interests and that's why it can run series after series. (He knew I had $70,000 for the FD.)

So he introduced me to Pinnacle Series 11. He showed me the colourful one sheet flyer. I did see the "Important Information" that you must read the prospectus. So I asked for it. The RM went out of his room to look for it and came back saying it has run out of stock. He promised to post to me. He kept repeating "Don't worry." I asked him how can I be sure that I will get back my money. He pointed to the Name of Note "4Y SGD Pinnacle Series 11 Principal Protected Equity Linked Notes" given on the subscription form. He said, here, it says so clearly "Principal Protected." I felt stupid. It was like a redundant question I asked.

Now X is not at Ang Mo Kio Branch anymore. The Branch won't even tell me whether he is still at Citibank. The value of the Note I paid for with $70,000 of family savings has dropped to $50K+ (last month). Another relationship manager at the Branch told me recently if I hold to maturity I will get back $70,000. But I could not understand how they come to the present value of $50K+. If I understand this second relationship manager's explanation correctly, it has to do with the share market.

Now the share market has gone even lower, I don't know whether there is still $50K+ now. What shall I do? This is all the family's saving. And my aged husband and I have to look after a severely ill adult son with this money. I know I was greedy for more interest when I agreed to take X's product. But for the last nine months, I didn't even get a single cent of interest.

I have resigned to accept the punishment for my greed. But I was encouraged when I was introduced to you blog. So I learn how to get to read it and have been updating myself with the info on your blog. I am grateful that your care.

Should I hold the Note to the maturity and hope to get back $70,000 or take out whatever amount of money that's left now. Should I accept that they can use my savings without interest to me for more than nine months and even lose some of it?

Thank you. Wishing you much blessings!

Aunty Esther

I am not familiar with Pinnacle Series 11. If I can find some information, I shall tell you later. So sorry, I cannot advise you at this time.

Tribute to Mr. J B Jeyaretnam

Someone sent an e-mail to me, giving this tribute to Mr. J B Jeyaretnam. I only know Mr. Jeyaretnam briefly - but enough for me to admire what he has done for Singapore.

As a kid who hungrily devoured all that the flat media supplied at the time, and ignorant of their propagandistic nature, I thought JBJ had dishonourable intentions - a fool who was always exposed by his powerful nemesis. It took several years before I realised that I was the fool.
By then, I was rooting for his entry into parliament and it was with great joy that I read the headlines "JBJ takes Anson". It was a historic breakthrough not appropriately celebrated by the media. JBJ had achieved the unthinkable!

Once whilst walking down the stairs of the Subordinate Courts to the taxi stand, I noticed that the drivers in the waiting taxis had suddenly almost in synchrony gotten out of their vehicles, shouting and waving greetings towards my direction. I turned my head to see none other than JBJ waving back at them with a big warm smile pasted on his face.

I witnessed how when he reached the taxi stand, all the drivers rushed to shake his hand, many thanking him for his work. It was a genuine and uncontrived demonstration of true admiration and warm respect; quite unlike - in fact in contrast to - the kind shown by members of certain residents' committees towards their elected leaders. I knew then that I was in the presence of a true people's leader.

The first-time when I had the privilege of witnessing first-hand in open court the mesmerising tone of his voice and the fearless manner he fought, it left me in no doubt that standing before me was an extraordinary man of upright constitution. If you had also noticed his poorly-pressed suit and unpolished worn-out brown leather shoes, you would have fathomed the real depth of this man who must have found preening himself just to look good an utterly waste of bloody time!

JBJ was the man amongst men.

Nothing I have said and can say would do justice to the real quality of this man. Today is a very sad day for his family and friends. But, as a country, it was already a very sad day when we allowed him to be mistreated and tormented by his nemesis. We stood by and did nothing.
Knowing JBJ, he has forgiven us. But can we forgive ourselves?


Minibond Series 5


Dear Sir/Madam,

My wife and I are joint account holders of Maybank Singapore. We purchased S$100K of Minibonds Series 5 from Maybank's investment banker around Aug'07. We were under the impression then that these were supposedly very safe bonds. Every few months, I'll even call up Maybank to inquire the well-being of our Minibonds and whether I should still hold on to them. Each time, I was informed that these bonds were still sound, and there wasn't any need to bail out.

Now that Lehman is bankrupt, and the public disclosure that our Minibonds has in fact, nothing at all to do with bonds, but are instead CDO-related derivatives, we are extremely disappointed, distressed and upset with Maybank's lack of professionalism and very poor-product knowledge. The investment advisers are more interested in closing the deal and going through the motion during the investors' risk-analysis.

We believe there are many more thousands of retail investors in Singapore whom are similarly short-changed by the high profile advertisements, aggressive marketing, and misleading sounding products such as "Minibonds", "High notes", etc, which gives a false impression of highly rated bonds or notes. This is compounded by the lack of explanation and product knowledge by the private-bankers/investment advisors. Obviously, no one of sound mind will be willing to accept a 5% return for taking on the risk of CDO-related derivatives!

We fully understand the concept of buyers beware. However in this situation, how is the layman supposed to beware of what they're being sold when the 60-odd pages of prospectus is filled with legalese and technical jargon that even the sellers themselves do not fully comprehend!

We seriously implore MAS and Maybank to investigate and not condone such unethical practices, lest Singapore's hope of becoming a leading fund-management and financial centre is tarnished.

Your faithfully,
Ngo Chee Keong (Mr)

Ng Wee Lay (Ms)

CC: Maybank, ST Forum, MAS, CASE, Mr. Tharman Shanmugaratnam - Minister for Finance, Mrs Lim Hwee Hua - Senior Minister of State for Finance

Bank staff do not understand financial products

Hi Mr Tan,

I used to be an institutional dealer(equities,bonds & futures) for two local banks but quit many years back because I was very disillusioned with what I was seeing everyday.

Personally, I feel that the local banks (can't comment on the foreign ones) are not out to misrepresent and/or mis-sell their credit link products to retail investors. I think the bank sales people simply do not have the training & background/experience to understand their derivatives themselves.

Perhaps, some incidental encounters of mine would be illuminating.
I am a very conservative investor.
I've only invested in Singapore government bonds (SGS), local bank preference shares & a small portion of my portfolio in REITs.
I regularly purchase SGS through 2 local banks but every time I make a purchase, I have to "teach" the bank's sale staff how to calculate accrued interest (ie. buyer must compensate the seller daily interest earned), help them identify which is the correct SGS series and other matters related to filling up the purchase/sales forms!

It really makes me wonder, if they cannot handle something as simple & direct as Singapore government bonds, then what of more complex derivatives ?

HSBC Trustee

HSBC Trustee is the trust company for the Minibonds. I am looking for a senior person in this company that handles the bonds. If you know the name and contact person, I wish to talk to this person. Someone has an idea to minimise the losses. Please e-mail to me at

High Notes 2

Hi Mr. Tan,

DBS has just sent to HN2 investors a list of names under the so called AA-rated basket of securities held by Constellation, the company owned by DBS and is the counter-party with DBS for various swap contracts.

There are 100 names in the list and I am very surprised that only 25 names are rated AA or better. There are 22 rated BBB+ or below. AA- to A- accounted for the balance 53. How can such a basket of securities rated as AA?

This is akin to call a basket containing a mix of some copper coins, alluminium coins and gold coins a basket of gold cans! This is grossly misleading!

All the while, the bank has been very secretive about this list of names. I think because it does not want to let investors know that the rating of AA for the basket of securities is actually not justifiable. The fact there are some low grade bonds in the basket may cause much discomfort to the investors. The bank as warned that this list is confidential and may not be copied or distributed. What a big secret is it!

The worst thing is after the defaults of 3 names in the basket of securities, the bank informed investors that a further 2 defaults would trigger a credit event. This is very unfair because nowhere in the pricing statement can we find any provision dictating that 5 defaults out of 100 names in the basket will constitute a credit event. The bank has no right to impose such a new default clause now!

On 23.9.08, the basket of securities was re-rated as BBB+. I am not surprised, as it should not have been rated AA in the first place, and the rating agencies have been under a lot of criticism after the subprime problems started because a lot of CDOs in the market were given ridiculously good ratings by such rating agencies.

Mr. Tan, I hope you could post this email in your blog and I would like to call on all interested parties to protest to the bank for being not transparant about the contents in the basket of securities when they launched High Notes 2. We must also object to the bank imposing the new default clause that is not provided for in the pricing statement.

One more thing, the bank proudly stated in the pricing statement that the notes are designed for "defensive investors seeking enhanced yield by providing exposure to a basket of highly rated regional and international banks (the reference banks...." What a misleading statement!


Comments in my blog

If you put up an anonymous comment in my blog, can you sign off with your actual name. This will identify you and give greater weight to your comment. Have courage. Use your real name.

False Signatures at the Petition

Some of the signatures in the Petition were put up by mischeivous people. They enter the particulars of other people who were not involved in the Petition.

I will ask my team to call the Petitioners by telephone to verify that they have signed the Petition. They will also collect your NRIC and other particulars. They will give you a telephone number to call back, so that you have a record of the people that called you.

Mr. J B Jeyaretnam

I convey my deepest condolences to the family of the late Mr. J B Jeyaretanam. He had strong beliefs and stood up for what is good for the ordinary people of Singapore. We shall miss him dearly.

Watch a video of the wake of Mr. J B Jeyaretnam. Also, the condolence letter sent by Lee Hsien Loong and Goh Chok Tong:

Tuesday, September 30, 2008

Complaint of mis-selling by bank

Re: Lehman's MiniBond Series 1 and 2.

1. I am note holder of Lehman's MiniBonds. I purchased these from your Bank through your Bank's Relationship Manager. Y. The details are as follows:

I was referred to Y when my time deposit at your bank matured. I have not heard of Lehman's MiniBond prior to that. Y explained that the MiniBond was a low risk investment giving a little higher yield than fixed deposits and arranged by Lehman Brothers, one of the most respected and AAA rated Investment Bank and that my investment would be invested into the 6 reference entities. These entities are well respected and rated AA and above. Only during the holding period of 5 ½ years to maturity, if anyone of these corporations goes into bankruptcy, then the notes will be terminated and sold. The risks are against such defaults and as we have to hold the notes to maturity, we will be compensated with a return higher than our normal practice of placing savings in time deposits of 2.5 to 3% for 6 months, at that time in early 2006.

There were no mention that our investments will be used to buy underlying portfolio of CDOs and Credit Default Swaps.

What we were told about MiniBonds, how it works and risks associated at time of purchase for Series 1 and 2 , were indeed very different than in reality.

2. For Series 1, I was not shown or given any prospectus. I was given a copy of the prospectus for Series 2 after signing up and payments made. The contents were too technical for any retail investor to understand. After Lehman's bankruptcy, and with explanation from your consultant Z some 2 weeks ago, I then finally realized the complexity and the risks.

3. I bought the MiniBonds based on the creditability of your Bank and that such Bonds were approved and registered through Monetary Authority of Singapore and that SRS accounts, an Government savings scheme designed to enhance savings to be used during retirement, could be used to purchase such notes. Your bank through your relationship manager, Y assured me that the MiniBonds was a low risk, secured investment giving a higher returns than interest for time deposit and that if I have no immediate need for such cash, MiniBond investment will be more suitable.

4. Now that with Lehman Brothers declaring bankrupt, it has created a credit event and with the numerous media coverage, and a face to face discussion held 2 weeks ago with your Relationship Manager and Investment Consultant, I finally realized that the operations of such notes and risks associated were very different from what was told to me previously.

5. It was absolute misrepresentation on the nature of these MiniBonds, its operations and risks which investors have to assume. Had I known that the moneys were not invested in the 6 referenced entities but instead in a portfolio of hundreds of underlying CDOs with high risks of failure, I would never sink in a dollar. Just look at my risks profile. I hardly invest in equities in Singapore Stock Exchange, even for blue chip stocks. I did not participate in any hedge fund or use private bankers to invest my extra cash. I put my surplus cash in time deposit with Singapore Banks and subscribe to SRS and annuities to provide for my retirement.

6. With the crash of financial system and liquidation of MiniBonds Series 1 and 2, I expect to incur substantial losses, being the difference paid for the notes and the net realizable value on redemption. I would like to know how your Bank proposes to compensate me with such substantial losses. Misrepresentation of information about the nature, process and risks of such investment from your organization will cause me potentially huge financial losses. I am not a risk taker nor have greed for higher returns with risky investment. Additionally, your Bank has not exercised proper diligence in your fiduciary responsibility to look after the interest of your customers who have trusted you to handle their hard earned savings for retirement.

7. I look forward to favorable response.

FAQ on Minibonds

Lehman Brothers Asia Ltd, as arranger of minibonds, posted this two weeks ago in HK
Note sfc is the HK Securities and Futures Commission.

Good and bad insurance products

65)--> question on September 30th, 2008 12.57 am
there is one thing i am very curious about mr tan kin lian. you are the ceo of insurance company for many years and yet now you warn people about bad insurance. it really something special or different. will those people in insurance hate you very much. because it is something like last time you are on same boat with them now you are against them. something like betrayal.\\\\\

There are good insurance products and bad insurance products.

A good insurance product offers protection at a fair premium. There is a fair margin to pay the sales person, cover the expenses of the insurance company and give a fair profit margin.

There are bad insurance products that over-charge the customer and pay excessive commission to the sales person and make excessive profit for the insurance company.

I want to encourage insurance companies to sell good products that are fair to customers.

I also want to encourage the banks to sell good financial products. The structured products are bad products because they give poor value to the customers in relation to the risk. The product creators and sales people take away too much in charges, and leave the investors to take big risks (like the minibonds, high notes, etc). These products are like high cost insurance policies, but many times worse.

I hope that more people will come forward and speak about business ethics. Business should not cheat customers to make profits. They should give fair value to customers.

More people should also tell the regulator and the Government - look after the interest of ordinary people, the retirees, uncles and aunties and also the young people. Do not allow these ordinary people to be cheated out of their hard earned savings.

File a Police report

If you feel that you have been cheated into investing in a structured product (e.g. the distributor is aware that the product is bad and still push it to you), you can file a Police report against the distributor.

Read this instruction:

Prospectus is too complicated

Dear Mr Tan

I think one of the key contentious point in this whole saga is that we should have read the prospectus for the issue ourselves to assess whether the product is suitable for us or not.

But the problem is the way the prospectus had been written. There's simply too much technical jargon for us to understand all the contents written in it. Although we have a responsibility to read it, is it actually reasonable for laymen like us to understand it? Because of this complexity, we have to depend on the integrity and expertise of the RMs or the bank officers selling the product to advise us properly on the risks. There must be a fundamental change in the way these prospectus are written so that the general public can understand them.

I believe the MAS has a duty to oversee this especially if the issue is to be offered to the general public for subscription. I am not an expert on how this can be done but surely they can tell if a prospectus has been written for a targeted audience or general public? If former, then the issue should not be allowed to be sold to the general public. If latter, then the prospectus must be written in a way that the general public can understand it. After all, the general public are not financial gurus.

I think the MAS has the duty to prevent such products from flooding the retail market by "testing" the suitability of the prospectus for digestion by the general public.

Thanks, KK

I hope that the Government will investigate the following:

2.1 Was there any fraudulent intent in the creation of these products? Were the products created with the aim of defrauding the investing public? Were the drafting of the prospectus, advertisements and other documents carried out with the intent of hiding the true facts from the investing public? Were the lawyers and other professionals involved in this activity?

Monday, September 29, 2008

Why did the banks continue to sell these products?

Dear Mr Tan,

Firstly, thanks for your blog very much!

I‘d like to highlight one point on your appeal for minibond holders. I am Pinnacle Note 1 investor. The issuer is Morgan Stanley. It is exactly same product as minibond. So, I have same worry as minibond holders’.

I bought Pinnacle Note 1 in 2006 because the newspaper advertisement keep saying it is some kind of bond. As an experienced bond investor, I took it as another alternative. For example, LTA 4.17% bond, we were paid every half year and I can cash out anytime as the price hardly change. The Pinnacle Note 1 is linked to 4 countries which are China, Malaysia, Thailand, and Korea. My understanding is unless these 4 counties have credit issue then I will have trouble. It is some kind of government bond.

However, I realized I made a big mistake one month later. I found the price of this product keep dropping at a very fast speed. It didn’t perform as my other government bonds at all. It is too late to read your opinion from your blog one year later.

My point is, if we are the first batch people cheated by this kind of product, so are the dealers if they do not know this kind of product before, I can accept their excuse. However, how could they continues market these kinds of product and promote it as safe bond to other investors when they have already known it is not safe at all from the experience of the first note?

The dealers also can not answer why the price dropped so much but only explained it should be penalty for early redemption. They do not fully understand their product also.

I am not sure Pinnacle Note’s future. The dealer told me I can get back my principle if I hold it until mature, but I do not know how true it is?


I hope that the Government will investigate the following:

2.2 Were the financial institutions that marketed the product aware about the real risks of the products? Did they train their front line advisers to hide the true facts? Were they negligent in not understanding the true risk? Did they monitor the conduct of their front line advisers to ensure that the products are sold to the right people, based on their risk profile and preference?

Loss of life savings

If you have lost most of your life savings in the credit linked product, please send your story to me at Your story should state the following:

1. Your name, contact number and age
2. How much did you invest, name of product, bank and branch
3. Circumstances in which you invested in the product
4. Details of any misleading statements or assurances given to you
5. Was your risk profile given to the seller?
6. Does your investment represent a substantial part of your lifetime savings
7. Will this loss cause great financial hardship to you?
8. Any additional information

I will compile your reports and pass them to Mr. Goh Chok Tong.

Goh Chok Tong's comments on minibonds, high notes

Some investors have expressed disappointments at the comments made by Mr. Goh Chok Tong on minibonds and high notes.

I believe that Mr. Goh made the comments while in China. He may not be aware that many investors are retirees with low risk profile and were misled into investing in these high risk products by the advisers.

I suggest that investors should prepare the Petition letter to your Member of Parliament. You should see your MP to tell the MP about how you were misled into the investment. If the MPs hear the story from many of their constituents, they may be moved into taking this matter up in Parliament.

You can also sign the Petition letter to the Singapore Government. I will include my report on the possible wrong doings for the Government to investigate.

Credit Linked Securities - Wrong doings?

Draft. Please identify additional areas that can be covered in this letter to the Government. Are there points that can strengthen this letter?

1. Introduction

Many people invested a large sum of money, or their life savings, in the credit linked securities, in the mistaken belief that these securities have low risk and are safe. These securities include the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacle Notes and Merill Lynch Jubilee Notes.

These investors lost a large part or all of their investments due to the financial crisis. They were shocked that these structured products had high risk, which they were not properly informed.

The Petition to the Singapore Government ask the Government to see if there were any wrong-doing on the part of the financial institutions that created or marketed these structured products.

These wrong doings could be in the form of negligence, dishonesty or fraud.

2. Wrong-doings

I suggest that the Government should appoint competent people to look into the following areas:

2.1 Was there any fraudulent intent in the creation of these products? Were the products created with the aim of defrauding the investing public? Were the drafting of the prospectus, advertisements and other documents carried out with the intent of hiding the true facts from the investing public? Were the lawyers and other professionals involved in this activity?

2.2 Were the financial institutions that marketed the product aware about the real risks of the products? Did they train their front line advisers to hide the true facts? Were they negligent in not understanding the true risk? Did they monitor the conduct of their front line advisers to ensure that the products are sold to the right people, based on their risk profile and preference?

2.3 What were the actual charges taken out of the structured products to pay the distributor and the product creator? Were these charges disclosed in the prospectus? Were the charges at a reasonable level, in comparison with the work that has to be done and the risk taken by the parties?

2.4 Were there conflicts of interest involved in the transactions between the various parties? Were the conflicts of interest adequately disclosed? Were the decisions on the pricing of the products made fairly in the interest of the investors? Was there any arrangement to ensure that the pricing is made based on fair market values?

2.5 Does this arrangement fall under certain laws, such as the Trust Act or more specific laws? Were there any breach of any of the provisions of these laws?

2.6 Does the fund manager break any law, if it takes out money from the fund that are not authorised by the trust deed?

3. Call for action

I hope that the Government look into these areas, to see if there were any wrong doing that led to such large losses among the investing public.

If there were wrong doing, the Government can take the appropriate action to bring the offenders to Court and to seek suitable compensation for the losses suffered by the investors.

Tan Kin Lian

Taiwan senator requests bank to buy back Minibond


Country: Taiwan
Date: 24 Sept 2008

1. A Senator reported the French Bank is willing to buy back the Minibond from investor
after the senator appear.
2. Reason: Taiwan is not a mature financial market suitable for sale of mature product such as mini-bond.
3. Many retirees thought Minibond is a bond and invest whole of life saving.
4. Senator call for Taiwan Monetary Authority to urge all local Taiwan banks to buy back minibond from retail investors.
5. Taiwan Monetary Authority will revise its regulation to protect retail investor.
6. Total Number of Investors: 51,000
7. Total Amount Invested with Lehman: NT 40 billion (SGD 1.8 billion)

If you find any mistake in the translation, please send a message to me at

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