Dear Mr Tan,
My dad has bought a 20 Year Modified Anticipated Endowment Policy in 1988 and his policy matured in August 2008.
After calculating the total amount of 5 yearly and maturity payout by the insurance company, we realize that the total payout of $11,000 is less than the total premium of $15,000 paid over 20 years.
He recalled in the 20 years, he has received payout of bonus every 5 years and the total bonus received is around $11,000 but he has already paid about $15,000 in premium for his endowment policy.
We cannot understand why he is making a loss with this endowment policy. I have writtent to the insurance company to ask for an explanation and have not heard from then yet.
As a layman, we do not understand how it works and I thought with your wealth of knowledge on insurance, you may be able to explain to us why my dad made a loss with this Anticipated Endowment policy. I sincerely hope you can also advise me on the next course of action.
REPLY
You can lodge a compliant with the CEO of the insurance company. In my view, the total payout should be more than the total premiums.
If they do not give you a satisfactory answer, you can file a complaint with FiDREC, www.fidrec.com.sg.
Tuesday, October 07, 2008
Is bond fund risky?
Hi Mr. Tan,
How about Bond Funds ? Is it safe ? Its unit price keeps dropping.
I have brought S$x of Bond Fund from Maybank at S$0.99 per unit and it was at S$0.86 now. It dropped by $0.13 dropped within 6 months time.
What shall I do now ? Cut lose or hold ? I was also told by the bank staff it was safe since it was a bond and having very little risk ...
Thanks you in advance for your advice please. I know you are very busy .. a lot of people seeking advice from you ...
REPLY
I am not familiar with this bond. It is all right to keep the investment.
It is also all right to sell the investment, as you are getting the actual value of the underlying bonds. Some of the bonds may have dropped in value due to the credit crisis.
How about Bond Funds ? Is it safe ? Its unit price keeps dropping.
I have brought S$x of Bond Fund from Maybank at S$0.99 per unit and it was at S$0.86 now. It dropped by $0.13 dropped within 6 months time.
What shall I do now ? Cut lose or hold ? I was also told by the bank staff it was safe since it was a bond and having very little risk ...
Thanks you in advance for your advice please. I know you are very busy .. a lot of people seeking advice from you ...
REPLY
I am not familiar with this bond. It is all right to keep the investment.
It is also all right to sell the investment, as you are getting the actual value of the underlying bonds. Some of the bonds may have dropped in value due to the credit crisis.
Legal fees - action against distributor
I have approached a well known lawyer. He told me that the legal fees to take a case to the High Court is likely to be $100,000 or more. If this is shared by 100 investors, the cost per investor is $1,000. If there are 200 investors, the cost is $500 per investor.
If investors wish to contemplate taking legal action, you have to be prepared to spend $500 to $1,000. As the amount invested in most cases is quite large, averaging about $50,000, it may be necessary to spend 1% or 2% to seek compensation.
I shall be putting up another "petition" to gauge the interest in taking collective action to engage the service of the lawyer. I will arrange for the investors to meet the lawyer before you take the final decision.
It may be necessary for the lawyer to take separate cases against separate distributors. This is complicated and may add to the cost. I will let the lawyer explain how to handle this matter at a future time.
What are your views? You can post your comments in this blog.
If investors wish to contemplate taking legal action, you have to be prepared to spend $500 to $1,000. As the amount invested in most cases is quite large, averaging about $50,000, it may be necessary to spend 1% or 2% to seek compensation.
I shall be putting up another "petition" to gauge the interest in taking collective action to engage the service of the lawyer. I will arrange for the investors to meet the lawyer before you take the final decision.
It may be necessary for the lawyer to take separate cases against separate distributors. This is complicated and may add to the cost. I will let the lawyer explain how to handle this matter at a future time.
What are your views? You can post your comments in this blog.
Credit default swaps - who benefits?
Someone should me a chart showing the cost of credit default swaps. Before the financial crisis, the swap rate is at average of 100 bps p.a. for well rated companies. If the structured product sells the swap to insure 6 entities, the total payout is 6% p.a. The money received from the investors were invested in CDOs and low quality bonds, which are likely to earn another 6% p.a. (this is my estimate).
It is possible that the structured product could earn up to 12% p.a. But, this is not the return given to the investors. They are given a low return of about 5% p.a. The question is, "where does the rest of the money go"? I suspect that they are taken away as charges for distribution and profit. There amounts are not disclosed to the investors.
The figures indicated by me are estimates and may not be accurate. It will be better to look at the actual figures. So far, the trustee or the arranger are not disclosing these figures. Perhaps the authority can step in and ask for these figures to be disclosed.
Even if the actual figures are lower than my estimates, there is still a question whether the charges are reasonable or excessive, and whether there is any breach of fiduciary duty.
It is possible that the structured product could earn up to 12% p.a. But, this is not the return given to the investors. They are given a low return of about 5% p.a. The question is, "where does the rest of the money go"? I suspect that they are taken away as charges for distribution and profit. There amounts are not disclosed to the investors.
The figures indicated by me are estimates and may not be accurate. It will be better to look at the actual figures. So far, the trustee or the arranger are not disclosing these figures. Perhaps the authority can step in and ask for these figures to be disclosed.
Even if the actual figures are lower than my estimates, there is still a question whether the charges are reasonable or excessive, and whether there is any breach of fiduciary duty.
Coordinated interest rate cuts
There is speculation in the financial markets that the central banks will have a coordinated interest rate cut to help the financial markets.
The chance of this happening is high. Inflation has dropped. Economies are entering into a recession, which will bring down inflationary pressures. The coordinated action means that several countries will be cutting interest rate together, at almost the same time.
Over the longer term, the global financial system needs to be revamped. It is bad to have extremely high leverage. There must be controls over the amount of debt that businesses are allowed to pile up. The control has to be stricter for financial institutions.
The chance of this happening is high. Inflation has dropped. Economies are entering into a recession, which will bring down inflationary pressures. The coordinated action means that several countries will be cutting interest rate together, at almost the same time.
Over the longer term, the global financial system needs to be revamped. It is bad to have extremely high leverage. There must be controls over the amount of debt that businesses are allowed to pile up. The control has to be stricter for financial institutions.
Monday, October 06, 2008
Reduced bonus under Income policies
Dear Mr. Tan,
With the fall in the global stockmarket, should I cancel my NTUC policies and take out the cash value. The bonus was cut this year. Can I ask NTUC to keep its promise and pay the higher bonus before the cut?
REPLY
If you decide to surrender the Income policy, you will get the cash value that is not less than the cash value before the bonus cut. Income has promised that they will declare a higher rate of special bonus for the current year that will compensate for the cut in the annual bonus. This guarantee is valid for the current one or two years only (I am not sure about the duration).
In the future years, there is no such guarantee. If the special bonus is cut, you will suffer a reduction in cash value, due to the lower rate of annual bonus. If you do not need the life insurance protection, it is better to surrender the policies now, and take out the cash value.
I am likely (but have not made a final decision) to surrender my existing policies, so that it wil lnot be affected by the lower rates of bonus in the future.
With the fall in the global stockmarket, should I cancel my NTUC policies and take out the cash value. The bonus was cut this year. Can I ask NTUC to keep its promise and pay the higher bonus before the cut?
REPLY
If you decide to surrender the Income policy, you will get the cash value that is not less than the cash value before the bonus cut. Income has promised that they will declare a higher rate of special bonus for the current year that will compensate for the cut in the annual bonus. This guarantee is valid for the current one or two years only (I am not sure about the duration).
In the future years, there is no such guarantee. If the special bonus is cut, you will suffer a reduction in cash value, due to the lower rate of annual bonus. If you do not need the life insurance protection, it is better to surrender the policies now, and take out the cash value.
I am likely (but have not made a final decision) to surrender my existing policies, so that it wil lnot be affected by the lower rates of bonus in the future.
Dividend under STI ETF
Hi Tan Kin Lian,
It is clear to me that any index ETF tracks the underlying index. However, index itself will have dividend yield (let's say 3%), which I believe is significant.
If so, in the ideal circumstances ETF performance shall have to beindex + dividend yield.
Does ETF price reflect the dividend yield of the index? Where does the dividend of index go?
REPLY
If you invest in the STI ETF by StateStreet, the dividend is paid out in half yearly distributions.
It is clear to me that any index ETF tracks the underlying index. However, index itself will have dividend yield (let's say 3%), which I believe is significant.
If so, in the ideal circumstances ETF performance shall have to beindex + dividend yield.
Does ETF price reflect the dividend yield of the index? Where does the dividend of index go?
REPLY
If you invest in the STI ETF by StateStreet, the dividend is paid out in half yearly distributions.
Full particulars of investors of credit linked securities
I wish to collect full particulars of investors to be submitted to the Monetary Authority of Singapore - including age, language, contact information, amount invested, type of structured product and distributor. Complete information has to be provided this time.
If you wish to provide the information, please click here: http://www.petitiononline.com/PICLS2/petition.html
---------------------------------
Update:
I have collected sufficient information and will close this "petition" now.
Someone asked me to state what the particulars are to be used for. A senior person in MAS asked me if I have information about older people, especially those that are not literate in English, who have been asked to invest in these structured products. This is why I have asked for age, language and occupation. I am not sure at this time, if this information will be helpful to get MAS to take a pro-active stand.
If you wish to provide the information, please click here: http://www.petitiononline.com/PICLS2/petition.html
---------------------------------
Update:
I have collected sufficient information and will close this "petition" now.
Someone asked me to state what the particulars are to be used for. A senior person in MAS asked me if I have information about older people, especially those that are not literate in English, who have been asked to invest in these structured products. This is why I have asked for age, language and occupation. I am not sure at this time, if this information will be helpful to get MAS to take a pro-active stand.
Hong kong - minibond buyback proposal
http://www.thestandard.com.hk/breaking_news_detail.asp?id=7315&icid=1&d_str=20081006
Minibond buyback proposal
Financial Secretary John Tsang Chun-wah said the government has proposed that banks to buy back Lehman Brothers minibonds from customers.
''This is a way to let investors recoup some losses from their investments quickly,'' Tsang said.
The trustee of the minibonds, HSBC (0005), has agreed to disclose more information to distributors such as the value of the underlying collateral on the investment products.
Investors are unlikely to get back all their investment, he said.
Earlier today, more than 200 people who invested in the finanical products sought help from the police. The group staged a protest outside the police headquarters in Wan Chai and Democratic Party members accompanied several of them to file complaints with the Commercial Crime Bureau that salesmen had misled them.
Minibond buyback proposal
Financial Secretary John Tsang Chun-wah said the government has proposed that banks to buy back Lehman Brothers minibonds from customers.
''This is a way to let investors recoup some losses from their investments quickly,'' Tsang said.
The trustee of the minibonds, HSBC (0005), has agreed to disclose more information to distributors such as the value of the underlying collateral on the investment products.
Investors are unlikely to get back all their investment, he said.
Earlier today, more than 200 people who invested in the finanical products sought help from the police. The group staged a protest outside the police headquarters in Wan Chai and Democratic Party members accompanied several of them to file complaints with the Commercial Crime Bureau that salesmen had misled them.
File a police report
A lawyer suggested that investors should file a police report against the representative (of the distributor) who misled them into buying the structured product. Several investors can file the report together. This will get the police to investigate and act.
http://tankinlian.blogspot.com/2008/09/have-you-been-cheated.html
In Hongkong, the investors have filed a police report and the police have started investigation.
http://tankinlian.blogspot.com/2008/09/have-you-been-cheated.html
In Hongkong, the investors have filed a police report and the police have started investigation.
Securities Investors Association of Singapore (SIAS)
I like to ask investors to approach the Securities Investors Assocation of Singapore (SIAS) and see if SIAS is able to help take up this matter collectively.
http://www.sias.org.sg/
http://www.sias.org.sg/
Consumer Association
I like to ask investors to approach the Consumer Association and ask CASE to take up this matter on your behalf. I hope that CASE will be willing to act. You can try CASE as an additional channel.
http://www.case.org.sg/
http://www.case.org.sg/
Collective Action against specific distributors
I have received several requests to help identify investors of specific products so that they can get together to take collective action.
I need to have volunteers who are willing to take the lead to act against specific distributors. If you are willing to volunteer, send an email to kinlian@gmail.com.
Please provide the following:
1. Your name
2. Your email address
3. Your telephone number
4. The specific distrbutor
I will provide you the particulars of the investors who bought from that specific distributor. You have to contact them, talk to them, arrange meetings and find a lawyer. If this work is too heavy for you, you can get a few volunteers from the list to help you.
If you wish to arrange meetings, you can send details for me to post in my blog.
The people who signed the Petition bought from the following distributors:
Maybank 305
Hong Leong 245
DBS 145
ABN 116
Philips 55
OCBC 53
UOB 40
CIMB 14
GYC 12
SCB 10
Citibank 10
Amex 10
Kim Eng 7
HSBC 7
Alpha 7
I need to have volunteers who are willing to take the lead to act against specific distributors. If you are willing to volunteer, send an email to kinlian@gmail.com.
Please provide the following:
1. Your name
2. Your email address
3. Your telephone number
4. The specific distrbutor
I will provide you the particulars of the investors who bought from that specific distributor. You have to contact them, talk to them, arrange meetings and find a lawyer. If this work is too heavy for you, you can get a few volunteers from the list to help you.
If you wish to arrange meetings, you can send details for me to post in my blog.
The people who signed the Petition bought from the following distributors:
Maybank 305
Hong Leong 245
DBS 145
ABN 116
Philips 55
OCBC 53
UOB 40
CIMB 14
GYC 12
SCB 10
Citibank 10
Amex 10
Kim Eng 7
HSBC 7
Alpha 7
Unable to give individual advice or attend to individual requests
I wish to remind visitors to my blog that I am not able to:
> give individual advice
> attend to individual request
I received about 50 emails every day on the financial crisis, including many emails that concern individual situations. Please do not send me your individual problem, as I do not have the time to read and advice you.
Please read my blog for update.
> give individual advice
> attend to individual request
I received about 50 emails every day on the financial crisis, including many emails that concern individual situations. Please do not send me your individual problem, as I do not have the time to read and advice you.
Please read my blog for update.
Monetary Authority of Singapore - Consumer Complaint
If you wish to lodge a complaint against an agent or a financial institution, you can refer to this guide in MAS website:
http://www.moneysense.gov.sg/contact_us/Consumer_Portal_Contact_Us.html#
Here is an extract from the webpage:
(IV) REPORTING A MATTER TO MAS
As the financial sector regulator, MAS' role is to ensure that financial institutions conduct their businesses in an appropriate manner and in accordance with the law. MAS is not able to resolve commercial disputes between you and your financial institution, or order the financial institution to pay compensation to you. We are, however, interested in matters that may raise issues of supervisory concern. These include violations of our rules and regulations, and breaches of other relevant codes of practice and guidelines.
MAS can...
Investigate wrongdoings by financial institutions (e.g. market misconduct like giving inappropriate or misleading advice, misrepresentation and lack of disclosure).
Take regulatory action against financial institutions that have breached our rules and regulations.
MAS cannot...
Intervene in matters relating to service standards, commercial decisions such as pricing policies of financial institutions, contractual arrangements and civil disputes.
Give legal advice or comment on cases that have been heard in court, adjudicated by FIDReC or are pending legal action.
Order financial institutions to compensate you.
Disclose the outcome of any investigations or actions taken against individual financial institutions.
If you wish to report a problem you have with your financial institution, please click here or write to
Monetary Authority of Singapore
Consumer Issues Division
Capital Markets Department
10 Shenton Way
MAS Building
Singapore 079117
Fax : (65) 6225-9766
http://www.moneysense.gov.sg/contact_us/Consumer_Portal_Contact_Us.html#
Here is an extract from the webpage:
(IV) REPORTING A MATTER TO MAS
As the financial sector regulator, MAS' role is to ensure that financial institutions conduct their businesses in an appropriate manner and in accordance with the law. MAS is not able to resolve commercial disputes between you and your financial institution, or order the financial institution to pay compensation to you. We are, however, interested in matters that may raise issues of supervisory concern. These include violations of our rules and regulations, and breaches of other relevant codes of practice and guidelines.
MAS can...
Investigate wrongdoings by financial institutions (e.g. market misconduct like giving inappropriate or misleading advice, misrepresentation and lack of disclosure).
Take regulatory action against financial institutions that have breached our rules and regulations.
MAS cannot...
Intervene in matters relating to service standards, commercial decisions such as pricing policies of financial institutions, contractual arrangements and civil disputes.
Give legal advice or comment on cases that have been heard in court, adjudicated by FIDReC or are pending legal action.
Order financial institutions to compensate you.
Disclose the outcome of any investigations or actions taken against individual financial institutions.
If you wish to report a problem you have with your financial institution, please click here or write to
Monetary Authority of Singapore
Consumer Issues Division
Capital Markets Department
10 Shenton Way
MAS Building
Singapore 079117
Fax : (65) 6225-9766
ST Index is still falling
It could go down to 1900
http://tankinlian.blogspot.com/2008/09/how-far-more-for-st-index-to-fall.html
But it is not time to sell, and not time to buy.
http://tankinlian.blogspot.com/2008/09/how-far-more-for-st-index-to-fall.html
But it is not time to sell, and not time to buy.
Lodge your complaint with the Distributor
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:
http://tankinlian.blogspot.com/2008/09/lodge-complaint-with-financial.html
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 <atans1@hotmail.com>
Read this blog:
http://tankinlian.blogspot.com/2008/09/lodge-complaint-with-financial.html
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 <atans1@hotmail.com>
Write to Monetary Authority of Singapore
If you wish to write to MAS, you can address your letter to:
Chairman
Monetary Authority of SingaporeConsumer
10 Shenton Way
MAS Building
Singapore 079117
You can send your letter by registered mail or by fax to
Fax : (65) 6225-9766.
If you wish to write to the Consumer Issues Department, you can follow this guide:
http://tankinlian.blogspot.com/2008/09/monetary-authority-of-singapore.html
Chairman
Monetary Authority of SingaporeConsumer
10 Shenton Way
MAS Building
Singapore 079117
You can send your letter by registered mail or by fax to
Fax : (65) 6225-9766.
If you wish to write to the Consumer Issues Department, you can follow this guide:
http://tankinlian.blogspot.com/2008/09/monetary-authority-of-singapore.html
Meet the Member of Parliament
The following people have volunteered to contact other investors in the same district to meet the Member of Parliament at the "Meet the People" session
Postal
Sector
12 Ho ES
14 Lee SK
15 Zhou
31 Anne Chua
32 Allan Kon
35 Alex Choo
52 Johnson Lee
53 H L Soh
54 Eunice Teo
55 Felicia Chua
65 Irene
73 Melvin
You can go to this website to find your MP.
http://www.parliament.gov.sg/AboutUs/Org-MP-whomp.htm
Postal
Sector
12 Ho ES
14 Lee SK
15 Zhou
31 Anne Chua
32 Allan Kon
35 Alex Choo
52 Johnson Lee
53 H L Soh
54 Eunice Teo
55 Felicia Chua
65 Irene
73 Melvin
You can go to this website to find your MP.
http://www.parliament.gov.sg/AboutUs/Org-MP-whomp.htm
My blog passes 500,000 visitors on 6 Oct 2008
My blog passes the 500,000 visitors on 6 Oct 2008 (today). My earlier prediction was that this landmark will be reached by 11-11-2008. Due to the crisis on the credit linked securities, the visitors to my blog increased to 3 times of the normal level.
This is just for historical record. The blog started in Feb 2007, so it has reached this landmark in 20 months. The average visitorship is 25,000 a month. In recent days, it is 3,000 a day or 90,000 a month.
This is just for historical record. The blog started in Feb 2007, so it has reached this landmark in 20 months. The average visitorship is 25,000 a month. In recent days, it is 3,000 a day or 90,000 a month.
Petition to Singapore Government - Credit Linked Securities
I have now closed the Petition asking the Singapore Government to investigate wrong doing on the credit linked securities. A total of 1080 signatures have been received.
My team is now telephoning the signatories to confirm that they have signed the Petition. We wish to remove names that have been entered mischievously by other people. I expect that the final Petition will contain slightly more than 1,000 names.
I wish to ask all investors to lodge their complaint to the CEO of the financial institution that distributed the structured product. If the matter is not resolved, you can bring it to FiDREC (www.fidrec.com.sg).
The Petition ask the Government to investigate. It is NOT the channel to register your claims against the distributor. It does not replace the work that you have to do to lodge your complaint with the distributor and FiDREC. It does not matter to your claim, if your name does not appear in the Petition.
My team is now telephoning the signatories to confirm that they have signed the Petition. We wish to remove names that have been entered mischievously by other people. I expect that the final Petition will contain slightly more than 1,000 names.
I wish to ask all investors to lodge their complaint to the CEO of the financial institution that distributed the structured product. If the matter is not resolved, you can bring it to FiDREC (www.fidrec.com.sg).
The Petition ask the Government to investigate. It is NOT the channel to register your claims against the distributor. It does not replace the work that you have to do to lodge your complaint with the distributor and FiDREC. It does not matter to your claim, if your name does not appear in the Petition.
Expensive to battle in court
http://www.thestandard.com.hk/news_detail.asp?pp_cat=11&art_id=72537&con_type=1&d_str=20081006
Banks should settle with Lehman minibond investors instead of battling it out in court, analysts say.
"Lawsuits are not the way to go to solve the Lehman Brothers minibonds dilemma, as they are lengthy in process and might not benefit the investor in the end," Ho Lok-sang, professor of economics and director of the Centre for Public Policy Studies at Lingnan University, said yesterday.
A member of the audience at RTHK's City Forum in Victoria Park agreed, saying: "Even if the lawsuits were won, the compensation given might not be enough to cover the lawyers' fees."
Ho added: "Of course, the banks should just settle with the affected investors if possible."
The professor said it was important to study the fine print in promotional material, claiming it could hint at certain levels of deception.
Legislative Council member Chim Pui-chung defended bank staff caught up in the fury.
He said they were merely acting on the orders of the banks who sold the products, and were told not to ask questions when they had doubts.
He added that some staff had fallen victim themselves, having invested in the structured products and recommending them to close friends and family.
But this was not the first time retail investors have been hard hit by structured products. Lawmaker- designate Ip Wai-ming said warrants and accumulators could also be problematic products that involved more leverage than many investors realized.
In a survey by the Democratic Party, 67.6 percent of 552 people polled did not understand the nature of Lehman Brothers' minibonds.
Banks should settle with Lehman minibond investors instead of battling it out in court, analysts say.
"Lawsuits are not the way to go to solve the Lehman Brothers minibonds dilemma, as they are lengthy in process and might not benefit the investor in the end," Ho Lok-sang, professor of economics and director of the Centre for Public Policy Studies at Lingnan University, said yesterday.
A member of the audience at RTHK's City Forum in Victoria Park agreed, saying: "Even if the lawsuits were won, the compensation given might not be enough to cover the lawyers' fees."
Ho added: "Of course, the banks should just settle with the affected investors if possible."
The professor said it was important to study the fine print in promotional material, claiming it could hint at certain levels of deception.
Legislative Council member Chim Pui-chung defended bank staff caught up in the fury.
He said they were merely acting on the orders of the banks who sold the products, and were told not to ask questions when they had doubts.
He added that some staff had fallen victim themselves, having invested in the structured products and recommending them to close friends and family.
But this was not the first time retail investors have been hard hit by structured products. Lawmaker- designate Ip Wai-ming said warrants and accumulators could also be problematic products that involved more leverage than many investors realized.
In a survey by the Democratic Party, 67.6 percent of 552 people polled did not understand the nature of Lehman Brothers' minibonds.
Consumer banking sells the structured products
Comment posted in my blog
I come from the banking industry and I am really ashamed about how these people from the consumer banking side conduct themselves.
It is the banking industry's secret that the lower calibre people in the bank are always chuffed into the consumer banking side. Managers from the consumer banking side also doesn't care about qualifications or training of the people they recruit as RMs or Investment Consultants. These unqualified people who join the consumer bank for the vain reason of being able to boast/ pose that they are "bankers" or "investment experts", even when they don't really have the substance or depth.
However, the conduct of the consumer banking divisions over the CLS scandal is downright unethical and heartless. It shows they don't care about the common folk, they just want to retain their undeserved titles.
We don't see such short-term-oriented and unscrupulous conduct occuring in the bank's Treasury dept/ Institution dept/ Corporate Bkg dept. Even in Private Bkg, I heard that Private Bkg RMs (those who serve customers with more than S$5m cash) refused to promote the structured investments to their customers cos they are afraid to lose their customers' long term business. In fact the Private Bkg RMs cannot see any reason why they should lock their customers' money into a 7-year, illiquid, fishy, structured investment.
I come from the banking industry and I am really ashamed about how these people from the consumer banking side conduct themselves.
It is the banking industry's secret that the lower calibre people in the bank are always chuffed into the consumer banking side. Managers from the consumer banking side also doesn't care about qualifications or training of the people they recruit as RMs or Investment Consultants. These unqualified people who join the consumer bank for the vain reason of being able to boast/ pose that they are "bankers" or "investment experts", even when they don't really have the substance or depth.
However, the conduct of the consumer banking divisions over the CLS scandal is downright unethical and heartless. It shows they don't care about the common folk, they just want to retain their undeserved titles.
We don't see such short-term-oriented and unscrupulous conduct occuring in the bank's Treasury dept/ Institution dept/ Corporate Bkg dept. Even in Private Bkg, I heard that Private Bkg RMs (those who serve customers with more than S$5m cash) refused to promote the structured investments to their customers cos they are afraid to lose their customers' long term business. In fact the Private Bkg RMs cannot see any reason why they should lock their customers' money into a 7-year, illiquid, fishy, structured investment.
Loss of retirement savings
Posted in my blog.
The irony of it all! In US, borrowers who have defaulted in their loans resulted in the collapse of the lenders. Lenders are blamed for the collapse but all the same the government bailed out the lenders.
In Singapore, savers (like me), who have obediently answered the call by the government to save to provide for our retirement stand to lose all or substantial part of that retirement fund are being told that it is our own fault for
(1) not understanding the thick prospectus littered with technical jargon; and
(2) not disbelieving the bank's representatives and agents when they told us they are safe investments.After all, we must be morons to proceed with these risky investments even after being told by the banks that they are risky. (Well, the banks must have been truthful and told us they are risky, right?)
Moral of the story? Borrow, don't save.
Tiang
The irony of it all! In US, borrowers who have defaulted in their loans resulted in the collapse of the lenders. Lenders are blamed for the collapse but all the same the government bailed out the lenders.
In Singapore, savers (like me), who have obediently answered the call by the government to save to provide for our retirement stand to lose all or substantial part of that retirement fund are being told that it is our own fault for
(1) not understanding the thick prospectus littered with technical jargon; and
(2) not disbelieving the bank's representatives and agents when they told us they are safe investments.After all, we must be morons to proceed with these risky investments even after being told by the banks that they are risky. (Well, the banks must have been truthful and told us they are risky, right?)
Moral of the story? Borrow, don't save.
Tiang
Sunday, October 05, 2008
Speaker's Corner, Saturday 11 October, 5 - 7 pm
CONFIRMED:
Venue: Speaker's Corner, Hong Lim Green
Date: Saturday 11 October from 5 to 7 pm.
Topic: Petition to Singapore Government on Credit Linked Securities.
Speakers:
1. Tan Kin Lian
2. Leong Sze Hian
As a large crowed is expected, it may not be possible for some investors to hear the speakers. The authority allow a loud hailer to be used, but not a powered loudspeaker. I will keep my speech short and give a handout to people who are not able to hear me.
Signs will be put up for the attendees to meet other investors who have invested in similar products, e.g. Minibond, High Notes, Pinnacle Notes, Jubilee Notes. The main purpose of this event is to show a large gathering of investors.
Venue: Speaker's Corner, Hong Lim Green
Date: Saturday 11 October from 5 to 7 pm.
Topic: Petition to Singapore Government on Credit Linked Securities.
Speakers:
1. Tan Kin Lian
2. Leong Sze Hian
As a large crowed is expected, it may not be possible for some investors to hear the speakers. The authority allow a loud hailer to be used, but not a powered loudspeaker. I will keep my speech short and give a handout to people who are not able to hear me.
Signs will be put up for the attendees to meet other investors who have invested in similar products, e.g. Minibond, High Notes, Pinnacle Notes, Jubilee Notes. The main purpose of this event is to show a large gathering of investors.
Section 199 of the Securities and Futures Act
Read this blog for the actual wordings of section 199 of the Securities and Futures Act.
http://tankinlian.blogspot.com/2008/10/securities-and-futures-act.html
The Act defines "securities" to mean any unit in a collective investment scheme. I consider a structured product to fall under this definition.
Section 199 stats that no person shall make a make a statement, or disseminate information, that is false or misleading in a material particular and is likely to induce other persons to subscribe for securities, if he knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.
The structured product are so complex that the representative (i.e. relationship manager) may not be aware that the statement they are making (i.e that the product has low risk and is like a bond) is false or misleading.
However, the financial institution that employs the representative "knows or ought reasonably to have known" that the statement or information is false or misleading. It is their duty to be aware about the nature of the product when they train the reprsentative to sell the product to the retail investors.
In my view, the financial institution has breached section 199 of the Act.
I hope that the MAS or Attorney General will take up this matter on behalf of the thousands of investors who have been given false and misleading information to invest in the structured products.
I hope that the MAS or Attorney General can negotiate an out-of-court settlement where the distributor shall buy back the product from the retail investors for 50% to 80% of the invested sum. A higher percentage should be given to the elderly and illiterate investors who were misled into the investment.
By buying back the structured product at the negotiated value, the distributor can reduce its loss from the recovery of any residual value arising from the liquidation of the assets of the structured product.
http://tankinlian.blogspot.com/2008/10/securities-and-futures-act.html
The Act defines "securities" to mean any unit in a collective investment scheme. I consider a structured product to fall under this definition.
Section 199 stats that no person shall make a make a statement, or disseminate information, that is false or misleading in a material particular and is likely to induce other persons to subscribe for securities, if he knows or ought reasonably to have known that the statement or information is false or misleading in a material particular.
The structured product are so complex that the representative (i.e. relationship manager) may not be aware that the statement they are making (i.e that the product has low risk and is like a bond) is false or misleading.
However, the financial institution that employs the representative "knows or ought reasonably to have known" that the statement or information is false or misleading. It is their duty to be aware about the nature of the product when they train the reprsentative to sell the product to the retail investors.
In my view, the financial institution has breached section 199 of the Act.
I hope that the MAS or Attorney General will take up this matter on behalf of the thousands of investors who have been given false and misleading information to invest in the structured products.
I hope that the MAS or Attorney General can negotiate an out-of-court settlement where the distributor shall buy back the product from the retail investors for 50% to 80% of the invested sum. A higher percentage should be given to the elderly and illiterate investors who were misled into the investment.
By buying back the structured product at the negotiated value, the distributor can reduce its loss from the recovery of any residual value arising from the liquidation of the assets of the structured product.
Section 27 of the Financial Advisers Act
http://tankinlian.blogspot.com/2008/09/financial-adviser-act-section-27.html
Section 27 of the Financial Adviser Act require an adviser to ensure that the recommendation (i.e. to invest in the credit linked securities) is appropriate to the person being advised.
No licensee (i.e. adviser) shall make a recommendation with respect to any investment product to a person who rely on the recommendation, if the licensee does not have a reasonable basis for making the recommendation.
A licensee does not have a reasonable basis for making a recommendation to a person unless he has obtained information or conducted investigation into the investment objectives, financial situation and particular needs of the person.
Where a licensee contravenes this requrement and the person who relies on the recoomendation has suffered loss or damage, the licensee is liable to pay damages to that person in respect of that loss or damage.
I believe that many distributing financial institutions will be found to have failed in their duty. It is inappropriate to recommend the credit-lined structured product to elderly folks who do not understand the risk.
Section 27 of the Financial Adviser Act require an adviser to ensure that the recommendation (i.e. to invest in the credit linked securities) is appropriate to the person being advised.
No licensee (i.e. adviser) shall make a recommendation with respect to any investment product to a person who rely on the recommendation, if the licensee does not have a reasonable basis for making the recommendation.
A licensee does not have a reasonable basis for making a recommendation to a person unless he has obtained information or conducted investigation into the investment objectives, financial situation and particular needs of the person.
Where a licensee contravenes this requrement and the person who relies on the recoomendation has suffered loss or damage, the licensee is liable to pay damages to that person in respect of that loss or damage.
I believe that many distributing financial institutions will be found to have failed in their duty. It is inappropriate to recommend the credit-lined structured product to elderly folks who do not understand the risk.
Request for help from Relationship Managers
Request from an investor
This is to invite the just and upright relationship managers from financial institions who were involved in the sales of Minibonds, High Notes, Pinnacle Notes, Jubilee Notes and similar products.
I believe you have heard/witness the number of people, some of those are old and financially blind, affected by the above product. To date the investigation is still on and what is mentioned/demanded by the financial institutions are proof of misrepresentation, which many of the victims will not be able to produce because most of the these are communicated verbally.
Can you share how the RM in your financial institution are trained to position he product and who are the targetted customers?
Please send your reply to kinlian@gmail.com. It will be treated in confidence.
This is to invite the just and upright relationship managers from financial institions who were involved in the sales of Minibonds, High Notes, Pinnacle Notes, Jubilee Notes and similar products.
I believe you have heard/witness the number of people, some of those are old and financially blind, affected by the above product. To date the investigation is still on and what is mentioned/demanded by the financial institutions are proof of misrepresentation, which many of the victims will not be able to produce because most of the these are communicated verbally.
Can you share how the RM in your financial institution are trained to position he product and who are the targetted customers?
Please send your reply to kinlian@gmail.com. It will be treated in confidence.
Petition on Credit Linked Securities, Singapore
LATEST: The Petition is now closed. A total of 1080 signatures were received.
The Petition to the Singapore Government is now ready for signing at:
http://www.petitiononline.com/PSGCLS01/petition.html
Investors in the credit linked securities can now sign the Petition which will be delivered to the Singapore Government, tentatively by early October.
The Petition to the Singapore Government is now ready for signing at:
http://www.petitiononline.com/PSGCLS01/petition.html
Investors in the credit linked securities can now sign the Petition which will be delivered to the Singapore Government, tentatively by early October.
Capital protected product
Here is an explanation from the London stock exchange:
http://www.londonstockexchange.com/en-gb/pricesnews/prices/structuredproducts/proddescriptions/capprotect.htm
Basically, the issuer of the product buys a zero coupon bond to provide the redemption of the capital at maturity date and uses the interest to buy an option.
If the option works well, it can give an attractive return. If the market moves in the wrong direction, the option is useless and the investor loses the option money entirely.
This product has a disadvantage. The issuer is likely to take away a large part of the investment (5% to 10%) as marketing expenses and profit. This leaves very little money to buy the option. This is why most capital protected product gives poor return over the past years.
For a capital guaranteed product, an additional fee is taken away to pay the bank that provides the capital guarantee. This reduces the return to the investor further.
Be aware about capital protected product. It is good for marketing, but is actually quite useless. Read this opinion:
http://www.wrenresearch.com.au/advisers/factsheets/060413/index-b.htm
http://www.londonstockexchange.com/en-gb/pricesnews/prices/structuredproducts/proddescriptions/capprotect.htm
Basically, the issuer of the product buys a zero coupon bond to provide the redemption of the capital at maturity date and uses the interest to buy an option.
If the option works well, it can give an attractive return. If the market moves in the wrong direction, the option is useless and the investor loses the option money entirely.
This product has a disadvantage. The issuer is likely to take away a large part of the investment (5% to 10%) as marketing expenses and profit. This leaves very little money to buy the option. This is why most capital protected product gives poor return over the past years.
For a capital guaranteed product, an additional fee is taken away to pay the bank that provides the capital guarantee. This reduces the return to the investor further.
Be aware about capital protected product. It is good for marketing, but is actually quite useless. Read this opinion:
http://www.wrenresearch.com.au/advisers/factsheets/060413/index-b.htm
Service to the people
Someone commented that my actions (in helping the people affected by te minibond and other structured product) reflect "service to the people".
There is another person who has sacrificed much for what he believes to be good for the people of Singapore. He is Mr. 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.
http://theonlinecitizen.com/2008/10/letter-to-pm-lee-to-honour-mr-jbj/
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:
http://www.petitiononline.com/IHOJBJ2/
There is another person who has sacrificed much for what he believes to be good for the people of Singapore. He is Mr. 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.
http://theonlinecitizen.com/2008/10/letter-to-pm-lee-to-honour-mr-jbj/
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:
http://www.petitiononline.com/IHOJBJ2/
CNBC short video on Minibond
CNBC's short video on Minibond.
http://www.cnbc.com/id/15840232?video=876393192
Chee Onn
http://onnzhai.blogspot.com
http://www.cnbc.com/id/15840232?video=876393192
Chee Onn
http://onnzhai.blogspot.com
Is it wise to cash out on the structured product now?
A few investors have asked for my advice whether they should cash out on the structured products that have not yet experienced a "credit default". The current price of these products now represent a loss of 20% or higher on the orignal investment.
I have replied that I am not able to give specific advice for any particular product. Each product has its own characteristics. To give proper advice, one needs to have more detailed data and to calculate the chance of a "credit default", which is quite difficult.
Here are some general remarks:
1. The quoted price now usually assume a "worse case" scenario. It is usually less than the current market value of the underlying assets. As there are more panicky sellers, the buyers can offer a lower price to make a profit (in relation to the actual risk). The buyer could be a savvy financial institution which is able to calculate the risk better than the retail investor.
2. The bailout plan passed in USA is likely to prevent further failures of large financial institutions, like Lehman Brothers. Perhaps, there will be no large failures of this kind in the future, even if the economy worsens.
3. If I were the retail investor, I would prefer to take the risk and wait for maturity. The chance of getting a higher return is better than cashing out now. But this is based on "gut feel" only.
I have replied that I am not able to give specific advice for any particular product. Each product has its own characteristics. To give proper advice, one needs to have more detailed data and to calculate the chance of a "credit default", which is quite difficult.
Here are some general remarks:
1. The quoted price now usually assume a "worse case" scenario. It is usually less than the current market value of the underlying assets. As there are more panicky sellers, the buyers can offer a lower price to make a profit (in relation to the actual risk). The buyer could be a savvy financial institution which is able to calculate the risk better than the retail investor.
2. The bailout plan passed in USA is likely to prevent further failures of large financial institutions, like Lehman Brothers. Perhaps, there will be no large failures of this kind in the future, even if the economy worsens.
3. If I were the retail investor, I would prefer to take the risk and wait for maturity. The chance of getting a higher return is better than cashing out now. But this is based on "gut feel" only.
A highly risky structured product
Some people (probably marketing the structured product) argued that 5% is a high return that justify a high risk. A safe return is 1% or less, which is the interest paid on fixed deposit. I disagree with this reasoning.
In my view, these investors are not risk takers. My reasons are:
1. Government bonds pay a return of about 3% per annum over a period of 5 years. It is guaranteed by the Government.
2. The 5% that is provided in the structured product is not guaranteed. It is actually paid out of the principal. Even if economic conditions are favourable, the investor may not get 100% of the principal paid on maturity. Even if the structured product is "principal protected", it is not the same as "capital protected".
3. It is irresponsible for the financial institution to earn a higher yield by risking the capital in credit default swaps. This is a gamble and is highly risky. This risk has not been properly explained to the investor. In most cases, the investor has been misled by improper advice and assurances.
There are strong grounds for the authority (MAS or attorney general) to investigate the financial institutions for wrong doings. I hope that the authority will act immediately. The purpose of the Petition to the Singapore Government is to ask for an investigation to be made to determine if any law has been broken.
In my view, these investors are not risk takers. My reasons are:
1. Government bonds pay a return of about 3% per annum over a period of 5 years. It is guaranteed by the Government.
2. The 5% that is provided in the structured product is not guaranteed. It is actually paid out of the principal. Even if economic conditions are favourable, the investor may not get 100% of the principal paid on maturity. Even if the structured product is "principal protected", it is not the same as "capital protected".
3. It is irresponsible for the financial institution to earn a higher yield by risking the capital in credit default swaps. This is a gamble and is highly risky. This risk has not been properly explained to the investor. In most cases, the investor has been misled by improper advice and assurances.
There are strong grounds for the authority (MAS or attorney general) to investigate the financial institutions for wrong doings. I hope that the authority will act immediately. The purpose of the Petition to the Singapore Government is to ask for an investigation to be made to determine if any law has been broken.
Selling of life insurance through multi-level
Someone asked if life insurnce is sold through multi-level, with high commission paid to all the levels. The focus of MLM organisation is to increase the volume of sales by paying high commission to all the levels.
The answer is "yes, in most cases". The total commission paid to all the levels can be as much as 160% of the annual premium, paid over the first three years. If you invest $500 per month in a life insurance policy, the total commission is as much as 160% X 12 X $500 = $9,600. The commission is taken out of your policy and is shared by the agent, agency supervisor and agency manager. This is money that you have to work very hard to earn, and you can lose it so easily and surely, when you buy a life insurance policy.
Most companies pay commission as high as indicated above. Some companies have only one level and pays a lower rate of commission. One company that I know of (which shall be unnamed) used to pay commission at less than half of the market rate, but I am told that this company has now increased its commission and advertising expenses considerably.
I generally advice people not to linvest in any life insurance product (i.e. whole life, endowment, education, investment-linked policy) due to the high charges. They give poor value to the consumer. It is better to invest in a low cost investment fund (i.e. equity, bond or money market fund).
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
If you have bought a high cost life insurance policy, it is usually better to continue the policy, as you have already incurred the upfront expense. But you should NEVER buy any high cost insurance policy in the future.
The answer is "yes, in most cases". The total commission paid to all the levels can be as much as 160% of the annual premium, paid over the first three years. If you invest $500 per month in a life insurance policy, the total commission is as much as 160% X 12 X $500 = $9,600. The commission is taken out of your policy and is shared by the agent, agency supervisor and agency manager. This is money that you have to work very hard to earn, and you can lose it so easily and surely, when you buy a life insurance policy.
Most companies pay commission as high as indicated above. Some companies have only one level and pays a lower rate of commission. One company that I know of (which shall be unnamed) used to pay commission at less than half of the market rate, but I am told that this company has now increased its commission and advertising expenses considerably.
I generally advice people not to linvest in any life insurance product (i.e. whole life, endowment, education, investment-linked policy) due to the high charges. They give poor value to the consumer. It is better to invest in a low cost investment fund (i.e. equity, bond or money market fund).
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
If you have bought a high cost life insurance policy, it is usually better to continue the policy, as you have already incurred the upfront expense. But you should NEVER buy any high cost insurance policy in the future.
Engaging a lawyer
A few investors have asked me to engage a lawyer to sue the financial institution collectively. They have lost trust in tbe MAS complaint process and FiDREC and believe that it will be a waste of time, leading to no compensation.
I will be contacting some lawyers. If you know of any lawyer who is willing to act, please send the name, email address and telephone number to kinlian@gmail.com.
Even if you have to engage a lawyer as a last resort, it is advisable for you to lodge your complaint according to the current arrangement, as set out in this MAS advisory:
http://www.moneysense.gov.sg/contact_us/Consumer_Portal_Contact_Us.html
I will be contacting some lawyers. If you know of any lawyer who is willing to act, please send the name, email address and telephone number to kinlian@gmail.com.
Even if you have to engage a lawyer as a last resort, it is advisable for you to lodge your complaint according to the current arrangement, as set out in this MAS advisory:
http://www.moneysense.gov.sg/contact_us/Consumer_Portal_Contact_Us.html
Elderly get hit the most!
It is very sad to see many elderly people lost all of their lifetime savings in the structured products. Many lost several hundred thousand dollars, representing many years of hard work and savings by being frugal.
These folks are risk adverse. They place their money on fixed deposit to earn interest. In recent years, the interest rate dropped to 1%, way below the inflation rate. Each year, the interest earned on their savings is insufficient to provide a decent income for them to live on.
The financial institutions employed marketeers to recommend the structured products to these folks. This is highly irresponsible. These products have high risk, including the risk of losing their entire savings on a "credit event". Regardless of how small the risk, this type of financial product is NOT suitable to elderly people. They cannot afford to lose their entire savings on a gamble that the "credit event" will not happen.
There is clearly a strong case for the Monetary Authority of Singapore to take against the financial institutions. So far, MAS does not want to step in. They expect the elderly folks to be able to deal with the financial institutions. How is this possible?
I hope that MAS realise the pain that they have caused to so many helpless, elderly folks - first by allowing these toxic products to be sold to them, and now by not stepping in to help them seek suitable redress.
Why are these products "toxic"? They can cause the entire loss of the savings. This is much worse than investing in a diversified fund of equities.
These folks are risk adverse. They place their money on fixed deposit to earn interest. In recent years, the interest rate dropped to 1%, way below the inflation rate. Each year, the interest earned on their savings is insufficient to provide a decent income for them to live on.
The financial institutions employed marketeers to recommend the structured products to these folks. This is highly irresponsible. These products have high risk, including the risk of losing their entire savings on a "credit event". Regardless of how small the risk, this type of financial product is NOT suitable to elderly people. They cannot afford to lose their entire savings on a gamble that the "credit event" will not happen.
There is clearly a strong case for the Monetary Authority of Singapore to take against the financial institutions. So far, MAS does not want to step in. They expect the elderly folks to be able to deal with the financial institutions. How is this possible?
I hope that MAS realise the pain that they have caused to so many helpless, elderly folks - first by allowing these toxic products to be sold to them, and now by not stepping in to help them seek suitable redress.
Why are these products "toxic"? They can cause the entire loss of the savings. This is much worse than investing in a diversified fund of equities.
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.
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:
http://tankinlian.com/trader/
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.
http://tankinlian.com/trader/
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:
http://www.tankinlian.com/trader
Players registered as at 4 October: 377 players
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:
http://www.tankinlian.com/trader
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.
http://theonlinecitizen.com/2008/10/letter-to-pm-lee-to-honour-mr-jbj/
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:
http://www.petitiononline.com/IHOJBJ2/
http://theonlinecitizen.com/2008/10/letter-to-pm-lee-to-honour-mr-jbj/
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:
http://www.petitiononline.com/IHOJBJ2/
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:// www.CSRSM.org.
For more information, please email nus.csrsm@gmail.com
Minibond in Hong Kong
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=VC2M107ZJWT&preview=magnifier&linkid=02c219dc-b579-454f-964c-01b06cf17d58&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
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.
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?
REPLY
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".
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?
REPLY
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?
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?
http://statutes.agc.gov.sg/non_version/cgi-bin/cgi_retrieve.pl?actno=REVED-289&doctitle=SECURITIES%20AND%20FUTURES%20ACT&date=latest&method=part
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;
http://statutes.agc.gov.sg/non_version/cgi-bin/cgi_retrieve.pl?actno=REVED-289&doctitle=SECURITIES%20AND%20FUTURES%20ACT&date=latest&method=part
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.
PETITION TO SINGAPORE GOVERNMENT
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.
PETITION TO SINGAPORE GOVERNMENT
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.
XL
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.
XL
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
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=2J6I999CTEE4&preview=magnifier&linkid=fc71a779-d21c-4026-b0c6-af6bdeceec43&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
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.
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"
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."
http://www.todayonline.com/articles/279135.asp
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.
TKH
REPLY
Financial advisers or relationship managers who face similar pressure to achieve sales results can send an e-mail to me at kinlian@gmail.com
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."
http://www.todayonline.com/articles/279135.asp
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.
TKH
REPLY
Financial advisers or relationship managers who face similar pressure to achieve sales results can send an e-mail to me at kinlian@gmail.com
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 kinlian@gmail.com 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:
http://www.parliament.gov.sg/cgi-bin/new-mpsearch.pl
Call for volunteers: If you are willing to call other investors to meet the MP, please send an email to me at kinlian@gmail.com 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:
http://www.parliament.gov.sg/cgi-bin/new-mpsearch.pl
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.
EL
REPLY
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, www.fidrec.com.sg
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.
EL
REPLY
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, www.fidrec.com.sg
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
REPLY
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.
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
REPLY
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.
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.
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:
http://thinkhappiness.blogspot.com/2008/10/test-your-mp.html
http://thinkhappiness.blogspot.com/2008/10/test-your-mp.html
Avoid going to court
http://www.thestandard.com.hk/news_detail.asp?pp_cat=11&art_id=72415&sid=20823932&con_type=1&d_str=20081002
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
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
SHNeo
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.
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
SHNeo
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.
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.
MN
REPLY
You should help your mother in lodge to lodge a complaint with the financial institution that sold the product to her.
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.
MN
REPLY
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.
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!!!
http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/379786/1/.html
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.
I just want to share my thoughts. All the best to you in fighting a good cause for us!!!
http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/379786/1/.html
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.
To MAS
Eradicate selling for financial products. Stop bad products to be sold in the market.
The Concerned Singaporean
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.
To MAS
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!
REPLY
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.
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!
REPLY
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!
Julie
REPLY
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.
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!
Julie
REPLY
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.
http://www.mas.gov.sg/news_room/press_releases/2008/MAS_Approach_in_Dealing_with_Recent_Developments_Concerning_the_Sale_of_Structured_Products.html
http://www.mas.gov.sg/news_room/press_releases/2008/MAS_and_Financial_Institutions_to_Ensure_Investor_Complaints_are_Dealt_With_Quickly_and_Fairly.html
Regards
Julie
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.
http://www.mas.gov.sg/news_room/press_releases/2008/MAS_Approach_in_Dealing_with_Recent_Developments_Concerning_the_Sale_of_Structured_Products.html
http://www.mas.gov.sg/news_room/press_releases/2008/MAS_and_Financial_Institutions_to_Ensure_Investor_Complaints_are_Dealt_With_Quickly_and_Fairly.html
Regards
Julie
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 .
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
http://www.lloyds.com/dj/DowJonesArticle.aspx?id=406944
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
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.
MW
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.
MW
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.
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 : http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10535307
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.
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.
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