Saturday, October 11, 2008

Distributor: UOB Kay Hian

Dear Kin Lian,

I wish I could shake your hand longer to express my gratitude in championing this movement. I applaud you for the leadership, courage and energy in all the things that you have done for us. Thank you very very much.

As you can see from above that we have formed a small group for the victims who bought the Minibond from UOB Kay Hian. Would you be able to put on your blog/web site my email addreess for those who wish to join this group? Any comment or advice will be greatly appreciated.

Thank you and hope you can continue to keep up the energy and determination for the worthwhile cause.

Best regards
T H Tan

Social responsibility to Singaporeans

Dear All ,

We, the unfortunate lot of Spore's DBS High Note investors( mostly people in their 50's to 70's ) who have gathered this evening at the Hong Lim Green to seek redress from their beloved National Bank ( DBS ) which they have given so much support with their financial support over the last 30-40 yrs wish to thank the repoters for lending us their ears.

Few interesting points I picked up :
- Retired clerk who entrusted 125K of her piggy bank to HN5 said it was heart-rending to learn a new word : Credit event which threatens to wipe out all her hard earned life savings which she was made to believe was a safe investment BUT now told all the risk exposures of 100 companies ! - unbelievable lies.
She also uttered that DBS as a National Bank ought to shoulder its SOCIAL RESPONSIBILITY towards Sporeans, especially to its "treasured customers "

-This is ridiculous, Singapore branding itself as a regional financial hub in good times and yet doing the least in bad times. Even Hong Kong government is doing something now after Taiwan, what is our Government doing for us.

What a let down!!


Speaker's Corner - 11 Oct 2008

An estimated 1,000 people turned up at Speaker's Corner. I spoke two times at 5 pm and 6 pm. Many of the investors met other investors who invested in the same product. Most investors told me that they are risk adverse and were misled into investing in the structured products. They could not imagine that the products could be so risky. Some of the investors cried.

I advised the investors to get a lawyer to prepare an affidavit to support their complaint to the financial institution. They can find their lawyer and use this template:

They can also approach the lawyer mentioned in my blog and get the affidavit signed for $120.

File an affidavit to support your claim

Dear Mr. Tan,
MAS statement says that only 600 people filed their complaint. Why so few? There are more than 8,000 people affected. Can you get more people to file their complaint? In Hongkong, more than 6,000 people have filed their complaint already.

The Hong Kong Monetary Authority set up a hotline and service center for investors to file their complaint. This is more convenient to the investors. The service center takes down the complaint and make investigation later. This approach is more effective.

The system adopted in Singapore is for the investor to file a complaint with the financial institution that sold the product. Few people file the complaint because they were not clear about how it can be done. Several people who filed the complaint reported that they were badly treated. They were challenged by the officer receiving the complaint. The process is badly handled. Some of their reports are published in this blog.

I suggest that the investors can take the following steps:

1. See a lawyer to write an affidavit. I have arranged with one lawyer willing to do this work for a fee of $120. You can approach another lawyer if you wish, using the template given here:

2. Use the affidavit to file your complaint.

3. If the matter is not resolved within three weeks, you can use the affidavit to lodge your complaint with FiDREC (

4. This affidavit can be used if you decide to take collective legal action at a future date.

Rebuilding the Global Financial System

It is time for people to think about how to rebuild the global financial system. Do not rely on the old experts, who build the old system based on financial engineering, greed, free market and dishonesty. They have led to the collapse of the system and loss of life savings of many ordinary people.

When Lehman Brother collapsed, it had debt of 30 times of equity. The debt is funded largely by short term credit, which has to be rolled over every 30 or 90 days. Many hedge funds have similar funding structure. When the credit could not be refinanced, they had to sell shares and bonds at any price, leading to the collapse of the markets.

The size of the unrglated credit default swaps (CDS) is USD 50 trillion, more than twice of the global stockmarkets!

The new financial system should, in my view, be build on the following pillars:

1. Stronger regulation
2. Regulated companies, e.g. financial institutions and listed companies, should have debt of not more than 1 time of equity, and it should be funded by bonds of at least 5 year duration.
3. Deriviatives should be regulated and traded on exchanges
4. Complex financial products, build by financial engineers, should be banned

The experts will argue that the "risk based capital" approach can help to prevent the collapse. I agree with this approach, but it has to be considerably simplifed.

We will have a simpler financial world, but a safer and fairer world. There will be less multi-million dollar jobs for financial experts, who milk the old, now collapsed, financial system.

High cost of life insurance at older ages

Dear Mr. Tan
I attended a briefing session by a Financial Advisory company that talks about some of the pitfalls in investment linked insurance (ILI)

One of it that struck me was the net cash value in the policy will peak at some point and start to drop drastically. There will be a point where the net value is 0.

The reason given was quite logical. Any ILI premium will be split into 2 parts, one for insurance, another for investment.

At the start, when the policyholder is young, premium for insurance is relatively low, and most of the money will be channeled to investment of funds. But as he ages, the insurance premium will increase, and there will be a point where the money accumulated under investement needs to be withdrawn to subsidise this part. The time will come when the money will be depleted.

Frankly, I don't see a way out of this. Premium for insurance for elderly people will skyrocket. This is inevitable. The outcome seems certain. Whatver accumulated in the earlier years will be used to pay for these premium, unless investment is so successful that the returns are so high year after year (outperform the premium rise rate). And I do think all insurance have the same practice. Otherwise, they won't be able to cope with the cost esp when the national population ages.

Does that mean that whe one ages, perhaps it is better for one to take the chance and close the policy and take back all the money generated, and be without insurance?

What would be your advice?


My advice is shown here:

Buy a decreasing term assurance for 30 years and invest your savings in a low cost investment fund.

Class action against Lehman Brothers in USA

Dear Mr Tan,

In US, there is a class action lawsuit against banks that misled retail investor to purchase Lehman Brothers Preferred Stock, Series J.

I think all affected investors must demonstrate the perservence and will power to want to go to this stage if necessary. Those FI / banks who misled / misrepresent must be taken to task. This is also for the benefit of the next generation of Singaporeans. If not, the young ones will come to the conclusion that it is ok to misled / misrepresent as long as there is legal loophole to take cover in! Also, to others not affected in this saga, do not be too happy or count yourself lucky that you are not invoved. You NEVER know when these FI / banks will outsmart you and you fall victim to it. Just look how they engineered the entire package (names) / coupled with young RM with quotas / approval from MAS / Legal paper and etc. We all become wiser after this eposide but they will also evolve even more...especially when the regulator say " power..."

"The class action lawsuit alleges that the statements made in the Offering Circular by the underwriting syndication were materially false and misleading. Many investors were advised by their financial advisors that the Lehman Brothers Preferred Stock, Series J was a suitable investment for risk adverse investors. Brokerage firms are obligated to give and investors are entitled to rely upon brokerage firms for, competent, suitable investment advice in accordance with the Financial Industry Regulatory Authority (FINRA) Rules and Regulations. Sales practice violations by financial advisors, such as the recommendation of unsuitable investments and concentration in a particular security or sector, are both violations which may qualify an investor for an individual arbitration claim with FINRA."

Is MAS at fault?

Dear Mr. Tan,
You are a bold person. Please tell me frankly. Is MAS at fault for approving the sale of the Minibonds? Is this why MAS is reluctant to take action now? Are they trying to hide their mistake?

I think that you should send this question to your Member of Parliament and ask your MP to bring this question up in Parliament.

The approach taken by MAS in the past was to require the risks to be stated in the prospectus and the advertisement. I was able to see the fine print in the advertisement that said, "In the event of a credit default, you could lose a substantial part or all of your investment". It is difficult for anyone, even an expert, to know what is the extent of this risk. This is why I had recommended against making such an investment.

Sadly, many retail investors relied on the advice of their financial institution representative to explain what this statement meant. The representative did not give them the right explanation and misled the investor into believing that the risk is very remote (when the real situation is quite different).

A better approach, which can only be done in the future, is to ban these types of risky products from being sold to the retail investors. It is difficult for a retail investor to know if a product is risky. This has to be the responsibility of the regulator in approving the product for sale. If the regulator is not able to make an assessment of the risk, how can they expect the retail investor to make this assessment?

The Hong Kong Monetary Authority also took a similar approach in the past and allowed the sale of the structured products. This is why so many investors in Hong Kong have been misled into investing in these products. But the HKMA is now quite pro-active in helping the investors to seek redress. They are now considering a ban on the sale of such products to retail investors in the future.

Unhappy with bank's complaint handling process (3)

Comment posted in my blog

The "investigation" consisted of the person telling me how I should have been smarter as a consumer. It was a lesson on how not to be stupid. No answers were documented or statements written down by them. Not even notes were taken I was also told that I would probably get nothing back. "Move on" was the message.

The tone was patronising and the body language hostile and bored in turns. It was a charade. It was tokenism at best. At worst it was arrogance and contempt for the customer. So much for care for the common investor and investigation of mis-selling! Shame on them!


Hong Kong - selling of structured products

South China Morning Post (Hong Kong) - October 10, 2008

Author: Joyce Man and Peter So

The Hong Kong Monetary Authority is considering a ban on banks selling complex investment products such as minibonds. It is one of the possible measures to be taken to protect small investors from financial turmoil.

The authority may also raise the minimum investment in such products to a level that would deter unsophisticated investors.

The possible steps were revealed yesterday by its deputy chief executive, Choi Yiu-kwan, amid continuing calls for relief for small investors facing heavy losses on minibonds and other complex derivatives issued or guaranteed by bankrupt US bank Lehman Brothers.

Meanwhile DBS Bank (Hong Kong) became the first local bank to say it would consider full compensation for losses on one such investment product - but only if its investigations showed buyers had been misled by the bank's sales staff.

At the same time, banking sources said banks were inclined to accept a government proposal that they buy back such products at current market value but that some questions still needed answering, including whether a buy-back would be legal.

The Monetary Authority will submit recommendations for changes in policies covering the sale of complex investment products to Financial Secretary John Tsang Tsun-wah within three months.

"Whether banks should be an investment adviser on such products could be one of the issues," Mr Choi said. The authority could also consider raising the minimum investment in them to US$1 million, so that they were out of the reach of small investors who could not handle the risk.

Banks have been selling minibonds in lots of as little as HK$100,000.

The authority has received 7,730 complaints of mis-selling of minibonds and other products issued or guaranteed by Lehman Brothers.

It has opened investigations into 41 cases and is seeking more information before deciding whether to investigate a further 189. The cases under investigation involve nine banks.

Investors complain they were misled into believing the minibonds - sold as proxy investments in well-known companies - were low-risk and unaware of the Lehman Brothers link. In fact they are high-risk, credit-linked derivatives.

Mr Choi said the authority had contracted 45 people to join more than 70 full-time staff already working on the complaints.

He noted that the authority had told banks in 2006 that they must take special care when dealing with vulnerable customers such as the elderly, illiterate or visually impaired and assess their tolerance of risk.

More than 70 worried purchasers of one such complex investment - called structured notes - met DBS Bank executives yesterday to seek a full refund for their losses.

The notes, issued by Constellation Structured Retail Notes, included some linked to Lehman Brothers. The bank will appoint an independent accounting firm to assess the products' remaining value, allowing customers to redeem them early.

"If we find any case of misleading sales, we will not rule out repaying the client's full investment," Linda Wong, regional head of consumer banking, said. Each case would be considered separately. The bank said it would not buy back structured notes unconditionally.

Billy Mak Sui-choi, associate professor in the department of finance and decision science at Hong Kong Baptist University, said structured products were securities linked to a broad class of financial instruments and their value could move with changes in interest rates and the prices of stocks and other assets.

Lawmakers who accompanied the DBS customers to yesterday's meeting questioned the independence and transparency of its in-house investigation of sales tactics.

Audrey Eu Yuet-mee, leader of the Civic Party, said the investigation should be conducted by a third party.

MAS publishes timeline for Minibond resolution process

10 October 2008

MAS publishes timeline for Minibond resolution process
The Monetary Authority of Singapore (MAS) has published a timeline for the resolution process for investors who bought Lehman Minibonds. The trustee (HSBC Institutional Trust Services Singapore), which is in charge of overseeing the Minibond products, has informed the MAS that it has not received any firm offers from potential new swap counterparties to replace the now bankrupt Lehman Brothers in the Minibond progamme. The MAS has said that the trustee does not expect any firm offers and will commence the selling of the underlying securities in two weeks.

If in the event of a swap counterparty being found the replacement swap proposal would require at least 75% of the votes cast by the noteholders at an extraordinary general meeting. However if a firm agreement is not reached within two weeks the trustee will commence the enforcement process for Series 5 and 6 of the Minibonds, which will ultimately entail selling the underlying securities in an orderly fashion and using the proceeds to pay the noteholders after deducting any other liabilities which are payable.

The total issue size of the Minibond programme was SG$508 million, of which S$375 million was sold to about 8,000 retail investors through nine distributors. Meanwhile SG$23 million of the total SG$28 million of Merrill Lynch Jubilee Series 3, which referenced Lehman Brothers, were sold to about 350 investors through six stockbroking firms. Over 80% of the Minibond programme and Merrill Lynch Jubilee Series 3 noteholders invested up to SG$50,000, with 28% having bought SG$10,000 or less. In the case of DBS High Notes 5, which also referenced Lehman Brothers, over 1,400 investors bought SG$103 million worth of notes. More than half of them invested SG$50,000 or less.

As of 10 October 2008, the ten distributors of the Minibond programme, Merrill Lynch Jubilee Series 3, and the DBS High Notes 5 have received 680 formal complaints from investors.

Friday, October 10, 2008

Climate of fear and intimidation

Someone sent a warning to me that I may be a risk of being sued for defamation - because I organise a petition to ask the Government, especially the Commercial Affairs Department, to conduct an investigation into the credit linked securities.

He reasoned that this petition implies that there were wrong doing by the parties involved in the credit linked securities, and they may consider that I have defamed them.

I rejected this reasoning. But a few other people seem to think that this is a possibility and advised me to "be careful".

This reflects a very sad state of affairs in Singapore. There is a climate of fear, even of speaking out against injustice and wrong doing. It is so easy for big business and powerful people to intimidate the weak with the threat of lawsuit.

Risky to trade on leverage

Dear Mr. Tan,

The various major newspaper are now flooded with many advertisments about "Good Money, sure profits" for various financial products such as Forex, option and futures etc.

These products are highly leveraged and they is no way that it is "Sure profit and easy money" as advertised, which would be disaster for innocent layman trying to beat the market. For one, these markets are played by the most experience trader/banker with extremely deep pocket and definitely not simple as advertised.

From my wild guess, these advertisement would try to get innocent laymen to come to their course to collect course fees. Laymen without good knowlege would only end up paying for the course fee plus the loss for sure.

I hope you could also bring these issues to the hugh readers of yr blog to be wary before getting into these trading.

MOST IMPORTANTLY, these advertisment must state warning "Leverage products are highly risky and could result in hugh financial loss" which seem that the people in ST does not require the advertiser to do so.

Feedback on complaint handling process

MAS advises investors who feel that they have been mis-informed about the structured product to lodge a complaint with the financial institution that sold the product.

If you wish to give your feedback on your experience in lodging the complaint, please send an email to with the following information:

1. Your name, age, occupation, telephone, e-mail
2. Date of complaint, financial institution, name of offices who attended to you
3. Did the officer explain the process? What did they say?
4. Did they listen to you and record the details of your complaints fairly? Did they help you to record the complaint?
5. Were they defensive? Did you challenge you about the facts of your complaints?
6. Are you satisfied with the process? If not, why?
7. Do you get the impression that your complaint will be attended to fairly?

Difficulty with travel insurance claim

Dear Mr Tan,
Recently I was holidaying in New York and had travelled to Niagra Falls by road where my hand bag together with my travel documents were stolen. Hence, without any travel documents I was refused entry into New York. I had to fly to Vancouver to get my temporary passport made at the Singapore Consulate and flew home from there. As a result, my luggage was left behind in New York.

I had a travel insurance with a leading insurance Company. I sought advice from the insurance Company's claim officer regarding my luggage that was still in New York. I was told to do what is necessary to bring back my luggage first and to follow up with the details later. I arranged for Fedex to send my luggage back and then submitted a claim for the freight cost. Three weeks have gone past and have not heard from the insurance Company. I gave them a call and was told that I cannot make any claim for the cost of sending back my luggage; the reason given was that my travel insurance does not cover freight cost.

Please advise if I am entitled to make this claim and to whom can I turn to for assistance if I were to pursue this matter.


I think that you are entitled to claim for the freight cost as you have done it at the request of the insurance company in connection with your claim. It is bad that they now reject your claim for the freight cost. If they do not pay your claim, you can lodge a complaint with FiDREC (

I find the claim handling of this insurance company to be deplorable.

If the claim is not paid, you can send a formal complaint to the CEO of the insurance company. If it is still rejected, you can file a complaint with FiDREC (

Lehman Bond Probe Widens

Wall Street Journal
Friday October 10, 2008

Lehman Bond Probe Widens


HONG KONG -- The Hong Kong Monetary Authority said Thursday it is investigating nine banks over sales of Lehman Brothers Holdings Inc. "minibonds" that sparked protests from investors who said they were duped into thinking their money was safe.

The HKMA has received 7,730 complaints about the minibond sales and has opened 41 investigations, HKMA Deputy Chief Executive Y.K. Choi told a news conference.

Mr. Choi said the regulator supports a proposal for banks to buy back the products at market value, which would be less than what they were sold for, and he said some banks have backed that idea as well.

Mr. Choi didn't identify the banks being investigated or provide figures for money lost by investors who invested in the structured products known as minibonds, which allegedly were marketed as secure bonds.

Mr. Choi said the HKMA might consider whether to stop retail banks from selling structured products like the Lehman minibonds and leave such dealings to professional investment consultants.

Investors have staged protests, with some complaining they lost millions of Hong Kong dollars in the minibonds tied to Lehman Brothers, the former Wall Street powerhouse that filed for bankruptcy protection last month.

One protest was held Wednesday outside the headquarters building of Bank of China Ltd.'s Hong Kong unit, BOC Hong Kong (Holdings) Ltd., with a group of investors going inside at one point to meet with bank officials.

A BOC Hong Kong spokeswoman, Carol Tam, said Thursday the bank had sold Lehman Brothers structured products. Ms. Tam said she wasn't aware of the bank being investigated but that it would cooperate with authorities if asked.

Mr. Choi said if irregularities are uncovered by the investigations , the HKMA will refer the matter to the Securities and Futures Commission.

ST Index approaching 1900

It appears that the ST Index is now approaching 1900. Read this blog:
I hope that it will not go below this level.

Petition has been lodged

I have people asking me to add their names to the Petition that has been lodged. This is not necessary.

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.

You should lodge their complaint to the CEO of the financial institution that distributed the structured product. Read this webpage:

How the market really works

Hong kong: Curb on banks' investment sales aired

HKMA weighs halt to minibond business;
DBS bank offers payouts if buyers were misled

The Hong Kong Monetary Authority is considering a ban on banks selling complex investment products such as minibonds. It is one of the possible measures to be taken to protect small investors from financial turmoil....

Complaint to MAS against a financial institition

Read this webpage:

Here is the online form

If you wish to write:

Monetary Authority of Singapore
Consumer Issues Division
Market and Business Conduct Department
10 Shenton WayMAS Building
Singapore 079117
Fax : (65) 6225-9766

SCMP - DBS offers full compensationto mini-bond holders

SCMP Report by: Michael Logan
DBS Bank in Hong Kong has said it will offer full compensation to customers who bought mini-bonds issued by Lehman Brothers. Customers only need to prove to DBS that DBS staff misled them during the sales process

Thursday, October 09, 2008

Fiduciary duty

I believe that the issuer or trustee of a structured product has a fiduciary duty towards the investors. A break of fiduciary duty is a criminal offence. I searched for an explanation of fiduciary duty and found the following:

Source: Wikipedia
The fiduciary duty is a legal relationship of confidence or trust between two or more parties, most commonly a fiduciary or trustee and a principal or beneficiary. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relation one person justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests.

“ A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.”

A fiduciary duty is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents. The word itself comes originally from the Latin fides, meaning faith, and fiducia, trust.

In English common law the fiduciary relation is arguably the most important concept within the portion of the legal system known as equity. In the United Kingdom, the Judicature Acts merged the courts of Equity (historically based in England's Court of Chancery) with the courts of common law, and as a result the concept of fiduciary duty also became usable in common law courts.

When a fiduciary duty is imposed, equity requires a stricter standard of behavior than the comparable tortious duty of care at common law. It is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where his fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from his fiduciary position without express knowledge and consent. A fiduciary cannot have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd" and that "the distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty."


Dear Mr. Tan,

Both my wife and I bought Minibond series 1, 5 & 6 from Maybank. We are near retiring age and now very 'gek sim' and dare not hope to get even portion out of our investment. The distributors (banks) must be responsible since they did not scrutinize the product packaging before selling to innocent laymen like us.

This akin to selling Slim 10 slimming pill. And as you already knew, the distributor was charged in court and made to compensate an innocent victim. Therefore as I have said, the distributors should be responsible for mis-representation of their products and to pull wool over our eyes.

It was not greed as some people have said. We are just trying to make our money work harder to increase wealth for our retirement and to beat the inflationary rate of 7%. The interest paid by the Minibond was 4 to 5% and these were unable to cover the inflation rate. We have to pursue for the return of our investment albeit a lesser amount.

Our govt. is seem to be standing with folded arms behind the scene and not being proactive to help the affected citizen and which is not the case in HK. The HK govt is taking a hard stand on the banks for the return of her citizen investment. What is our PAP govt stand on this nothing? So much for the votes on PAP!!!!
My vote goes to the opposition, come next election.


Global Financial Crisis - subprime loans

Dear Mr Tan,

Thank you for your effort in seeking justifications for innocent investors.

While investigations do help, much could have been done to prevent this crisis from happening which started in the United States last year. At the onset, many financial institutions had been trying to cover up their losses for their exposure in the sub-prime credits and loans. The Japanese used to cover up their losses by sweeping them under the carpet. However, the Westerners cover up (or pass on) their losses (and risks) by "auditing" their books, and/or repackaged their risks and exposures into "High Yield Notes" or "Funds" to be sold to retail investors globally via local financial institutions.

Incidentally, the very people who packaged such products, so-called "investment bankers" or "funds managers" knew the risks of such products are extremely high, and also that defaults in payment by those very Sub-Prime borrowers were also high, are the same group of people who are not only "highly" educated - academically, but also people who think they are smarter than the man-in-the-street.

Long before this financial crisis erupted, as a financial trader, I had been advising people from taking risks which they are unfamiliar with. Relationship managers in banks - just how much do they know about those financial products which they had been selling to their customers? Even portfolio managers and fund managers do not know precisely how such funds are packaged! While insurance may be quite an outright product, investment-linked products and other financial investment products can never be thoroughly understood by the average fund manager or relationship manager, let alone the average investor. Such products are normally sold by relationship managers basing on their on quota(s) (not forgetting their monetary rewards) and fine tuned (in sales presentation) to suit the need of their customers.

Hence, I feel that MAS should also be fully responsible for its failure to ensure that these investment products were thoroughly "safe" enough to be marketed by financial institutions here, let alone sold by inexperience relationship managers. In addition, bankers should also be held accountable.

This is not going to be an easy crisis, but it will be one that is going to force all central bankers to clear up the whole financial system, globally. And it is going to take at least the next 5 to 10 years for it to be over. Lowering interest rates is not going to help at all since most of the financial institutions had been trying to cover up their exposures since the eruption of the Sub-Prime Crisis last August.


Get information from my blog

Dear Mr Tan
I have bought ML Jubilee Series 8 Note on Jun 2008. I heard that Jubilee Series 3 Note is almost dropped to zero value. Is it true? Could you please give me an advice how to handle Jubilee Series 8 Note.

I suggest that you ask the trustee or the distributor bank about the value of your investment.

If you feel that you have been misled into investing in this structured product, you should lodge a complaint with the CEO of the distributor that sold the product to you. If this is not resolved, you have to lodge a complaint with FiDREC.

Please follow the guidelines in my blog. I am not able to handle individual request, as it will take a lot of my time, and I cannot afford to spend this time.

Book on financial planning

I hope to be able to find the time to start on my book, after the financial crisis is over:

Unhappy with bank's complaint handling process (2)

Dear Mr Tan,

I also attended a fact-finding session at the bank, and there were 2 bank officers present.

I was quite surprised by the way it was conducted. It felt as if the same questions were repeated over again but in different words, many times.

And each time I raised a query, the officer reacted by pointing to my signature on the back of the form, in support of the bank's position and the RM.

I also asked for a copy of the thick risk profile form with my signature on it but they refused to give me a copy for me to take home and run through. It looked totally unfamiliar to me and I wanted to see what the RM could have written about me then as I was with the RM for less than 30mins one year ago.

All the forms they had in their file were filled in by the RM, comments, ticks...etc (not my hand writing) On the main application form, there was however a slight difference on their copy compared to the one I had.

I understand from the bank officers that the independent person appointed by MAS to oversee the investigation has the authority to select case files to take a look but it does not mean that all cases will be looked into by this independent person.

MAS should assign independent assistants (not employed by the bank) to help review all cases to ensure each case is given due attention and justice, afterall our Government should try its best to help us citizens as much as possible.

You have the right to ask for a copy of the document that you were supposed to have signed. You can challenge statements that are written by the representative, if they do not reflect the true situation, e.g. the representative write on your behalf without checking with you. Or if the representative ask you to sign first, and fill in the details later.

Bank agree to buy back risky investments

Mr. Tan,

I came across this article and I think it will be helpful. I hope that this will convince MAS to do something to help the affected retail investor.

Bank of America Corp. has agreed to buy back up to $4.7 billion in auction-rate securities to settle charges it misled thousands of customers about the risky investments, federal and state regulators said Wednesday.

No personal investment in credit linked securities

I do not have any personal investments in the credit linked securities, such as the mini-bonds, high notes, pinnacle notes and jubilee notes.

I have warned investors for the past year that these products have risks that are not easily measurable, and that the higher yield does not justify the uncertain risk.

My wife was sold the pinnacle notes. Like many other investors, she was told that it offer a higher interest rate and the risk was small. I told her to go back to the finance company and get her money back. She was able to get the full refund.

Previously, my wife and daughter invested in capital guaranteed or capital protected products. They waited patiently for the product to mature after 5 years and received a miserable total return of only 2%. These products were structured to make profit for the financial institutions and were unfair to retail investors.

I am very sad that the financial institutions were allowed to offer these "unfair" structured products to retail investors during the past ten years. They make big profits for the financial institutions but leave the retail investors with a miserable return, or as in the current case, with the loss of most of their hard earned savings.

Nobody looked after the interest of the retail investors - not the regulator nor the consumer association.

Media interviews on Petition

The following media interviewed me regarding the Petition that was handled to MAS:

> Channel News Asia (Channel 8)
> Mediacorp Radio
> The Online Citizen (

I have been quite frank in replying to the detailed questions from the media. Please watch TV and listen to the radio about the inteviews.

Call for investors to take the next step

Dear Mr Tan KL,

Here are the comments posted by Ming Thu Oct 09, 2008 7:25 am on Channel News Asia -forum- Market Talk

'Finally, the CAD is involved. The MAS only has powers over civil matters. Crimes such as financial fraud would have to be referred to the CAD as they are the ones who are empowered to act on the criminal provisions of the relevant statutes.

Tan Kin Lian has been quite selfless and I would urge any stragglers left to contact him about joining up and forming a group, but petitions are probably insufficient if you wish to motivate an investigation into the matter.

Evidence is needed to demonstrate, even if only on a prima facie level, that the financial institutions have misrepresented their products. To do so, the oral testimony of the various affected parties must be collected. If a large number of people say that DBS for instance represented their offerings as essentially risk free or had the equivalence to capital protected products, then that becomes evidence which cannot simply be brushed aside.

To make the case even stronger, the testimony of former relationship managers could be added. DBS is known to have a high staff turnover and it may be possible to find former employees who are willing to step out and speak the truth. If the protocol had been to say whatever was necessary to close the sale, then the so called ‘ironclad’ contracts can be called into question.

Do not just sit back and hope that someone will help you. More than ever, you need to be active citizens who are willing to stand up for your rights, and in protecting your interests, fulfill your duty as citizens of our republic. Everyone needs to take the initiative, find the courage and be a leader.'

Unhappy with bank's complaint handling process

Dear Mr Tan

In my experience so far the "investigation" by the bank into mis-selling is unsatisfactory. In fact what happened was that as soon as I raised a point, there was a rebuttal from the bank's view by the Investor Care person.

From MAS's assurances the FI's "independent" arm is meant to be fair and impartial.
What I encountered was defensive and biased. In my case I had a written statement to give them. Should we not also get in writing how they will proceed and what the timeline is?

Are they wearing us down? Is this a tactic to ensure attrition? In fact it makes me even more determined to fight on! We have all lost enormous amounts of money and don't need this badgering. If they wanted to ask us questions they should do so in a less confrontational manner. Their approach is also biased because the person who interviewed me defended the RM!

I suggest that you complain to the person who was appointed by MAS to oversea the bank's complaint handling process.

Financial institution fined for mis-selling

Dear Mr Tan KL,

Regulator fines A&L record £7m for mis-selling loan insurance

Miles Brignall
The Guardian, Wednesday October 8 2008

Alliance & Leicester has been hit with a record £7m fine by the financial regulator after it was caught training staff to pressure loan customers to take out expensive payment protection insurance (PPI).

The Financial Services Authority said yesterday that it had found evidence that A&L's call-centre staff had failed to give customers details of the cost of PPI, and that the bank had tried to sell the product "without properly considering its customers' needs".

Between January 2005 and December 2007, A&L sold about 210,000 PPI policies to its personal loan customers, with the average policy costing £1,265 - turning over an extra £265m.

The City watchdog said yesterday the bank had failed to make it clear that the cover was optional, and had even trained staff to put pressure on personal loans customers when they asked why PPI was included in quotes for repayments.

PPI insurance, which is sold to those taking out credit cards, loans and mortgages, is designed to cover repayments if the policyholder is made redundant or is unable to work.

However, it has been criticised for being expensive and unsuitable for many of those who are sold policies as it rarely pays out in the event of a claim. It is also hugely profitable for the banks.

Margaret Cole, director of enforcement at the FSA, said: "The failings at A&L are the most serious we have found ... Customers should be able to rely on impartial advice based on their individual needs and demands.

"It is particularly unacceptable for a firm to train its advisers to put pressure on customers when recommending insurance cover which they have not asked for and may not need."

The FSA said the company qualified for a 30% reduction in the penalty by settling at an early stage of the FSA's investigation. Were it not for this discount, the FSA said the penalty would have been £10m.

However, Sara-Ann Burgess, who as director at PPI specialist Burgesses has campaigned against poor performing policies, said A&L would still end up making a significant profit out of the non-compliant business. "The regulator has said A&L sold approximately 211,000 policies - that equates to £265m in premiums. The £7m fine may be a record, but this sorry affair shows just how much some of the high-street banks have made out of PPI."

David Bennett, A&L's chief executive, said: "I apologise sincerely for our shortcomings. We will be writing to every customer concerned and will be working with independent accountants and the FSA to ensure we put right any disadvantage."

Oversight of the complaint handling process

Dear Mr. Tan,
Can you ask MAS the following?

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 ? If so defeats their independence and credibility.

Wednesday, October 08, 2008

Misleading advertisements

Dear Mr Tan

I bought Minibond Series 5 & 6 through one of the local Financial Institutions with the understanding (from the sales brochure and newspaper advertisements) that the bond is issued by six leading banks namely, DBS, Citibank, Merrill lynch. Goldman Sachs, HSBC, and Standard Chartered bank. The bond pays 5.1% interest per year for a 5-year tenure.

I understand that the principal amount is not guaranteed but the risk is very low, as the six leading banks are very strong and sound. And if one of the banks go bankrupt, the maximum loss will only 1/6 (16.7%) of the principal amount. I will suffer a substantial loss of my principal amount only when all the six leading banks go bankrupt.

Comparing with the OCBC 4.2% and 4.5% preference shares available from the stock market, which I can sell the shares anytime if I need cash, the interest offered by the bond is not very attractive because I have to part the money for 5 years for 5.1% interest. But because it is a very low risk bond issued by the six leading banks, I decided to buy the bond.

Recently, I discovered from the newspaper that the bond which I bought is actually not issued by the six leading banks and will suffer a substantial loss due to Lehman brothers go bankrupt. I further discovered that it is not a bond and instead, it is a very complex product which even the sales people from the Financial institutions are unable to explain clearly. Until today I still do not kwon who is the recipient of the ‘bond’ and how is the Lehman brothers related to the bond ?

The key to this issue is that, how can the information provided from the sales brochures and newspaper advertisements, distributed by the local Financial institutions, are so misleading that it misled hundreds and thousands of ordinary people into believing that the product they bought is a bond and that it is issued by the six leading banks ? Will the authorities go after those parties who are responsible for the misleading sales brochures and newspaper advertisements ?

I agree with your views. The Petition signed by 983 investors ask the authorities to investigate any wrong doing, including misleading advertisements.

Hong Kong: Minibond investors demand full refund

Wednesday, October 08, 2008

Lehman Brothers minibond holders are demanding a full refund of their money following the government's proposal that banks buy back the failed US investment bank's minibonds from investors.

The Hong Kong government on Monday proposed that 19 distributor banks and brokerage firms buy back minibonds from clients at market value to shorten the painful process of individuals recovering their money and limit reputational damage to banks.

About 50 investors attended a Democratic Party meeting yesterday to discuss the proposal.

Some minibond holders said they would not be happy if they can only get back 60 to 70 percent of their investment and insisted on a 100 percent refund. They also blamed the government for lacking supervision of investment products.

The investors said they will continue to pursue legal action on the marketing practices of the banks promoting Lehman minibonds.

Undersecretary of Financial Services and the Treasury Bureau Julia Leung Fung-yee reiterated yesterday that banks "are not exempted from the investigation on marketing practices even if they are willing to buy back."

The government expects distributors to look at the proposal and assess its potential risks before deciding within a week on whether to accept.

Investors will separately meet Bank of China (Hong Kong) (2388) representatives and lawmakers at the Legislative Council today.

Restrict the issue of credit cards

Hello Mr Tan,
Someone said that credit card facilities to consumers need to be tightened up, to prevent situations where a person gets multiple credit lines from many banks. Do you have any ideas on how this can be done?



It is important to educate consumers to avoid borrowing on credit cards. The interest charge on late payments could be as high as 2% per month. This works out to 24% a high. It is extremely high.

Many consumers borrow excessively on credit cards and incur large debts with high interest costs. They are not able to cope with the debts, and have to declare bankrupcy.The number of these cases have been increasing in alarming proportions - according to insiders who are involved in collection of credit card debts.

I suggest that MAS should require all banks to provide data into a central database managed by MAS on the credit cards taken by individual persons. Each person should be limited to a maximum of two credit cards. The total credit limit on these cards should be limited to two months of salary.

Banks should not be allowed to issue credit cards, if an individual already has two cards. Exceptions can be made for high net worth individuals who need more than two credit cards.

Petition to Singapore Government - 983 signatures

I will be handing over the Petition tomorrow (9 October) to Dr. Andrew Khoo, Executive Director of Capital Markets of MAS. The Petition is addressed to the Senior Minister and Chairman of MAS, Mr. Goh Chok Tong. Mr. Goh was not able to receive the petition personally and has asked me to pass it to Dr. Khoo.

The wording of the Petition is below. The final Petition has 983 signatures. I have removed signatories with incomplete particulars. The original list has more than 1,000 signatories.


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.

HKMA investigates complaints of alleged mis-selling of investment products

HKMA investigates complaints of alleged mis-selling of investment products related to Lehman Brothers

The Hong Kong Monetary Authority announced today (Monday) that, up to 3 October 2008, it had received 5,567 complaints from retail investors alleging improper selling of investment products by licensed banks. In 4,205 cases, the HKMA had received the initial complaint and assigned a complaint number to facilitate follow-up action. For a further 1,250 cases, the HKMA was calling back the complainants to obtain further details and confirm the allegations. The HKMA had already assessed 112 cases to determine what further action is required and had opened investigations into 22 of them. In 7 cases, insufficient evidence of mis-selling had been found, while further information was being sought in the remaining 83 cases.

Mr Joseph Yam, Chief Executive of the HKMA, said that the role of the HKMA is to investigate complaints of mis-selling against banks. "The HKMA is dealing with the complaints as quickly as possible. It is, of course, very important that we do this objectively and without pre-judging the issue. If, after investigation, we find cases of mis-selling, we will treat them very seriously.

Mr Yam added "The consideration of complaints entails a heavy workload and is time consuming. We have mobilised about one-third of the staff of from the three banking departments in the HKMA and have employed temporary outside help. We are also making arrangements to bring in additional staff. At a time when the banking system in Hong Kong is under some externally induced stress, requiring much closer attention by banking supervisors, there has obviously been some pressure on resources"

Mr Yam stressed "We sympathise with investors who have been affected by the collapse of Lehman Brothers. Our priority now, is to consider the complaints as quickly as possible. Within the authority of the HKMA, this is the action that will be most helpful to the aggrieved investors. "

South China Morning Post: 2003 case sets precedent for action against financial advisers

South China Morning Post (Hong Kong) - October 7, 2008
Financial advisers can be held liable for negligent investment recommendations to clients, a local court ruling in 2003 has established.

In the Field vs Barber Asia Limited (HCA7119/2000) case, plaintiff Susan Field was awarded compensation of GBP219,890 (HK$2.84 million) plus interest and costs that she had lost as a result of changing an investment portfolio on the recommendation of the defendant.

Ms Field had asked for a conservative investment portfolio. It initially made a British sterling-dominated portfolio for her, but later advised her to gear up her portfolio with a Japanese yen loan. A subsequent appreciation of the yen forced her to provide additional cash for the loan, eventually losing the whole investment.

The Court of First Instance ruled that the financial adviser was expected to warn Ms Field of the risks. The ruling was upheld by the Court of Appeal when the defendant appealed.

Citing this case yesterday, Civic Party leader Audrey Eu Yuet-mee said minibond holders were in an even stronger position than Ms Field to claim compensation, as they had signed contracts with the distributors. She has asked the Consumer Council to refer to the case and consider using its consumer legal action fund to help holders claim compensation.

Ms Eu said individual investors might not be willing to launch costly lawsuits.

Fanny W.Y. Fung

New type of foreign talent

The pay is peanuts. Can Singaporeans compete against them?

Tuesday, October 07, 2008

Poor payout on Anticipated Endowment policy

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.

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,

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 ...

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.

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.

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.

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?

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?

If you invest in the STI ETF by StateStreet, the dividend is paid out in half yearly distributions.

Credit default swap

Documentary on CDS :

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:


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

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.

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.

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.

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

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
UOB 40
GYC 12
SCB 10
Citibank 10
Amex 10
Kim Eng 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.

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:

Here is an extract from the webpage:


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

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:

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 <>

Write to Monetary Authority of Singapore

If you wish to write to MAS, you can address your letter to:

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:

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

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.

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.

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 (

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

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.

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.


Sunday, October 05, 2008

Speaker's Corner, Saturday 11 October, 5 - 7 pm

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.

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.

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

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 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:

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:

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:

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.

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:

CNBC short video on Minibond

CNBC's short video on Minibond.

Chee Onn

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.

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.

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:

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

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:

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.

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