Saturday, November 22, 2008

Assessment of liability

Dear Mr. Tan

My car lately got involved in an accident (side collision) at no fault of mine. The driver cut into my lane, done damage to my car and twisted the whole story to say it was my fault.

I had no evidences against him(no pics, no eye witness), hence, the verdict of the liability status given by INCOME was, I am to be responsible for 50% of this accident's fault.

But I am the victim of the accident. Yet I am to be responsible for the other party's irresponsible driving.

I disputed against this 50% liability status with INCOME. But their assessment still stands. But deriving at the liability status basing merely on statement provided, has done unjustice to my case. INCOME did not carried out any professional inspection
on my car, to at least gathered some 'collision evidence', like the angle and dent on my car, how can it be possibly me swerving into the other party's lane.

I wish to know who i can turn to dispute against this unfair assessment?

Mdm Ong

Income has to make the assessment based on the available evidence. Under this type of situation, an assessemnt of 50% liability seems to be reasonable - especially as you are not able to produce evidence that the other party swerve to hit your car.

It is possible that the other party could have made a statement that you swerve your car to hit his car. It is one person's word against another.

If you still feel aggrieved about the decision, you can lodge a complaint with FIDREC (

Dear Mr Tan

Thank you for taking your precious time to answer my question. Indeed, the other party has made the statement to say that my car swerve into his lane, which is an falseful allegation.

I had told INCOME I will raise my dispute to FiDREC and INCOME has actually asked me to go ahead with it for any mediation.

I guess for this case, I will have to let it rest and just blame it on my bad luck. I think FiDREC can't do much about it since I do not have any evidence against the other party.

Mdm Ong

Risk analysis form

Ask for your risk analysis form from the financial institution that you bought the credit linked notes. You may need it to file your complaint:

Misrepresentation about the risk of CDOs

Dear Mr. Tan

After reading the explanations from many financial experts, I realize that the real risk for the minibond is the 150 securities CDO.

Out of the 150 securities, if 11 or more credits events then the investor will loose some of their principal. If 13 or more credit events then investors will lose all of their principal.

The risk for this condition is extremely high because this is equivalent to any 2 credit events out of 23 securities (or any 1 out of 11.5).

Since bank should be much safer than others, it is not unreasonable to assume that on average, the risk of one security is 2 times the risk of one bank Then the risk of 13 or more credit events will be about 23 times (2 x 150/13 = 23.1) the risk of credit event for one bank

Moreover, the pricing statement did not disclose the identities of the 150 securities referenced by the synthetic CDO. This makes it difficult for us to assess the risk. The sales brochures and newspaper advertisements did not even mention the 150 securities CDO.

Can we sue the Financial Institutions for the omitting of these important information in the pricing statement/sales brochures/newspaper advertisements ?


In my view, this omission is material. The investors can sue the financial institution.

It is better for the government to act and take action to enforce the law (i.e. Securities and Futures Act) which requires the seller of securities to provide relevant, reliable and complete information about the securities being sold to the public.

Complaints in Hong Kong and Taiwan

Dear Mr. Tan,

I have found these links in : MiniBond saga in Hong Kong (part 1) (part 2)

They explain in Cantonese on how difficult it is to understand the products. I think these clips will be helpful to explain some facts to the old folks, and those who still don't know what has happened to cause BIG losses to their investments.

Here is an explanation in English:

After spending many days of searching on Google, Yahoo, Youtube and most importantly reading your blog, I still don't understand the operation and structure behind the product that I bought. I strongly believe that most of the RMs don't know that their products are in fact so risky and the reward is not in the fair proportion to the risk.

To be fair and kind (as all Singaporeans are), I think these RMs are also very stressful now to be involved in all this "mess".

My wife told me that in a Taiwanese news that she watched last night, mentioned that angry, distressed and fustrated investors are crowding around a bank to demand for refund. The Structed Deposits saga in just beginning in Taiwan as more and more Taiwanese investors start to realise about the real truth behind the painted truth.

I take this opportunity to thank you for posting my previous email to you in your blog (RE : Mental health concerns during difficult times). My wife and I are so touch that at least there is a place to air our sadness as it is extremely unhealthy to bottle up these negative emotions.

Of course, I agree with the replies/comments to my post that we should do it in a constructive and sensible way. Life still has to go on. And that is the main reason motivating me to write the post on mental health.

Last but not least, I hope that more people as knowledgeable, righteous and selfless like you will stand out to help the distressed ones. Wishing You Great Health, Strength and Happiness.



Damage to integrity and character

Hi KL Tan,
I felt sorry for u on the outrageous remarks posted in ST by Mr Chua SY. I strongly suggest that you should sue both ST and the latter for the damage to your integrity and character as a result. Otherwise, the general public may really lead to conclude that you have other agendas in mind as what Mr Chua had written. At the very least, a public apology must be sought from them in order to put this matter to a close.

What are your thoughts ?


Thank you. I do not wish to engage in the "suing" activity.

Writing to a Government official

If you wish to write to a Government official, including a Minister, you can get the e-mail or telephone number from this website:

For example, if you type Goh Chok Tong, you will get the following:
DID : 62358577

Writing to your Member of Parliament

You can find the name and contact of your Member of Parliament from this website:

You can meet your MP at the weekly meet-the-people session.

Your MP came forward to be elected to work for the people, and has the duty to represent the people. If you have any problem, you can see your MP. You should expect your MP to carry out his duty in looking after your interest (provided that your interest is legitimate).

If several of your neighbours share a common problem, you should see your MP together.

Your experience with credit linked notes

Please share your experience on investing in the credit linked notes, i.e. minibond, pinnacle notes, high notes, jubilee notes. Send your article to

Friday, November 21, 2008

Selling toxic CDO products

Hi Mr Tan,

I should think that the FIs cannot be forgiven for miselling the toxic CDO products. Take for instance the pinnacles notes. Various series have been launched during the past two years. Upon the launching of series 1 , the FIs should have been aware of where the money have gone into and the details of the 100 over companies where the money are invested. Is it justifable that if 8 out of the 150 companies went bust then the investor will lose all the money? Is this a high risk or a definite gone case investment? I believe the FIs know the answer.

If it is a high risks investment then it must have a high return. Is it justifable that the town councils invest into these products to get a modest 5% return? In these product the amount receive at the maturity will be equivalent to our initial investment if nothing goes wrong and thus the return is only about 25 percent. Any mature person will definitely know that it is crazy to invest in this high risk product and getting such a low return. The worst thing is that it is not liquid at all and the investor has very little or no control of his investment.

To think that so many series have been launched and sold to general public as a safe bond like investment instrument of negligible risks is really a shame to these FIs.

In recent years, whenever the RM in the bank want to sell me any product he/she will always say ever since the Asian crisis, MAS has put stricker measures on the financial products and if they mis-represent they will get into trouble.The product they sold have to be MAS APPROVED. Many people like me have been led to believe that the MAS has stepped in to protect the people and we are not suspicious of the RMs' advice.

I really hope that the FIs will admit their mistakes and make compensations to all investors . This will definitely benefit them in long run as the customers will have more faith in investing with the FIs. In order for the FIs not to lose their liquidity I suggest that the money compensated to be put back into the FDs at prevailing interest rates and allowing the investors to withdraw a certain % a year.


I suggest that you send your views to Mr Goh Chok Tong and to MAS.
DID : 62358577

How RMs are taught to sell financial products

Dear Kin Lian,

I read you blog with interest everyday and after hearing about this fiasco with the minibonds. I am glad that I had left the banking sector many years ago. I have no interests in any of the minibonds. Things may have changed now, but I would like to relate my experience as a RM in a local bank then.

I personally feel that banks should try not to sell so many different types of financial products to the mass market.

This should be done by the broking housings as they are more equiped to do so. Anyway back to my experience.

During the haydays when units trust were just being introduced to the markets, I remember Aberdeen Global Tech Fund was trading about 1.90+ many banks were scrambling to earn commission given by the fund houses. (There was an upfront sales charge of 5%, how much given to the bank, I am not sure.) Banks were flushed with Fixed Deposits and management was very short sighted. why? Because it was a liability for the bank to hold fixed deposits.

As bank sales staff, we were like attending fund launches almost every week. The product manager would come in, talk a little about the fund and give us sales target. Also started to say what customers are suited. With sales target, what does it mean? It means you need to milk you customers. We were given customers details especially those that were going to expire and also made to stay after work to make calls to them to `recommend' them this product.

Well, as sales people, we can't argue right. We were employed to do sales. How we achieve it is not they problem, just sell and be rewarded with commissions. But at the same time, we were named Financial Planner. What about this?

I remember that there was this time that the bank was selling `capital protected' funds. Of course we knew that Capital Protected is a marketing gimmick. Your capital is protected less certain charges.

Anyway, I was in mass market sales. There was a bank staff that managed to persuade a customer to place SGD 2.5 milllion in the fund.(Guess what, the fund total size was 50 mil) Any financial planner would know that is not the way. It would be best to diversify to Cash account, Fixed Deposits, Equity funds, etc). We were like shocked when we heard this.

One more point to add, usually bank sales staff have a limited time to do sales and they are taught to close the seal in the shortest time possible. (We were actually taught to close a `long term saving plan' in 15 minutes.(which is actually an insurance plan) I am not against this, but wouldn't it be better to take some more time to explain to customer if she/he actually needs this?

Let me say again, this happened many years ago. I don't know whether is it the same. If you are saying that banks had introduced the FNA (Financial Needs Analysis) signed by the customer, let me ask you one thing, WAS IT DONE PROPERLY? Do you think the aunties and uncles who do not speak English know what this document is about? I can tell you they just sign the document based on the trust of the bank or the sales staff.

This is all I have to say. Thank god I left that industry.


Social grace in commenting in other people's blog

I wish to thank Everlearning for this comment in my blog:

Hi Mr. Tan
Coming back to this blog ..... (I was shocked) to read some unhappy comments. As a guest, I have no rights to impose my host in whatever way in his house. I suppose bloggers have to exercise some discreet and courtesy when commenting in other people's blog. This is social grace.

I have received several personal attacks and sarcastic comments by people posting anonymously or under a false name. They expect their comments to be published here in the name of "presenting the other view". I expect these people to use their real identity, if they wish their contrary views to be posted.

Mental health concerns during difficult times

Dear Mr. Tan,
First of all, thank you for all the help and info you provided in your blog and in Hong Lim Park.

With the recent saga over the structured products and mini-bonds, most of the affected investors are going through emotional stress as well as financial stress.

Sad to say that I am also exposed to one of the products and have to go through emotional “struggle” everday.

On one side of my mind, I have to stay alert to handle the daily routine, the other side worrying on what will be the outcome of my hard-earned money … etc

I believe that all investors are affected will be going through the followings : before taking every steps, during the process and while waiting for more info, you have to go through the stressful grinding of you brain (and heart) again and again.

> Complaining to the FIs …..
> Waiting for reply ….
> Going to FiDrec ….
> Waiting for more info from the news ….
> Will I get back my hard-earned money … how much … when …

It is like, going forward, but dragging your feet in a muddy field.
It is like, when you are taking a break, you mind is still spinning.
It is like, when your child gives you a smile, you have to put in extra effort to move your facial muscles to reply his greeting.
It is like, you want to shut down the computer, but the hard disk refuses to stop and keeps spinning.
It is like, you want to sleep, but you are worried about the outcomes.
It is like, you want to sleep, but you are also worried about other investment on hand that may have “toxic ingredients” in them.

BUT don’t know how to check, don’t know whether you should believe you RMs or insurance agents (or friends that you have bought from). Not saying that they are lying but they may not have the knowledge to “detect” the “toxic ingredients”

This list will go on and on and on and on … …

With all said above, I would like to chip in some of my thoughts that I think it will be helpful to all the distressed ones :

Calling all volunteers from appropriate organizations, reach out to these people to help relieve their emotional stress, especially the old folks, uneducated ones and those that are all alone (either they have no friends and relatives to approach for help, or they are afraid to let them know about they involvement in the structured deposit products)

Seek medical help if you are having problem coping with the stress and having problem sleeping at night. I have done so. I have to “force” myself to sleep by taking the medication from my doctor, so that I can handle the routines in the day.

This is a list of useful phone numbers that I have found from the web :

Samaritans of Singapore (SOS. 24 hrs) 1800-221-4444
Singapore Association for Mental Health Helpline 1800-283-7019
Care Corner 800 Hotline (in Mandarin, 10am-10pm daily) 1800-353-5800
Touchline Mon-Sat (10am-10pm)(for 13 to 25 year olds) 1800-377-2252
BABES (For teenage girls facing pregnancy crisis) 1800-833-6666
Pregnancy Crisis Service Mon-Fri (9am-5pm), Sat (9am-1pm) 6339-9770
Association of Women for Action and Research Helpline (AWARE) Mon-Fri (4pm-10pm) 1800-774-5935
National Family Service Centre (FSC) Helpline 1800-2255-372
SENIORS helpline (for older persons and their care-givers) 1800-555-5555
TOUCH Caregivers Centre 1800-352-1622
SAGE helpline Mon-Fri (9am-5pm), Sat (9am-1pm) 1800-3538633
Alcoholics Anonymous 6475-0890
Eating Disorders Helpline - Tel: 6345-3435 (10:00am - 4:00pm Phone Mail Mon-Fri
Source :

Thank you Mr. Tan for being so helpful and kind, and taking your time to read this letter.

My wife and I are so stressed that we have to seek medical help so that on top of our busy daily routine, we will not neglect our toddler son and of course our health.

This is in fact the main message I would like to get across to all the distressed and worried ones out there. While fighting for what we believe is right, we still have to take good care of ourselves and our loved ones.

God Bless All !


Much to learn from American politics

When John McCain lost the election, he gave a magnanimous speech conceding defeat and pledging to work with Barack Obama as "my President".

In turn, Obama acknowledged McCain's long record of dedicated public service to America. He pledged to work with McCain.

Obama met with McCain a few weeks later to discuss how they can work together to solve America's problems.

Here is a country with 60 times the population and talent pool of Singapore. They know how to work together to find the best people to solve their problems.

In Singapore, we have a limited talent pool. We need to find a way to tap the best of our limited talents. We should rely on our local talents, instead of foreignt talents who do not have a long term interest of our nation.

Top up on margin calls

If you borrow money and pledge shares, the bank will check the prices each day. If the values of your holdings fall below the amount borrowed less a safety margin, the bank ask you to put in additional money. If you do not, you have to sell the shares at its depressed prices. This is called "margin call".

This causes the prices to fall further. As they are no buyers, the prices can drop a lot. This triggers more margin calls.

Solution: do not invest with borrowed money. Invest with long term savings.

Thursday, November 20, 2008

Relief loans to repay credit card debts

Many people expect the next big financial crisis to be triggered by the failure of the credit card debts.

I hope that action can be taken to minimise the impact of this impending crisis. I believe that a large number of people borrowed on credit cards due to reduction or loss of their earnings. The high interest rate on the credit cards add to their burden.

I suggest that a relief loan be provided to these people who have runned up the credit card debts for this reason. This relief loan can help them to reduce their heavy debts. My proposal for this relief loan is set out below:

I suggest that the banks should give a discount on the repayment of the credit card debts through the relief loan. As they have earned a high rate of interest before, they should take a reduction in return for the repayment of the loan.

I also hope that a limited amount of relief loan be given to other borrowers who have incurred a credit card debt for other reasons, e.g. over-spending.

The relief loan, charged at a modest rate of interest, will give the borrower a better chance to repay the borrowings, and prevent another round of financial crisis.

This targeted approach is better than giving every person a cheque under a stimulus package (as was practiced recently in USA).

Poor return from Living policy

Dear Mr. Tan,

I bought a Living policy with NTUC when you were CEO. Lately, I read that you recommended against the Living policy. Can you clarify?

I have just surrendered my Living policy. After paying premium for 12 years, my cash value is still below the total premiums paid.

In the earlier years, the bonus was quite attractive. Later, the bonus was cut due to the economic downturn in 2003.

There was a chance to restore the bonus earlier this year, before the financial crisis, but the management refused to do so. I have decided to terminate the policy as it is likely to provide a poor return over the next few years.

This poor return applies to most life insurance policies issued in recent years. It is better for the consumer to buy term insurance and invest the savings in a low cost investment fund. With the drop in investment values, there is potential for a good return over the next 10 to 20 years.

Lodge your complaint now, before the fund collapsed

Dear Mr. Tan,

I have just visited to H. I think you may want to highlight the following:

1. PS6 is not worth 1.7% of original value

2. PS6 now has a high chance of worthless, but no letter was sent. However, the letter dated 10 Nov 2008 from H only said credit event has occurred. It is up to you to research. Thanks to your website, which is very informative.

3. I try to see my wife’s RM and I can sense that they are systematically preventing her from meeting us. They arranged until we insisted, or otherwise they give us a written letter whey we could not see our RM. I thieir strategy is that once you lodge the complaint, the RM dropped out. At it becomes words against words, in cold environment. RM become shun from lying infront of the client.

4. I went to the branch and they originally sent a very junior RM who is only prepared to take complaint and not explaining the product.

5. My RM was on MC although I had scheduled and confirmed meeting with her. Even the branch manager did not even know she is on MC. She said she only started relieving as Br Mgr the day before.

[I had 3 different stories. The counter staff said RM was having outside appointment and will contact her. The relieve RM said she was very sick, but did not know we spoke to our RM the day before. The more senior RM said my RM has stomach flu. The branch manager did not know my RM was on MC until I told her what they told me.]

6. The RM whom met us even dare to say, even if the prospectus is given after sale, as long it is given on the same day, it is considered given BEFORE sale. It shows how green those people they use to speak to us.

I think you may want to advise others their complaint for mis-selling, if any, even before the fund collapsed.

As for my case. I am clear it was mis-selling, because the RM today said differently about the product compared to the RM at point of sale. I think it is very likely that the current RM and original RM may not understood the product.

I think we will do a SD and file it, and let nature takes its course, bec it is already a dead horse unless the Authority really takes action.

I really feel painful for those who may not know how to take care of themselves. I am saddened not because of the loss of my $50,000, but how institutions take advantage of ordinary main-street workers’ hard earn saving. This is SOFT TALK for our HARD CASH.

We are grateful that you stood for ordinary men and women, and yet being criticized by the Chua Chap [don’t even bother to remember his name].


Straits Times deleted these sentences

The Straits Times Forum editor published my reply to Chua Sheng Yang but deleted the following sentences:

I can only recall the saying, “None are so blind as those who will not see the truth”.

Mr. Chua made a personal attack on my character in the last three paragraphs of his letter. I am surprised that your newspaper found it fit to print these unsubstantiated remarks, as they are not relevant to the main issue. I shall not respond to them.

Sieze the opportunity

Some people said that I "siezed the opportunity" to represent the misled investors. This statement has a negative connotation. It does not fairly reflect my intent.

I hope that the Government can help to find a fair collective solution for all investors who have been misled into these investments, regardless of their age or education level (provided that the independent investigation shows that they were misled).

I do not enjoy being the target of personal attacks and cynicism, and to take the burden of attending to so many aggrieved persons asking for assistance. I wish to have a more tranquil life.

Explanation on CDS - Vanguard's Bogle

Suppose you have a house and you insure it against fire for $200,000. Now, suppose that you have 130 neighbors, 65 of whom are betting that it will burn down and 65 of whom are betting that it won't. And, that's approximately the ratio we have got here.

It's supposed to be about $2 trillion debt instruments covered by CDS and $62 [trillion] or $65 trillion of credit default swaps. Half of them are in one side and half of them are in the other. So, you could say "well what's the matter with having your neighbors insuring or betting your house will burn down or betting it won't burn down?"

What's the matter is you have to keep a close eye out for arsonists. So, we have arsonists out there playing the CDS market, to sink your firm, make money for themselves and their hedge funds. They want those premiums to go way up and playing games like that

Personal values and characters

I wish to share some of my personal values that define my character:

> work for the benefit of all, and not for self-interest
> respect other people, including the poor and weak
> be fair
> be honest
> be courageous

I hope that more Singaporeans can share these values, for the good of the people of Singapore.

I wish to thank Everlearning for the following additional values (which I agree with):
> be humble
> be kind-hearted (or thoughtful or considerate)

Our Continued Fascination with wall street bankers leading to our Downfall ?

Contributed by LA

1) Die die must have wall street bankers here ( somehow, more wall street bankers here = top financial hub )

2) Die die must have wall street bankers advise us.

3) Die die must have wall street bankers to better run our own banks here.

4) Die die must have wall street bankers to better run our sovereign funds.

5) Die die must have wall street bankers sell us ( Town Councils included ) poisonous "investment" products.

Afterwards, ….. we all die ?

P.S. maybe we are all fascinated by their obscene buddy-buddy compensation – how would you like to receive US$25 Million for being a Merrill Lynch banker for just 4 months ?
how would you like to crash big name banks and still receive tens of millions dollars - no prior experience required ?

And we are told off we are greedy for 5% return, and deserve our pain and suffering !


A tsunami of hope or terror

Here's how it works: a bank will set up a shelf company in Cayman Islands or somewhere with $2 of capital and shareholders other than the bank itself. They are usually charities that could use a little cash, and when some nice banker in a suit shows up and offers them money to sign some documents, they do.

That allows the so-called special purpose vehicle (SPV) to have "deniability", as in "it's nothing to do with us" – an idea the banks would have picked up from the Godfather movies.

The bank then creates a CDS between itself and the SPV. Usually credit default swaps reference a single third party, but for the purpose of the synthetic CDOs, they reference at least 100 companies.

The CDS contracts between the SPV can be $US500 million to $US1 billion, or sometimes more. They have a variety of twists and turns, but it usually goes something like this: if seven of the 100 reference entities default, the SPV has to pay the bank a third of the money; if eight default, it's two-thirds; and if nine default, the whole amount is repayable.

For this, the bank agrees to pay the SPV 1 or 2 per cent per annum of the contracted sum.

Finally the SPV is taken along to Moody's, Standard and Poor's and Fitch's and the ratings agencies sprinkle AAA magic dust upon it, and transform it from a pumpkin into a splendid coach.

The bank's sales people then hit the road to sell this SPV to investors. It's presented as the bank's product, and the sales staff pretend that the bank is fully behind it, but of course it's actually a $2 Cayman Islands company with one or two unknowing charities as shareholders.

It offers a highly-rated, investment-grade, fixed-interest product paying a 1 or 2 per cent premium. Those investors who bother to read the fine print will see that they will lose some or all of their money if seven, eight or nine of a long list of apparently strong global corporations go broke. In 2004-2006 it seemed money for jam. The companies listed would never go broke – it was unthinkable.

Here are some of the companies that are on all of the synthetic CDO reference lists: the three Icelandic banks, Lehman Brothers, Bear Stearns, Freddie Mac, Fannie Mae, American Insurance Group, Ambac, MBIA, Countrywide Financial, Countrywide Home Loans, PMI, General Motors, Ford and a pretty full retinue of US home builders.

In other words, the bankers who created the synthetic CDOs knew exactly what they were doing. These were not simply investment products created out of thin air and designed to give their sales people something from which to earn fees – although they were that too.

They were specifically designed to protect the banks against default by the most leveraged companies in the world. And of course the banks knew better than anyone else who they were.

As one part of the bank was furiously selling loans to these companies, another part was furiously selling insurance contracts against them defaulting, to unsuspecting investors who were actually a bit like "Lloyds Names" – the 1500 or so individuals who back the London reinsurance giant.

Except in this case very few of the "names" knew what they were buying. And nobody has any idea how many were sold, or with what total face value.

It is known that some $2 billion was sold to charities and municipal councils in Australia, but that is just the tip of the iceberg in this country. And Australia, of course, is the tiniest tip of the global iceberg of synthetic CDOs. The total undoubtedly runs into trillions of dollars.

All the banks did it, not just Lehman Brothers which had the largest market share, and many of them seem to have invested in the things as well (a bit like a dog eating its own vomit).

How I was misled (3)

Dear Mr. Tan
I wish I had read your blog before purchasing my pinnacle notes series 6 last year.

The picture painted by the sales representative was so good, I was convinced it was a great investment. I even encouraged my two daughters to invest their hard earned savings, something I have not stopped regretting since the downturn.

On hindsight, I should have realised that there were some things that were not so right. The prospectus was not shown to me although it was sent to me much later, by post, after I had closed the deal. I tried to read it, but the technicality floored me. So many pages of fine print. The copies of the agreement were not sent to me either.

When I called the representative's mobile, he didn't answer my calls. Then I called his office at H and discovered that he had left. Subsequently, the manager very kindly did a trace and delivered the copies by hand to me. By then I had managed to read some of the stuff in the prospectus and realised that I could lose all my money as it was not capital protected. It was too late to do anything except pray, but it looks like prayers didn't help.

I don't know if there is anything left of what we invested. Is there anything that can be done? I have left out the names of the people as I don't know if I should at this stage. I hope you can help in some ways.


Investing in ETF

Hi Mr. Tan,
I came across your blog on ETF ..

Given many global banks are currently in stress, can you advice what happen will
happen to Lyxor or STI ETF (value) if in the worst scenario, their parent company like StateStreet or Barclay go under?


If the fund manager goes under, I believe that it is easy for another fund manager to be appointed to take over their work. The assets are held by trustees in separate accounts. They should not be adversely affected.

This is my guess but I am not a legal expert on such matters.

NTUC Income shares

Hi Mr Tan,

I would like to seek your advise with regards to the Income Shares which i had 'invested' in. Are these shares safe to hold on in the midst of the financial meltdown?

While I had trust in NTUC, I'm just afraid the monies collected by Income could be used to invest in junk derivatives and erode Income's financial position.

Would you be able to offer your advise? Many thanks for your time, and do continue the fighting spirit!


It should be safe. I also have shares in Income and will keep them during the financial crisis.

Bank Negara Zeti appointed to financial reform task force

Malaysia is one of the very few countries least affected by subprimes and CDOs....thanks to a large extent to Bank Negara Governor Zeti.

Source: Central Banker Analysis

Published on November 19, 2008

The governor of Malaysia’s central bank says early detection and action is critical to minimising financial crises.

Bank Negara Malaysia governor Dr. Zeti Akhtar Aziz was recently appointed a member of the newly-formed United Nations high level task force to examine possible reforms of the global financial system, including the International Monetary Fund and the World Bank. She tells The Asian Banker that the current global financial crisis might have been less severe if the multilateral financial institutions had exercised a leadership role at an earlier stage.

“We have not really seen the international financial institutions come forward and certainly not at the early stages of the crisis. They are now coming forward to deal with the effects of the crisis,” says Zeti, who will have a hand in recommending reforms of the institutions through the UN task force known as the Commission of Experts on Reforms of the International Monetary and Financial System.

Since the global financial crisis took a more severe turn in October, some world leaders have called for a new financial world order or a review of the role of the Bretton Woods institutions in promoting financial stability.

Aside from Zeti, the other members of the task force include Chukwuma Soludo, Central Bank of Nigeria governor; Jean-Paul Fitoussi, professor of economics at the Institute d’Etudes Politiques de Paris; Avinash Persaud of Barbados, chairman of Intelligence Capital; Yaga Venugopal Reddy, former governor of the Reserve Bank of India; Eisuke Sakakibara, professor at Waseda University; Yu Yongding, director of the Institute of World Economics and Politics. Joseph Stiglitz, Nobel prize winner for economics and former chief economist at the World Bank, will chair the Commission.

With several Asians on the task force, it is seen as a key platform to give the region a greater voice in efforts to reform the global financial system. Zeti says she hopes international financial institutions will engage more with Asia at the international level to better appreciate Asian perspectives and conditions. There are moves towards achieving this, she adds, as there is a growing appreciation of the fact that Asian participation is crucial in unwinding current global imbalances.

Zeti, who was also appointed chair of the Bank for International Settlements Asian Consultative Council, recognises that it is important for the region to have a strong interface with the rest of the world and appreciates the forums that are paving the way for this. The council is currently assessing the spillover effects of the financial crisis and looking at how these may be best managed.

For Zeti, early detection and action is critical. “I believe that crisis may happen from time to time in different parts of the world, but when there is a detection that the crisis is imminent, it is very critical to take early action, because if early action is not taken then what happens is the crisis has to run its full course,” Zeti points out. In Malaysia’s experience, early intervention reduces the costs of a crisis, she adds.

In the wake of the Asian financial crisis, Malaysia set up entities to acquire the non-performing assets of its beleaguered banks and recapitalised some institutions. Zeti says within six months of initiating these institutional arrangements, the banks started lending again, helping the country recover quickly from the Asian financial crisis. “The cost of the crisis was less than 5% of GDP,” she says. “The main reason for early action is to minimise the costs. Once the crisis is prolonged the deterioration that takes place will be greater and the cost of any resolution or repair is going to be much higher.”

In the current situation, Malaysia itself is preparing for tougher times. Zeti says it is closely monitoring financial institutions and that Bank Negara will take pre-emptive action.

“In the previous crisis we had a debt restructuring committee that dealt with it (non-performing corporate loans), and even during normal times we had a small debt restructuring entity for small and medium scale enterprises that include financial advisory services and so on. We also have such services for households to deal with their financial problems before they result in foreclosures or repossessions and so on. This is what we are managing well before it happens,” Zeti explains.

From a regulatory perspective, Bank Negara is looking at the issues that have surfaced in the crisis, including how to deal with non-regulated institutions when they need liquidity, and how to improve the coordination of regulators within the financial system like the relationship between the central bank and the Securities and Exchange Commission. It will be hoping it has taken the right actions early enough to minimise the pain to the financial system.

Wednesday, November 19, 2008

Town councils should take legal action for mis-selling

This letter has been sent to Straits Times, Today and Zaobao.

Forum Page
Straits Times

Eight town councils have invested a combined sum of about $16 million in the credit-linked notes, including the minibonds, pinnacle notes, high notes and jubilee notes. Some of these notes are worthless. Others have lost a large part of their value.

The funds of these town councils belong to the residents who pay the conservancy charges. The town councils have the fiduciary duty to invest these funds carefully.

I suggest that the town councils explain if, when making the investment, they were aware that the credit linked notes carry the risk of the entire loss of the principal on a credit event involving any one of 5 to 8 reference entities, and the additional risks of the defaults of a certain number of 100 to 150 underlying assets, cormprising of collateralised debt obligations, subprime mortgages and other risky products?

Were the town councils aware that the risks of these credit linked notes are many times of the risk of default of a single entity? Does the return of around 5% commensurate with this high risk?

Were the town councils misled by the financial adviser who sold the notes or by the mis-representation contained in the sales materials or prospectus. If this is the case, I suggest that the town councils should take a legal case against the distributor for their negligence or bad advice and to seek fair compensation for their losses.

As the sums involved are quite large, the town councils should take the appropriate action to discharge their fiduciary duty to the residents.

If the town councils succeed in their action, the outcome will indirectly benefit over 10,000 helpless individuals who were also misled into investing in these credit linked notes.

Tan Kin Lian

CPF Medishield

Dear Mr. Tan,

I'm thinking of buying a health insurance but in the market there is so many health insurance. Could you recommend me one company that is providing the best health insurance?

I will be out of job soon, as my company is moving its operations to another country. I'm now 35 years old.


I recommend CPF Medishield. As you will be losing a job, there is no need to spend so much money on a private Shield plan.

Ask MAS to provide guidelines on mis-selling

Dear Mr. Tan

Can you help to lobby MAS to come out with some guidelines on mis-selling. That will help ordinary man a lot.

For examples MAS can say the following situations are high likelihood of mis-selling.
1. Sold product the buyer not originally wanted
2. Concluded sale (such a complicated product) within 30 mins
3. Sold without going through line by line of the marketing brochure
4. Sold without giving prospectus
5. Prospectus was given after sale concluded
6. Sold on repetition of the Reference Entities but did not mention RISK of other link products (just mentioning link is not enough)
7. RM did not read prospectus before selling to the clients

I think you expect your doctor to read the details of the drugs before prescribing it to you or children? I just think that it is not right to sell by mis-representation, but eliminate their responsibility by thick documentation.


I will post your views in my blog first. I will decide later on how to approach MAS.

A doctor's definition of caveat emptor

Read this letter:

The doctor said nothing about "eyes opened" or "eyes closed" or "greedy investors".

Reply to Chua Sheng Yang

Chua Sheng Yang's letter:

18 November 2008

The Editor
Forum Page
Straits Times

I refer to the letter entitled “Questions on investment products rally” by Chua Sheng Yang (Straits Times, 18 Nov 2008).

I organize the fifth rally on 15 November for the purpose of updating the investors on the status of the three petitions that were sent to the Monetary Authority of Singapore. The text of my speech can be found in my blog,

I did not organize the rally for the purpose of promoting The Online Citizen, as suggested by Mr. Chua.

I do wish to acknowledge the coverage given by The Online Citizen and other online blogs. They help to bring my messages to the investors who were not able to attend the events at Speaker’s Corner.

The first petition, signed by 983 investors and submitted on 9 October 2008, asked the Government to carry out an independent investigation to find out if there were any wrong doings by the financial institutions that created and marketed these credit linked securities and, if there were, to take appropriate action under the law. Specifically, the investigation should look at possible breaches under section 199 of the Securities and Futures Act and section 27 of the Financial Adviser’s Act.

Mr. Chua asked me to state if the people, who are neither elderly nor uneducated, should be entitled to their money back. In my view, all investors who have been misled into these securities through mis-representation and mis-selling (if proven by the findings) should be fairly compensated, regardless of their age and educational level.

I do not expect the Government to reimburse the investors for the financial loss. I only urge the Government to help the investors to get fair compensation for their loss from the financial institutions. I do not expect the compensation to be in full, as the investors have to bear some responsibility.

Several articles, written by journalists and university professors, have been printed in the newspapers explaining the high risk of these securities and how the investors could have been misled. I wonder why people like Mr. Chua choose to ignore them. I can only recall the saying, “None are so blind as those who will not see the truth”.

Mr. Chua made a personal attack on my character in the last three paragraphs of his letter. I am surprised that your newspaper found it fit to print these unsubstantiated remarks, as they are not relevant to the main issue. I shall not respond to them.

Tan Kin Lian

Tuesday, November 18, 2008

Comment on statement by Minister of Finance

Comments posted by ming in CNA Forum:
On a case-by-case basis, with a breezy wave of his hand like some Jedi knight the Minister for Finance wants the crowds at Hong Lim now gathering in strength to disperse. Have faith in the MAS. As the former Managing Director of MAS, Tharman would be in the position to tell us that MAS can be your advocate, prosecutor, judge and juror because they are staffed by so many talented and handpicked scholars. It is superior and efficient because everything is fused into one body just like Singapore.

Let the scales fall from your eyes and you will see that the trust which so many Singaporeans have placed in this system is unjustified. We have been fooled by the decades of prosperity and lulled into believing that obedience is all that is needed to perpetuate the good life. Those who remember their duties as citizens are called mad and suffer the indignity of ostracism. But when the reality hits and you realize that the system is not right, and by virtue of having awakened you become mad, the colossal blunder we have made as a people will chill you to the bone.

Note to the Minister of Finance:
Unless people like Tan Kin Lian are included in an independent investigation to be conducted by a special body that is separate from any governmental group because the investigation must cover how these products were regulated, no one will accept what is concluded. If you want closure Tharman, do the right thing. As the putative Prime Minister, I urge you now to set our country on the course to long term peace and prosperity. As a citizen and a member of the Cabinet, you swore oaths that you would. Now I ask that you make good on it.

George Washington and the cherry tree

A legend is told about George Washington as a boy. Young George had a new hatchet and with it he cut down a small cherry tree. When his father saw the tree, he was angry. "George," he said. "Did you do that?" George was afraid to admit that he did.

Nevertheless, the boy decided to tell the truth. "Yes, Father," he said, "I cut down the cherry tree with my hatchet. I cannot tell a lie." George Washington's father was proud of George for telling the truth.

Moral of this story
1. No investor would have bought the credit linked notes, if they were told that the real risk is 10 to 15 times of the risk of default of a single entity.

2. The financial institution would not have sold this type of product, if they know that it was toxic and very high risk.

3 The authority would have not "registered" the product for sale.

I hope that the moral of George Washington's story will encourage the parties to come forward and say, "I cannot tell a lie. I made a mistake to buy/ sell / register the product."

Revosave and Vivolife

Someone continues to post comments to attack the new products- Revosave and Vivolife, launched by NTUC Income. I have blocked these comments.

If this person submits a fair analysis of the products, I will post them here.

Here are some of my post postings giving general comments about these products:

Pinnacle Notes 9 and 10

Read my blog dated November 2007, when the product was first advertised:

Asians fail to join class action claims

Dear Kin Lian,

I am not one of those affected investors, but I think this class action in US could be something for our institutional investors to think about. Thank you.

Asian investors are missing out on billions of dollars by not taking part in class action lawsuits against US companies whose managers have been accused of improper corporate behaviour, according to a study.

Pension and asset managers in the region failed to claim a combined $1.5bn in compensation between 2000 and 2007, said Goal Group, a class action services specialist.

This article can be found at:,_i_email=y.html

Local Banks still focused on garnering new sales at this time!

Dear Mr Tan,

With the recent saga over the few structured products and mini-bonds, we would assumed that the banks' role will be focusing on providing assurance to their existing customers and customer retention.

Yesterday, I received a call from a personal banker from a local bank. He was telling me about a fixed deposit promotion and that I should meet him at the branch as the promotion will be ending soon. Fair enough, I went down to check it out but to my surprise, the banker starts to sell me their insurance plans!

Upon further subtle probing, I realised that the bank are still pressuring their staff to sell and to maintain certain target or they may be the next to go. Is this what the local banks should focus on at this point of time? Is it just another convenient excuse to axe their staff? Or is it trying to compete with rival banks for business?

I read in a recent article that most foreign banks have channelled their sales force to focus entirely on customer service and handling all the related enquries. I believed that this is the correct approach and the least that the banks can do now for their customers.

I cannot even imagine that there are still banks imposing targets on their staffs at this time. Are they encouraging them to mis-sell or misrepresent their products to secure their jobs? Does it matter to them what product they are selling to the customers or if the product is suitable? Will history repeats itself all over again when the customers complained about the products they buy at this time?

As more products are being affected, I believed that the whole episode is here to stay thus I sincerely hope that the local banks will know their priority, have more compassion and adopt the correct approach. It would definitely be better if the MAS can intervene and developed a policy to control the industry.

This is an extremely difficult time for Singaporeans, especially so for many uneducated and unsavvy customers who do not know the avenue to check about their current products.

Mr Seow

High risk of credit linked notes

When we invest in a corporate bond, we take the credit risk of one company. If the company goes bust, we lose our invested sum.

When we buy a credit-linked note, we take the risk of 6 to 8 reference entities. If any reference entity goes bust, we lose our invested sum. The risk is mutiplied 6 to 8 times.

In addition, we take the risk of 100 or 150 underlying assets. If a certain number goes bust, we lost our invested sum. This may double the risk of the reference entities.

In all, the risk of losing our invested sum can be 10 to 15 times of the risk of 1 corporate bond. What do we get for this high risk? 5.1% per annum.

Did the sales materials and propectus describe the risks transparently and fully? They did not. In fact, the sales materials were written to mislead the investor. The propectus was not intelligible to the ordinary investor.

The only statement that is readable is "You can lose some or all of your investments on a credit event". This statement applies to most types of investments. It failed to disclose that the risk is 10 to 15 times (or whatever is the correct level of the risk) of the failure of one bond.

Under the Securities & Futures Act, it is an offence to give misleading statements or to hide relevant facts when selling securities to the public. I hope that the authority will take the financial insitution to task for breach of this Act.

Monday, November 17, 2008

None Are So Blind As Those Who Will Not See The Truth

When I read the statements from various high-level ministers about investors who should be aware about the nature of the credit linked notes, I recall a statement: "None Are So Blind As Those Who Will Not See The Truth"

My blog and its target audience

I write this blog to educate the general public about financial planning, insurance and social issues in Singapore.

I advised people against investing in high cost financial products, such as structured products, certain types of life insurance products, time share and land banking.

The people who sell these products dislike my views. They attack me by posting anonymous and mischievous comments in my blog. I have to block these comments.

Some people also use my blog to attack NTUC Income, their agents and products. I also block these comments.

If you wish to submit comments that differ from my views, you can state them honestly and fairly, and use your real name. I will be happy to post them.

If you dislike the views posted in my blog, you should stop visiting it. My blog is not meant for people who make a living selling products that I discourage. You can create your own blog to argue the merits of your products and encourage people to visit your blog.

Match investors' needs

Nov 17, 2008

THE Monetary Authority of Singapore (MAS) may require financial services companies to sell products that better match investors' needs and include clearer risk labels linked to the investments, Finance Minister Tharman Shanmugaratnam said in Parliament on Monday. 'If an investor has been sold a product that's clearly unsuitable, if there are clear-cut cases of a mismatch, then the financial institution will ensure the investor gets proper restitution,' he said. 'That's the way we ensure there's trust in the system.'

Mr Tharman was replying to questions on the MAS probe into complaints by retail investors who said they were misled into buying structured products linked to the now-bankrupt Lehman Brothers Holdings.

Individual investors in Hong Kong, Singapore, and Taiwan have demanded refunds from banks selling them structured notes linked to Lehman.

DBS Group Holdings, Singapore's biggest bank which said late Oct most of the securities are now worthless, has estimated compensation to investors in cases where the bank didn't meet the 'standards' it upheld could amount to as much as $80 million.

Lehman's bankruptcy on Sept 15 sparked protests by investors in Hong Kong and Singapore seeking compensation for the products sold by DBS and other financial services companies.

'What's far more useful is to ensure good disclosure: simple, clear, good disclosure,' said Mr Tharman, adding that the monetary authority will study 'all' investor complaints.

He also said the note buyers should bear the responsibility of the investment outcome if there's no mis-selling by the banks, though he said his 'sympathies' lie with the investors, reported Bloomberg news.

Islamic investment products

Dear Mr. Tan Kin Lian,

I am an avid reader of your blog and must thank you very much for all the help and info you provided. Unfortunately I invested in Minibond before getting to know about your blog.

Though not urgent, perhaps you could write something about Islamic Investment products in your blog. I somehow feel that the current fiasco involving Minibond, Jubilee, Pinnacle, High Notes 5 products etc WOULD NOT have occurred had these products been structured according to Islamic investment guidelines.

From the little I know about Islamic investments, they are governed by certain principles viz:-

> Full transparency in the product structure. Product should not knowingly hide bad points and boast about the good points.
> There must be no intent to deceive investors, nor sell knowingly worthless products.
> Product should not involve highly risky companies whose values may swing very high or very low.
> Product should not be speculative in nature, but rather based on solid long-term fundamentals.
> Investment should not be linked to immoral activities eg gambling, drug trafficking, prostitution etc.
> “Interest” should not be paid to investors, but modest “dividends” may be distributed to investors based on product profitability.
> Above all, the investment product must comply with Islamic religious scriptures.

I feel such products are what we need in this age of uncertainty. They will be very reassuring for the bulk of investors who are mainly low-risk type. Certain Middle East countries are moving fast in this direction, including targeting women investors who are traditionally risk-averse and are now coming out of the closet.

In the book that you are planning to write, pls dedicate several detailed chapters on Islamic Investment products. The world is full of western-style investment gurus, but short on Islamic Investment advisers.

I don’t see much of Islamic investment opportunities for the retail sector in Singapore. There are some, but are meant more for institutional investors or having a high entry level. Any pointers on this pls? Thank you very much for your continued efforts to educate investors.


I am not knowledgeable on Islamic principles. But, I must say that I like all of the principles that have been described above (except the "above all" principle, which is relevant only to the Muslims).

Remembering Mohideen Gany

Dear Mr Tan,

On behalf of my family, I wish to thank you for your kind concern, visits and support during my father's last few moments.

I know how much my father must have been comforted by your visit and presenceand had valued & treasured those moments when you visted him at the hospital and at home.

He had held NTUC INCOME very dear to his life. I know that for sure as my siblings and I grew up in the midst of his untiring effort, commitment and dedication to the progress and development of NTUC INCOME.

He had been a model and an inspiration to me and we sorely miss him. We are proud of his achievements as the First President of NTUC Summit Club President and for being one of the leading organisers for several years in the 1970's and 80's.

Thanks for remembering him in your blog.

With deep appreciation and thanks
Naseer Ghani
(His Eldest Son)

Interview of investors on Blogs

The Online Citizen and Wayang Party wish to interview investors and upload the interview (on video) into their blogs. This will help to bring the message to the wider public about how the ordinary people have been misled into investing in these toxic products.

If you are willing to share your experience, as a lesson for other people to be careful in the future, please come forward to be interviewed.

You can send an email to

Publish a book on Credit Linked Notes

I wish to collect materials to publish a book to outline the experience of investors of the credit linked notes (i.e. minibonds, pinnacle notes, high notes, jubilee notes, etc).

If you wish to share your personal experience, please write your story (800 to 1200 words) to explain the following:

1. How did you get to invest in these notes
2. What were your told about the product
3. How much did you invest
4. What was your past experience in investing your money?
5. What was your reaction when you learn about the true nature of these credit linked notes?
6. How does the financial loss impact you?
7. What lesson do you wish to share with the future generation?

Please use your real name, contact number, name of product and financial institution. The editor will use another name (to hide your identity) and get your agreement, before your story is published.

Send your story to

Lawyers able to act on credit linked notes

Read the following:

How I was misled (2)

Dear Mr. Tan,

My UOB fixed deposit has matured during that period. During that time H has a better interest rate offer for fixed deposit. We intend to place the money as fixed deposit with H.

When we were there, the staff at the counter persistently advised us to deposit our money into their investment product. We told her that it was our life saving and we were a low risk taker and would not want to take risk and we would want to place it as fixed deposit and we don’t want to get involve in any investment which we are not sure of.

She continued to show us a brochure on Pinnacle Notes and persistently advised us to reconsider as it is high interest rate return and also very low risk. Thinking that it would be very safe and we are going to put in our saving for sometimes, we agreed to understand further. She directed us to the Financial Manager R.

The Financial Manager R explained to us on the Pinnacles Notes product. She told us how good the product is and told us that it is for 5.5 years saving with higher interest rate of 5.25%. It is also a very low risk investment as the bank is investing on reputable AAA’s companies listed under the Reference Entities stated in the brochure so we don’t have to worry.

They are:
Commonwealth of Australia
Hong Kong Special Adminstrative Region of the People’s Republic of China
Republic of Singapore
Singapore Telecommunications Limited
Temasek Holdings Pte Ltd

She told us that even in the event that US or the whole world goes into financial crisis our deposit and interest will remain and continue to receive the interest every six-monthly. She told us that ONLY if one of the 5 companies goes bankrupt then our deposit will be affected.

We repeatedly highlighted to her that we are very low risk takers and this is our life saving. She kept reassuring us that the companies involved are all AAA and reputable company and we don’t have to worry about that. However, she never mentioned of any other investment on any other companies that the bank does that would affect my deposit.

She also told us that this product is overwhelming and they reopened it again.
To be cautious, I called one of my colleagues for his opinion. He said that the five companies are quite reputable and if the promise is there, then it should be ok.

After some thoughts, we decided to invest in the product since she kept repeatedly said that the risk is very low and ONLY if one of the 5 companies goes bankrupt then our deposit will be affected and the product is going to end soon on 30 Nov 2007 and we may miss the opportunity.

She did mention to us that the investment is not guaranteed return. She repeatedly assured that ONLY if one of the 5 companies goes bankrupt then our deposit will be affected.

She asked us to sign some forms to declare that she have briefed us on the product. She mentioned that it is only for formality sake. We don’t totally understand the content in details. Based on verbal trust of what she had assured us and since it is formality we signed the form as this is our first time investing in such a product.

The forms were given only after we agreed to invest in the product. We didn’t really read the forms in detail. Just like we buy and sell HDB flat where the officer will require us to sign copies and copies of forms, we do not have the time to read all the details especially the small prints. We don’t really fully know and understand what is in the content in the forms.

We totally rely on what the Financial Manager R verbally assured us. The most important aspects of the advice is that she kept repeatedly assuring us that the risk is very low and ONLY if one of the 5 companies in the Reference Entities goes bankrupt then our deposit will be affected. Even if US or the world goes into crisis it will not affect our investment and we will continue to get our interest six monthly. The most important point is that she did not mention of any other investment on any other companies that the bank does that would affect my deposit.

Speech at Speaker's Corner - 15 Nov 2008

1. Petitions to MAS
1 wish to give you an update of the progress of the three Petitions sent to the Monetary Authority of Singapore.

Petition #1 was sent to MAS on 9 October 2008. It was signed by 983 investors of the credit linked securities. It asked the Government to investigate into possible wrong-doings by the financial institutions that created and marketed these securities to the retail investors.

If there were possible wrong doings or breaches of the existing laws, specifically the Securities and Futures Act and the Financial Advisers Act, the Petition ask the Government to take appropriate action against the financial institutions and to seek fair compensation for the investors for their losses.

I met with Dr. Andrew Khoo and his colleagues on 9 October to hand over the Petition, which was addressed to Mr. Goh Chok Tong, chairman of MAS. I briefed Dr. Khoo and his colleagues about the possible areas of breaches of the existing laws.

I have not heard from MAS subsequently on the outcome of this Petition. I have sent two rerquests to Mr. Goh Chok Tong and to Dr. Andrew Khoo for a meeting to discuss the progress. So far, I have not been successful in getting this meeting.

Petition #2 was sent to MAS on 17 October 2008. It was signed by 277 investors. It asked MAS to investigate the sales training and marketing processes of the financial institutions that distributed these securities. Specifically, the investigation should examine if the sales representatives that distributed the securities were trained about the correct features of the securities and on the content of the prospectus, so that they can give the correct information to the investing public.

I have received an acknowledgment to this Petition. I do not know if the MAS intend to carry out any investigation as requested in the Petition.

Petition #4 was sent to MAS on 31 October 2008. It was signed by 1,017 investors. It asked MAS to review the complaint handling process of the financial institutions that distributed the credit linked securities. It asked MAS to set up an independent unit to receive the complaints and to encourage the financial institutions to adopt a collective approach in offering fair compensation to the investors who were misled into investing in these securities.

I have asked for a meeting with a senior official in MAS to discuss this petition and to follow up on the progress of the earlier petitions. My request was declined.

I reminded MAS that I am speaking on behalf of about 1,000 investors. They should not ignore my request for a meeting or to treat me like any single individual with a grievance. Even a single voice should be heard. If 1,000 voices are not loud enough, I wonder what will make our officials hear?

I will continue with my efforts.

2. Letter from an investor
I wish to share with you the views of an investor called SB. It is posted in my blog. This investor is willing to share some responsibility for investing in the credit linked securities carelessly, but is unhappy with the response of the Government leaders. I read his letter to you:

I replied to SB that his approach is along the same lines that have been covered in Petition #1. So far, I have not heard from MAS if they intend to carry out an independent investigation into this matter.

3. Statutory declaration
A few weeks ago, I suggested that each investor should get a lawyer to help you to write a statutory declaration. This statement should explain how you were advised into making the investment. If you were given the wrong information or were misled about the credit linked notes, this fact should be stated in the statutory declaration. The lawyer will help you to state this fact properly.

You should make the statutory declaration truthfully and honestly. If you tell a lie, you can be prosecuted under the law. However, if you tell the truth, your statement under oath will have a stronger impact.

If many investors make similar statements about how they were sold or mis-sold on the credit linked notes by the sales representatives from the same financial institution, these declarations taken together will establish a pattern of mis-selling by the financial institution. It will convince an independent and impartial judge about the mis-selling.

The Monetary Authority of Singapore and FIDREC said that the statutory declaration is not necessary.

Subsequently, we learn that many of the financial institutions have rejected the claims of mis-selling made by the investors.

If your claim has been rejected, I advise you to make a statutory declaration now and lodged your complaint again with the financial institution. If they reject it again, you can use your statutory declaration to lodge your complaint to FIDREC.

You have lost many tens or hundred of thousand dollars in making these investments. It is better for you to send $120 to make the statutory declaration and lodge your complaint again.

If the statutory declaration is still rejected by FIDREC, you can join the collective legal action. The statutory declaration can be used for this third step.

4. Collective legal action
My committee is discussing with a few lawyers on the approach to take on a collective legal action.

Our Government leaders and MAS have advised that this should be avoided, and that other avenues are open for the investors to seek their redress.

Many investors have lost faith in their recommended approach.

My committee will help the investors to prepare for collective legal action, but we still advice that the legal action should be taken only as the last resort.

I hope that the MAS will respond to my requests for a meeting to discuss how the matter can be resolved fairly and that a costly legal action can be avoided.

We are still keen to seek an outcome that is fair to the investors and preserve Singapore’s reputation as a financial hub that can be trusted to take care of the interest of the ordinary people.

Tan Kin Lian

Sunday, November 16, 2008

Pinnacle Notes value as at 14 Nov 2008

Bid Side Valuation (including Accrued Interest) based on Morgan Stanley’s discretion
as 14 Nov 2008:

Pinnacle Series 9 0%
Pinnacle Series 10 0%

Pinnacle Series 1 1.83% 1.47%
Pinnacle Series 2 3.79% 3.26%
Pinnacle Series 3 10.32% 10.03%
Pinnacle Series 5 8.61% 8.35%
Pinnacle Series 6 2.95% 1.26%
Pinnacle Series 7 1.67% 1.48%

The above notes lost more than 89% of value

Pinnacle Series 8 69.50% 66.28%
Pinnacle Series 12 79.97% 80.28%
Pinnacle Series 15 84.87%
Pinnacle Series 16 82.15%

Check the weekly prices of your credit linked notes

Here is a tip.

Ask you distributor to show you the website that you can check the weekly prices of the credit linked notes that you have bought.

If you find that the notes have dropped in value, you should ask for an explanation from the distributor or the product issuer.

You can make your request verbally. If you do not get a satisfactory answer, you can send your request in writing. If it is still not answered, you can lodge a complaint with MAS.

It is the duty of the distributor to advice you on how you can get this important piece of information. As the value of many series of notes are dropping seriously, you should monitor these values regularly.

Ask for your risk analysis form

Here is a tip.

Write to the financial institution to ask for a copy of the risk analysis form that you signed at the time that you bought the credit linked notes.

Check if the answers in the form are based on what you told the sales representative. If the answers are not taken from you, you can write a letter immediately to point out any wrong facts.

A few investors have asked for and received the signed form. They found statements written by the sales representative (of the distributor) without their permission. If the wrong facts are entered with fraudalent intent, you can lodge a police report.

You can consult a knowledgeable fellow investor about the implications of the facts contained in the risk analysis form.

Views posted by an investor

To: All Investors,
Please ask your FI for a copy of ALL documents that you signed, preferabky BEFORE going for the interview. There have been some cases where the FI's copy of the risk profile form contain additions and/or modifications that were not reflected in the investor's copy. This is highly irregular.

During application time, the RM typically asked some random questions which were ticked on the form. The investor then signed the form, and the RM gave investor his copy on the spot. Later on, the RM filled up the balance of the form with info in his favour. This additional info was not made known to investor upon signup.The investor has unknowingly signed a "blank check".

The RM should get the agreement of the investor for any additional notes he plans to add, but he did not.From a legal standpoint, can one argue that the risk analysis form is invalid, and hence the entire purchase agreement in null and void?

Barclays AREIT

Hi Mr Tan,

What can you tell me about Barclays AREIT. I bought this product from DBS. The officer told me it is a safe product with little risk and it is gives dividends. Since I joined in 2006, at $1, I have now lost about half of the investment.

Can you advise?


You should ask DBS and get them to reply in writing. If you do not understqnd the product, you should ask them to explain in terms that you can understand.

Invitation to investors who bought from UOB Kay Hian

We would like to invite investors who invested structured products (Pinnacle Notes, Minibonds, Jubilee, etc) through UOB Kay Hian to join our contact group. Many of us have a frustrating experience with UOB Kay Hian individually and we believe we can engage UOB Kay Hian more effectively as a group.

Please send us an email at, indicating your full name, email and phone contacts and type of products bought. Thank you.

UOB Kay Hian Investors Group

How I was misled (1)

Dear All,

I have written to H and MAS 3 weeks ago. Until now, I have not got any reply from them yet. I have bought Pinnacle series 6 & 7 from H. I felt that I am misled and I this was what happen to me.

Last year June 2007, I was looking around for banks that offered good fixed deposit rates. Through the website, I found out that H offered one of the highest interest fixed deposit rates.

My wife and I then went to H as it was near to our workplace. When we approached the counter staff on the intention of opening an fixed deposit account, she instead persuaded and recommended us the Pinnacle Notes Series 6 & 7. She told us that this product was as safe as fixed deposit but with a much higher interest paid out. Upon hearing this, we were quite excited and keen of learning more of this product. She then introduced us to the FM J, as she was busy assisting customers who had signed up for the Notes.

J started by showing us the brochures at the side of the counter. She told us that the response was overwhelming the H might stop accepting further applications as they had a lot of back log to process and clear.

The following was what she had told us during that short time :-

* The notes issued are invested in five leading banks, namely DBS, Citibank, UOB, OCBC, BOA and as well as SingTel.

* It pays between 5.2% and 5.0% interest per year for a 5.5 year tenure.

* Series 7 is tied to the share price of the mentioned 5 leading banks and SingTel.

* The risk is low and it operates just like the fixed deposit account.

* She did mention that the principal amount is not guaranteed but she assured us that the 5 leading banks and SingTel will not go bankrupt. She told us that even if you put your money in the fixed deposit account and the bank goes bankrupt, you will also stand to loose your principal amount.

* She further explained that as the money will be invested in the mentioned 5 leading banks and SingTel, even if you are so unlucky that one of the banks goes bankrupt, you will note loose all your principal amount, unless all the 5 banks go bankrupt a the same time.

* During the short time that she explained the product to us, she kept emphasizing the word "secured" credit linked notes. Hence, the product is extremely safe as it is linked to the 5 banks and SingTel.

* We were under a bit of pressure to sign up on the spot as she kept saying that due to the overwhelming response, H would stop accepting further applications these one or two days, before the closing date.

We were definitely being misled into believing that the Notes are used to invest in the 5 banks as well as SingTel. We invested $X Each in both Series 6 & 7 Pinnacle Notes.

Hastily, she filled up the application form for us, with brief explanation. Thereafter, she told us that she needed to do a simple survey of my profile. She said that this was required by her company. She flip through the survey form and randomly asked a few questions. She asked about our particulars, whether do we need the money in the next five years, and also did we purchase any similar products from other banks. The rest of the questions, she said she will tick "average/medium".

Before we left the bank, she handed a copy of the application form and survey form to us. Since then, we did not hear anything from H until 11 July 07. We received from DMG & Partners a confirmation notice that we had bought the Series 6 & 7 Pinnacle Notes. We have also received 2 payouts, on Jan 08 and July 08.

When we learnt of the collapse of the Lehman Brothers Bank and protest from investers of Pinnacle Notes, we decided to check it out from H.

On 9 Oct 08, I went to H to check if the Notes that we have invested are alright. Only then that I came to realise that our money are actually not invested in the 5 mentioned banks and SingTel. It was instead invested in 125 companies and 2 (Lehman Brothers and Washington Mutual) had already bankrupt. I was shocked and asked to see the list of the 125 companies. They were initially not very willing to show me but I insisted. I was even more shock when I received their email, as it is not only invested in the 125 companies but also used to buy credit card bills of Chase Bank.

I asked why we are not shown this list, prior to our purchase of these Notes. His explanation was that the list of companies which they have invested were only released after the offer period closed.

We were angry and fustrated that how can a Relationship Manager from such a reputable financial institution, deceived us into believing that the product is issued and invested in the 5 banks and SingTel, and that it is very safe, just like fixed deposit account.

Did the Financial Insitution do a risk assessment before they undertake to sell the product? Why are we not shown the list on what were invested. No clear and detailed explanation is provided before our purchase. Why H did not update us after the closing date on the list of companies that the notes invested. Why H did not update us when 2 of the 125 companies go bankrupt?


Mibibond has return of 3 (on scale) and risk of 9

This contribution has been edited by TKL

Dear Mr. Tan
If we using the rating scale of 1 to 10 for the return and risk, then if the fixed deposit is rated at return of 1 with the risk of 1 , then minibond should be rated at return of 3 but with the risk of 9. OCBC 5.1% preference share should be rated at return of 3 and with the risk of 3.

Risk analysis for OCBC PS and minibond :

> We can sell the OCBC 5.1% PS anytime if we need cash

> We are locked up for 5 full years for minibond.

> The risk for losing everything for OCBC 5.1% PS is when OCBC bank go bankrupt

> The risk for losing everything for minibond is any one of the followings:
1) any one of the six major banks or Lehman brothers go bankrupt
2) some others credit events(out of 150 CDOs) occurred (very complex)

Under (1), the risk of minibond is already 7 times of OCBC PS. If we include (2), the risk will multiply, say 20 to 30 times. (I have the impression that the 150 CDOs are much more risky than the six banks)

Clearly, no one in the right mind will buy minibond for a return of 3 but with the risk of 9, if they are aware of the full risk.


Wayang Party

I wish to introduce you to another blog that contains information about developments on the credit-linked notes, and also about issues in Singapore.

Lesson from China: Hu Jintao

Chinese President Hu Jintao said China can help alleviate the impact of the financial crisis and slowing global growth by stoking its own economy.

Steady and relatively fast growth in China is in itself an important contribution to international financial stability and world economic growth.

China announced a $586 billion economic stimulus, focused on building low-rent housing, roads, railways and airports. The package also allows tax deductions for fixed assets such as machinery to stimulate investment. Farmers will also benefit from more subsidies.

China has taken an active part in the international cooperation to deal with the financial crisis and played a positive role in maintaining international financial stability and promoting the development of the world economy. Hu suggested that rich countries must take the lead in addressing the crisis.

Developed nations “should undertake their due responsibilities and obligations” by stabilizing their economies, restoring growth and taking steps to “safeguard investors’ interests”.

Lesson from President-elect Obama

Extracted from
Obama said he has assigned someone on his presidential transition team who interacts with Paulson (treasury secretary of Bush administration) daily.

"We are getting the information that's required, and we're making suggestions in some circumstances about how we think they might approach some of these problems,'' Obama said. Obama also said the government must do more to help distressed homeowners.

"We have not focused on foreclosures and what's happening to homeowners as much as I would like,'' Obama said, according to the excerpts. He called for setting up ``a negotiation between banks and borrowers so that people can stay in their homes.''

Translate into Singapore situation
The government and MAS must do more to help distressed investors of the credit linked notes.
They have not focused on helping the investors as much as is possible. There should be a negotiation between banks and investors so that fair compensation can be given to the investors for their losses.

Write directly to MAS and your MP

Dear Mr. Tan,

I am writing with a great deal of embarrassment. My husband and I are far from being uneducated. In fact, there are two phDs between us but that goes to show that stupidity doesn't discriminate against people with education. We sank $100 000 - half of it was with pinnacles 8.

I have the following questions:
(details deleted)

What we want to say is that there is definitely a history of misrepresentation in this case. However, we are also embarrassed by the fact that we were so gullible and trusting. In the news, much is made of the plight of retirees who couldn't have known better. However, the honest truth is - it is a very complex product and if we (someone like us) could not understand it, I suspect, many people will walk into this blindly.

My point - the law usually wouldn't allow anyone to sell lousy goods in bad faith. However, when it comes to banks - they can legitimately take millions off simple folks like us and walk away. This is what I find incomprehensible. Is MAS an innocent bystander?

Finally, I just want to thank your website for helping me understand the issues even though I feel more of a fool after reading what others are saying. What I want to say is that don't assume education is going to protect you from such blunders. (details deleted)

I hope this reaches your personal email account and not your blog. If for some reason it goes to your blog, I would be grateful if you could remove it.

I advise you to write directly to the MAS and to your member of Parliament. I have a few hundred people writing to me on similar experiences. I do not have the power to do anything, except to post into my blog, speak at Hong Lim Park, and organise Petitions (which are ignored by MAS).

G20 and G8

The G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.

The Netherlands and Spain were also represented, as were the IMF, World Bank, Financial Stability Forum and United Nations.

The G8 are Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States of America, and the President of the European Commission.

There are still regulations in Singapore

I brought my small dog to Yio Chu Kang stadium. After two rounds the track, the attendant called to me. He said that "dogs are not allowed". It is posted in the regulation of the stadium. I checked and found "Animals, birds or reptiles are not allowed".

It is an irony. MAS registered more than 50 series of credit linked notes that are approved for sale to the public who are expected to invest "with their eyes open". It seems that dogs are not allowed in the stadium, but credit linked notes, with "first to default" swaps and 100 or more toxic CDOs are approved - even if you can lose a lifetime of savings.

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