Tan Kin Lian's Blog: Only 20% received offer

Saturday, June 27, 2009

Only 20% received offer

Dear Mr. Tan
508 million was invested in minibonds. but Mr. Goh revealed offers made to victims from the distributors totalled 100 million, or 20%. Is it a joke of the century or what when Mr. Goh bragged about "2/3 receiving compensation?

17 comments:

Anonymous said...: Did he meant 2/3 who submitted for claims and were eiligible for the claim?; June 27, 2009 1:15 PM
Anonymous said...: If he shouts loud enough they may become truth. You can see that he unashamedly bragged without batting an eyelid. As chairman of MAS he cannot appear blind.
He too must say with 2 eyes wide open.; June 27, 2009 1:30 PM
Anonymous said...: Mr. Tan
Given what has happened, it is very easy to overreact. But I do not think the financial industry should be over- regulated. Creation of new financial products should continue to be encouraged.
A lot of products currently villified by the press and to the extend egged on by this blog are not scams. Minibonds and ELNs did provide good returns for a lot of people prior to the crisis. Retail investors should not be deprived of access to products if they understand and is willing to take the risk.
Just because one losses money does not mean the product is bad. Are AUD/NZD dollar deposits and bank stocks bad? Should investors ask for 100% return of their money?
The issue here should be regarding having the right regulatory framework and enforcement. Suggestions by David Webb (famous Hong Kong financial commentator and activist) should be noted. He does not suggest a ban of all things derivatives..etc. He favours disclosure of how much marketers make, and also a cooling off period. I think this is a level headed approach.
It is reported in SCMP today that the SFC chief reported yesterday to HK Legco that they found product sales document to have met legal requirements. I know this is not what victims, bloggers and commentators may like to hear or believe, but sometimes the truth may not be popular. I really think the topic of misleading documentation should not be confused/mixed up with misselling of products, which is the problem here. If the salesperson did not disclose terms of the product properly to they should be punished. However, if buyers have read the terms and agree to it, then they should assume the risk that comes with the return. If the terms of the contract is too complicated to understand why did the buyer buy in the first place? Then are victims claiming they were lied to or wrongly assured by the salesperson?
Then it is a misselling issue again.
Where do we draw the line? Should the government play big brother and decide which type of products are allowed and not allowed to be marketed? I hope we don't go down that road. As a financial product consumer at the retail level I do not want an environment where only the rich individuals and corporations have access to a broad range of products and we don't.
The regulators have had a lot of mud thrown at them as well. However, it is best we all step back a little and re-evaluate the situation from a different angle. Do we blame the police for all crimes out there? Regulators can't stop crime and dishonesty, but they can investigate complaints and prosecute when they have the evidence, I think they are doing that. The broader debate around role of the regulator is should functions of the SFC and HKMA be combined. And this is also happening in the US with regards to Fed and the SEC. And my view on that is rather than combining the roles of these regulators, we should keep it separate. In fact, we should go have to the pre-Citigroup days when Banks are deposit taking and loan making institutions and brokers are financial product providers. The Glass-Stegall in the US was created after the last Wall Street mess in the 1930s and the model replicated globally for decades rather successfully until the repeal and the recent craziness. Banks putting depositors at risk with their wanton risk underwriting with a view of selling on the risk to retail. Investment banks without access to deposits and lack of balance sheet forced to take on more risk just to compete with banks. Perhaps it is time for us to focus on the role of legislators in this debate, as regulators can only do what their scope allows them to do.; June 27, 2009 2:06 PM
Anonymous said...: Dear first poster.
I don't know how to explain to you. But I can give you a simple mathematical illustration (based on hypothetical numbers) for example:
* 100 investors bought $100 minibond ($1 each)
* 80 investors or $80 were mis-sold.
* 67 investors were offerred compensation, each at 30% of investment, ie $20 compensation was offered
* 50% offered investors accepted offer (ie 33 investors or $10 compensation).

If you do the maths, the following are correct answers:
(1) 67% of investors was offered settlement.
(2) 20% investment value was offered settlement.
(3) 33% (50% of offers) pax accepted settlement
(4) 10% or $10 investment value accept settlement

Comparative Analysis, based on hypothetical numbers:
(a) Assuming there is justice, compensation could have been $80
(b) Compensation based on current procedure $10
(c) Injustice ratio 8x ($80/$10).

# Disclaimer: No politics, just brain teaser in mathematics.
# Other note: The newspaper only mentioned Minibond. There are still many other products not being reported yet.

Note from Maths Analyst; June 27, 2009 2:11 PM
Anonymous said...: The $100 million is only from 3 banks and 1 finance company. So not really 20% of total. Could be more. But I guess may not be much more otherwise they would have bragged about it.

They should break down by amounts invested eg for full compensation, what was the amount invested, 50% compensation, what was the amount invested etc.

Because I have the feeling that full compensation maybe for amounts less than $10K. Or for more than eg $100K, it maybe 50% compensation or less.

I even have the feeling that the more you invested, the less or even zero compensated, doesn't matter whether you are young or old, educated or not.

I based my obsrvation on some anecdotal letters of complaint by victims to the press, as well as how the FIs asked victims about their total net worth in evaluating compensation.; June 27, 2009 3:35 PM
Anonymous said...: MAS and government are just selecting numbers to put forward an impression to public, we investors remained unhappy and damned !!!; June 27, 2009 5:15 PM
Anonymous said...: If other products (other than minibomd) are included, the % would be much less!!; June 27, 2009 10:00 PM
Anonymous said...: June 27, 2009 2:06 PM,

That is being unfair to the 99.9% of the investors who are just clueless. To conclude that because an investor bought the investment puts him or her in your category, the savvy investor or the intelligent investor according to Benjamin Graham is unfair. Now you should know how many got 'trapped' or beguiled into buying the investment and these people were ordinary folks without any iota of investment knowledge let alone knowledge of derivatives.
You are right that these alternative investments are good if you know how they work otherwise you have to depend and trust somebody to advise that they are good. The old folks, the uneducated and even those PhDs when it comes to investment they are like fish out of water.Therefore they depend on the middleman, the human being in between called the insurance agents or the RMs for advise and help and decision making will be solely on this advice. This advice can be wrong if it is NOT properly derived. This is exactly what happened.The RMs didn't conduct a proper fact finding. The RMs weren't competent. If you add these two together you get a salesman who was hard pressed to push the product for the commission and that was what they did. A 1/2million deal was tied up in 30 minutes, super duper fast and which would take a qualified financial planner 3 meetings at least. Exactly the customers were duped into buying.That was how all hell broke loose.
As for you, the savvy one, why should you pay commission to agents or RMs for no advice as their so called 'advice' would be form filling only or execute only.; June 27, 2009 11:01 PM
Anonymous said...: I like to respond to the post on June 27, 2009 2:06 PM.

*** Clarification no 1. ***
* Your comment: "Given what has happened, it is very easy to overreact. But I do not think the financial industry should be over- regulated."
* Reality: Mis-selling is not a moral obligation; is is a statutory duty under s27 of Fin Adv Act.

***Clarification no 2.
* Your comment: "A lot of products currently villified by the press and to the extend egged on by this blog are not scams. Minibonds and ELNs did provide good returns for a lot of people prior to the crisis."
* Reality: Whether the products is good or not, it is the FI responsibility to explain the product clearly. We are not talking about market risk of structured products, we are talking about the systematic risk of the structured products.

***Clarification no 3. ***
* Your comment: "It is reported in SCMP today that the SFC chief reported yesterday to HK Legco that they found product sales document to have met legal requirements."
* Reality: Product sale document is differrent from selling. For example, the product description for "viagra" is clear; but a irresponsible sale staff think it is safe for you without explaining the details of the danger. Another example, no doctor will prescribe Viagra or Sleeping pills within 15 minutes of diagnosis; while the sale document of Viagra is legally correct.

*** Clarification no. 4 ***
* Your comment: "Should the government play big brother and decide which type of products are allowed and not allowed to be marketed?"
* Reality: The reality is that MAS is the authority. We are not undermining MAS's authority, we are just asking MAS to do what is required to do under the statutory duty under Fin Adv Act.

FROM CASHEW NUT; June 27, 2009 11:50 PM
Anonymous said...: No, it is not the joke of the century. It belongs to the same class of statement like the "More Good Years" type. What else you expect the chairman of MAS to say? This is consistent with all these "Good Years" that we are experiencing. If he says its good, it must be good lah.; June 28, 2009 1:47 AM
Anonymous said...: GCT also speak loud and clear:
1. We will reach Swiss standard of living by year 20XX.
2. We will be qualified for Football World Cup by year 20XX.
(Can't remember the exact year he mentioned, but must be in HIS life time)
3. The Govt will share more national assets with you.(During SINGTEL IPO launching)

And now what happen?

All are crabs.; June 28, 2009 2:45 PM
Anonymous said...: GCT is the JOKER of the century.; June 28, 2009 4:09 PM
Anonymous said...: Cashew Nut. I could not agree with you more. Then again that is actually exactly what the post is saying. Rather than focusing on the product being bad, it is the misselling. I.e. the Viagra analogy.; June 28, 2009 6:43 PM
Anonymous said...: Hi,
After what has happened, I have lost faith in our financial system.; June 29, 2009 12:38 PM
whattodo said...: Well said Cashew Nut. I really wish that people can spend more time study the issue before giving their comments.; June 30, 2009 10:29 AM
Anonymous said...: If MAS wants to play with figures, they are at least 2 FI's in Hong Kong paid 100% to ALL their investors. Isn't this 100% compensation to their customers?; June 30, 2009 11:32 PM
Anonymous said...: Vote these people out. You now know they are not on your side when you need help.

No longer a PAP voter; July 01, 2009 5:50 PM