Several investors have suggested that a petition be sent to the Prime Minister to ask him to get the banks to offer compensation similar to Hong Kong, namely 60% now and 40% of the proceeds at maturity. Is there any point to organise this petition? Can it be the focus of the Gathering on 22 August in Hong Lim Park?
I Think the PM is well aware of the situation so a petition is not going to change anything.
ReplyDeleteThis is why govmin doesn't believe in forcing the distributors to be more generous, despite evidence of misselling -- something MSM, and investors have skirted over.
ReplyDeleteThe average 12 mth FD rate for banks in 2007 was 0.8% and that of finance co was 1.5%.
Minibonds were paying 4.88% pa and DBS HN5 5% pa
This means minibond was paying 610%more than bank FD and 325% more than finco FD.
HN5 note was paying 625% more than bank FD and 367% more than finco FD.
Govmin conclusion -- these investors shld have known better. So high differential, and still claim risk?
Govmin is sacrificing the chicken (minibond, DBS HN5, Jub, Pin investors) to scare the monkeys (S'poreans who take risks blindly.
No harm trying. At least we know what his stance is and we will then know what to do next.
ReplyDeleteAdding to An Inconvenient Truth.
ReplyDeleteNot fair to use 12 mth FD rate because minibond, HN5 is for 5 yrs.
There is no MAs data on 5 yr FD because there is no such FD.
So using using the yield of 5 yr govmin bonds (2.33% pa in 2007), this shows minibond interest rate of 4.88% is 209% more than the yield on 5 yr govmin paper. That of DBSHN5 is 215%.
This doesn't make investors look so greedy but it is still a big enough markup to warn them not to have trusted trust RMs' sales talk.
Dear Mr. Tan,
ReplyDeleteInstead of petitioning the PM, it may be worthwhile to petition MAS to get the trustee to make more disclosure. Fo Example, the following is an extract from the trustee website on the minibond as follow:
"- In the meantime, no coupons will be paid to noteholders of any series of Minibond notes. While there could be monies received periodically from the underlying securities for a minority of the series, as enforcement action has been taken, these sums will be retained by the Receivers and applied in accordance with the priority provisions in the programme documents including, to the extent necessary, funding the ongoing costs and expenses of the enforcement process in respect of the series to which they relate."
The trustee never disclose the income received from the respective series of minibond and how the fund received is disbursed.
I believe the investors should be informed. While it may not be possible to determine the value of the notes, it is certainly not an issue to disclose the income stream of each series received (Its already been paid and received)and also the amount disbursed for professional fee.
Can the trustee received the income stream from some series and paid this out as fee for all series?
Hi An Inconvenient Truth:
ReplyDeleteThe other truth is: Both NTUC Income and Great Easten were also offering 3.5% to 5.5% returns for their single premium policies for 5-10 years, capital guaranteed, in 2007.
Maybe going to MP and asking them to bring up this issue in Parliament is better, ask your MPs why do HK get 60% and Taiwan 100% ??? Ask them for an answer?
ReplyDeleteHi Kin Lian,
ReplyDeleteI have now moved my case to FIDReC for mediation/adjudication.
After months of waiting in anticipation, MAS’s report has identified wrong and unethical practices by the FIs on wide-spread or systemic scale. But alas, the punishment meted out is lame and insignificant and painless for the FIs. It is a great mystery why no monetary penalties are not imposed by MAS, a practice quite commonly done by other regulators when public interest are involved.
The govt’s care and loyalty to its people is misplaced and questionable. In a democracy, the FIs are innocent until proven guilty. But now that their guilt have been proven, surely the burden of prove of any innocence must shift to the FIs. But not so,
according to MAS. It is telling the victims that they must still prove their innocence on a case by case basis despite its findings that the FIs’ wrong-doings are not isolated ones but wide-spread. This stance of MAS, our caretaker our regulator and public servants of the people, is cruel, mindless and incomprehensible. I liken it to throwing innocent victims, mostly ill-equipped, into gladiatorial pits to fend for ourselves against horny raging bulls. We all know it wouldn’t be fair fight, MAS knows that and we all were hoping for their divine intervention and salvation against the guilty. Alas in vain.
Now tens of thousands of individual citizens are asked to write off hundreds of millions of their hard-earned money and much-needed retirement funds. The govt is rubbing salt into our wounds. These defaulting and financially-healthy are in the meantime happily drawing on the Resilience Package, in particular the unconditional Jobs Credit Scheme, in the millions which are funded by national reserves of the people, the victimized investors included, which will be more than sufficient to defray the settlements these FIs have paid out.
So yes yes yes. Individual public protestation is illegalized. Access to the main media is muted. So Speakers Corner is our last resort to publicly rally, protest and demand. The public and the media must also be given the true small scale of FIs’ settlement to put the remaining atrocity in the right perspective.
SB
The PM has no more moral authority to ask the banks for anything. Can you imagine him asking the banks not to be greedy? What will the banks say back to him?
ReplyDeleteThe FD rate was around 3% for 12 months FD during that time. These products paid 5% but you have to leave your money wth the bank for 5 years. I do not think the interest rate was excessive.
ReplyDeleteIn fact DBS, OCBC and UOB was paying 5% for their prefernce shares.
ReplyDeleteNot true, at that point of time (2006), I put my funds in Maybank isavvy account, with the flexibility to withdraw anytime, int rate was 2.08% ... who will be so silly to be exposed so high risks for tat miserable 4.88% and being tight down to more than 5 yrs ?
ReplyDeleteDear Inconvenient Truth.
ReplyDeleteI understand your story. I can see your frustration.
I just like to add that we cannot just say HN5 is paying 367% more than Finco FD. The issue is that the FIs are selling "viagra" in the "panadol" packaging. The issue is not the return, the issue is telling you "safe" when it is "not safe".
From Cashew Nut
Hello, REX has two points to make.
ReplyDeletePoint 1.
Regarding the course of action to take, i do think that petition to PM is quite futile for the reasons given by various posts here. It really boils down to finding someone in power and have guts and has some desire to be compassionate and above politics, and try to mediate a path. I am wondering if the Attorney General Mr Walter Woon can do something to help. He is an expert lawyer and also i reckon he does have some guts, we might see some light if somehow we create a case for the matter to be taken up or commented upon at the AG Chambers, just maybe....
Point 2
In one of the posting it was mentioned that no one would be mad enough to buy these toxic high risk products for 5%. To be more correct, at the point in time, the risks were really tied to default of the banks. Before the subprime crisis, nobody thought that these big US banks will crumble, so at that moment the risk was not seen as high.... The whole system crashed because of subprime loans default... caused by the greedy Wall street swines who issued the subprime loans that triggered the whole collapse. But before the knowledge of these matters was exposed, Lehman bonds were just about as safe as single premium insurance to the layman because of the trust in the brand names of these age-old institutions.
REX
Several commentors felt that there is no point in signing this petition to the Prime Minister, as he is not likely to act.
ReplyDeleteA smaller number (here and in another group) said that there is no harm giving it a try, as it will register the extent of the unhappiness.
As there appears to be not much enthusiasm and support for this petition, I will probably drop this matter.
I do not wish to organise any other petition, especially to the MAS.
You must understand that the Singapore Gahmen, and the PM as Head, does not work by petitions or protests, even legal ones at Hong Lim Park.
ReplyDeleteDon't bang your head against a concrete wall.
The sooner this is realised, the less effort, hopes and emotions wasted.
Reply to 7:20 PM
ReplyDeleteThe people who support the Petition know what you said. But they wanted to use the petition to register their unhappniess. They do not expect any positive results.
It is important for people to express their views, even though these views are being ignored.
You should respect other people's views and avoid making statements that make you look "right" and other people "wrong".
Dear Mr Tan
ReplyDeleteIn the American system of rough-and-tumble democracy, capitalism and free speech, such situations are resolved in a very straight-forward manner.
The person needing help says 'help me please'
The person who is in a position to help says "what's in it for me to help you ?"
The helper and the helpee will then sit down and do a bit of bargaining.
So my question to all who bought credit-linked notes ... what's your bargaining chip? And who do you have to negotiate with to get what you want?
I support this petition and the gathering at HLP, reason being this is about the only thing we can do to register our unhappiness and voice the injustice.
ReplyDeleteIn reply to 7:20PM,
You must also understand that the SG Gahmen does not work by anything else. Is there anything else to do that will really work? I do not think so. What they say is law. Given that we are not a democracy but a tyranny, in the final analysis there are only two real options, either keep quiet and accept whatever is shafted upon us, or pack up and leave.
Hi Rex,
ReplyDeleteYou point 2 is incorrect. These credit link notes are designed to failure products, not design to invest. At that time, most retail customers are not aware of its risk level. Unlike bond funds, one bond collapsed, you still have 7 (for the case of HN5). For these credit link notes, investors' monies are not invested in the bonds, instead, the monies used as insurance premium for the bonds issued by the Reference Entities.
Therefore one bond fails, all the monies will be gone.
John
Several members of the working group for the Gathering on 22 August are in support of the Petition. They like it to be the focus of the Gathering. So, the Petition is now being actively considered.
ReplyDeleteIt is indeed sad when one can forsee the outcome of the petition as futile. It speaks volumes of the sad state of justice in Singapore. It is still important to put through on record a petition, even if it only serves to put it on record for posterity and history lessons in the future, and to prevent the powers-that-be to not have an excuse that it was not brought to their attention or not serious enough to be put to their attention. Therefore, the petition must proceed.
ReplyDeleteThe use of a petition is a very Chinese thing from the olden times to today
ReplyDeleteThe popular belief that is that China's emperors and principal leaders are benevolent and that the main problem is that their subordinates simply fail to carry out their wise orders properly.
Now China is a big place, so this thesis could be valid. But it stretches credibility that in this little red speck, our all seeing, all wise and all powerful PM has missed this issue.
The PM hs already said that prospectus said you could lose all yr money. So has his father.
What more needs to be said.
I think there are better ways to spend a sat afternoon. TKL's initial view not to do the petition is correct.
But if investors want another petition, turn up and get yr friends to turn up. If there is less than 100 people, forget the petition, organising commitee.
hello John from REX
ReplyDeleteYes you are quite right, the so called minibonds are high risk in the sense that if one fail all collpase. Theoretically on academic basis you are absolutely correct. However, the "real" risk is related to one's perception of the specific bank's strength in the list given in the prospectus. The point i was making is that the banks constituting the list AT THAT POINT IN TIME was consdered good banks/FIs. The track records of all these banks/FI were spotless, they were world famous, has been around for donkey years, and so most layman, even governments, town councils, experts, viewed that not any one of these giant banks in the US could collapse in the blink of an eye.
So The point i was trying to make was that Risk is time-dependent. What is risky today might not have been risky in the past... the failure of the banks caused by the subprime loans bubble burst was something not every layman could predict or understand.. to them they just see the names of each and eveyone of these big banks, buy the product "with their eyes wide open" and see it as low risk.
Just like when you see NTUC Fairprice you just go and buy food and stuff into your body, also "with your eyes wide open" without worrying about risk, simply because we know NTUC has been around a long time, and government supported, there is no risk. Who knows unless you do a 100% analysis of the detailed operations of NTUC Fairprice.
Just an example, no offense to the company.
REX
Mr. Tan who is not a victim of this fiasco is willing to stick out his neck to organise the talk and petition for the affected investors, and yet some of the affected investors are saying that it is a pointless effort?
ReplyDeleteResults only come to people who help themselves. So, we must try, no matter how futile it is.
Hi REX,
ReplyDeleteI am not sure whether you get my point. Use your example of NTUC Fairprice, if the govt tells you that if NTUC Fairprice collapses, all Singaporeans will be starved to death. Would you still happily buying stuff with eyes open or would you be thinking of running to other countries. What I am trying to say is that these toxic products are ethnically wrong to be sold to normal folks in the first place, it has nothing to do with time dependent risk. Would you like to live in a country if NTUC Fairplace collapses, all of us have to starved to death? Although we all know that under PAP govt support, NTUC Fairprice at this moment of time it will not collapse.
Plse rethink! It is not the time dependent risk, it is the unsound structure! Regardless whether it is the country or the company or the product.
John
The aims of the petition are not only registering our unhappiness,
ReplyDeletebut to prove to the authority that
our regulatory system has too many flaws and needs to be re-edified.
I would like the petition consists
of the following contents:
1)The comparison of other countries
like HG, Taiwan in solving the
issue and who gets the highest
respect and praise.
2)What are the reasons MAS can not
fixed the culprits and put
penalty on them. Was MAS lax in
allowing the toxic products to
be sold to the public though
they were banned in the US?
3)The whole world is watching as
to how our PM handles the
issue in a fair and effective
manner. How can MAS be so
bias against the retail
investors and so protective to
the FIs?
Hi All,
ReplyDeleteWarren Buffet once said of these structured products ~ "they are weapons of mass destruction, ticking time-bombs waiting to explode".
No sane investor will buy them for 5% had not the perpetrators of the scams not concealed the risks, not the top and very visible layer of 6 or 7 Reference Entities, but the 125 to 150 Underlying "Securities" or "Assets",a basket of synthetic CDOs, the ticking time-bombs.
Petition to the PM likely will have no result but petition to MAS for trustee disclosure will allow note holders to make an educated guess on the minibond value and it is doabale.
ReplyDeleteIf we know the stream if income by series, we should be able to guess the value of the assets as we know the face value of the assets invested by series?
ReplyDeleteFYI, quote from wiki:
ReplyDelete"American Express began to divest itself of its banking and brokerage operations. It sold its retail brokerage and asset management operations to Primerica[32] and in 1994 it spun off Lehman Brothers Kuhn Loeb in an initial public offering, as Lehman Brothers Holdings, Inc."
In short, Lehman Brothers Holdings, Inc is only a 15year old company. Before that, it is known as Shearson Lehman Brothers.
Not sure why large fines would help investors who lost money. If MAS fines the FIs or RMs, the money would not go to the investors. Instead the money would go to MAS who would end up being richer for having failed in the duty.
ReplyDeleteWhat's worse is that if the fines end up bankrupting some RMs, then there would be no money to pay investors that manage to sucessfullly sue their RM.
I don't understand why there is this irrational fear of going to court. So much so that it was described as:
ReplyDelete"I liken it to throwing innocent victims, mostly ill-equipped, into gladiatorial pits to fend for ourselves against horny raging bulls."
Perhaps this fear is related to the fear Mr Tan perviously observed in a very well written post earlier in his blog.
Based on what MAS has released so far, it is quite obvious that some investors have strong claims because of the circumstances under which they were sold the structured product (e.g. RM not qualified, risk profile missing or not correctly done).
If such investors file an individual claim, the lawyer for the FI/RM would look at the merits of the case and advise the FI/RM accordingly.
If the case looks like a lost cause, then the lawyer would most likely advise to settle out of court rather than going for a full court battle.
Rich as the FIs are, it makes no commerical sense to spends large amounts of $$$ to fight high profile lost causes.
Refering to John's post, July 15, 2009 10:57 AM, herewith i comment.
ReplyDeleteI can agree with you that from Day 1 the products were "risky" and of "unsound" stucture but this is known only to very few people. Most people,, and i think many people even within the banks, FIs, the govt, even MAS could not fathom the dangerous principles that the notes were linked directly to bad loans (sub prime) and CDO swaps.. the real cause of the current financial meltdown.
Hence, the risky nature of the notes is not related to the principle that "if one bank collapse you lose your principal". In the normal course of things, if subprime crisis and the cheats did not take place, then, at that point in time, it is very low risk to consider that any one of the huge FI and banks listed in the prospectus could fail. The notes should never have been approved by MAS and sold by DBS. Since everybody made mistake one way or other, the best practice is to compensate 50% to everyone, as a humble admission of guilt but without losing too much face by either party. Unfortunately, in this current regime, it is deemed to be weak to admit mistakes, and strong to protect the establishment. The miserable 6% compared to hongkong 60% compensation,, it is very sad.
REX