Thursday, October 22, 2009

Minibond suit in Singapore let by Conrad Campos

22 Oct 2009
SINGAPORE — One of the three defendants in the second class action suit related to botched structured notes has filed its defence against allegations of negligent and fraudulent misrepresentation. The structured notes in question are one of the Minibond Series linked to collapsed United States investment bank Lehman Brothers.

Lehman Brothers Singapore, which was named as the arranger of the now-defunct Minibond Series 2 in a suit backed by 165 investors, refuted claims that the investors were misled by the statements in advertisements, base prospectus and pricing sheets of the notes.

The company is represented by Senior Counsel Andre Yeap and Mr Danny Ong from Rajah & Tann.

The other two defendants are Minibond Ltd, the issuer of the investment, and ABN Amro, one of the nine distributors of the product. They are represented by Shook Lin & Bok and Allen & Gledhill, respectively. The latter is expected to file its defence in about two weeks.

One point of contention in this case is the issue of risks faced by the Minibond investors. Earlier, the plaintiffs alleged that the defendants have perpetuated a “false and misleading” impression that the product’s “primary risk” is with the credit standing of seven companies known as the reference entities (REs).

The reference entities included names like DBS Bank, Standard Chartered Bank and SingTel and these companies form the first layer of the credit-default swaps embedded in the product. This means that the occurrence of default or bankruptcy in any of these seven companies could result in a “credit event” which can potentially cause the Minibonds to become worthless.

However, the plaintiffs — represented by their lawyer Conrad Campos and Company — alleged that the seven REs are, in fact, a “ruse” to induce investors to invest in the Minibonds. The true risk of the product lies with the second layer of underlying securities, made up of collateralised debt obligations, of which there was inadequate disclosure, they claimed.

In its 58-page defence filed on Oct 2, Lehman Singapore maintained that the credit risks related to the REs were indeed the “primary risks” borne by the investors.

In fact, Lehman Singapore claimed that the default or bankruptcy risk of the REs is “at all material times” higher than that of the underlying securities.

If there were indeed misleading representations, Lehman Singapore said that there are documents which had been signed by the plaintiffs which stated that investments were made based on their own independent judgment and appraisal of risks.

Lehman Singapore also alleged that the plaintiffs were negligent on their part such that they contributed partly or wholly to any losses incurred. In response, the plaintiffs said in their filed reply last Friday that returns from Minibond Series 2 were derived from the underlying securities. They also added that this substantiates their claims that these securities carry more risks compared to the seven REs.

As for Lehman Singapore’s point on signed warranties, the plaintiffs countered that the prospectus for the underlying securities was created only after the offer period for the sale of Minibond Series 2 had closed.

Hence, the plaintiffs said that it is “devoid of good faith, common sense and commercial reality” to expect Singapore retail investors to conduct their own investigation and analysis of the underlying securities.

12 comments:

  1. My comment is that the case is in the hand of the court. Should we discuss openly the merit of the case?

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  2. Very good information. If you are still claiming from the FIs, these may be useful.
    Anyone knows where to get more detailed info? Thanks.

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  3. good, I was going to settle with the FI that sold us minibonds 2 and 3. Now I may not settle with them and rather wait for the end of the lawsuit.

    Mr. Tan, where was the article published?

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  4. Looks like a longdrawn court case, and an expensive one too. MAS have
    recently prompted investors to go for legal action, and they are looking on as if they are not involved at all.

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  5. Let the court decides!!! It's time we nail the chow angmoh bankers for who they really are - blood-suckers all!!!!

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  6. You want more information and have your interest proteted, join MIAG before too late. Do not be a free rider!

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  7. The Minibonds were designed by the FIs, if they hide the risk there was no way investors can fully grasp the danger of the products. Until today, FIs do not want to disclose the true nature of the products claiming that by doing so they could expose their trade secret. In other word, they never actually tell the investors the complete stories of their products.

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  8. The legal actions will expose how the banks in Sinagpore bully and con their "treasured" customer.

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  9. you can find the article in TODAY thursday's issue on page B1.

    While I am a MB investor and still pending my case in FIDREC, I have my reservation.

    i) DBS HN5 vs 200 investors. Tough case as Govt=Court=DBS+Davinder Singh. If court award 200 investors, HK HN5 will also jump for joy. But again, how can Govt lose when Sgp Court is part of the 60,000 civil servants.

    ii) LB, ABN & Minibond contest Conrad's claim. Going to be expensive legal battle which the defendents knows that MIAG has financial limitation while they don't. If defendents engage Queen's Counsel, this battle will be even more expensive.

    Minibond application has a clause stating:

    "I/We hereby declare that I/We have read, understood and agree to the terms and conditions set out in the Prospectus including the terms, conditions and procedures for application and acceptance of the Notes set out in Appendix 4 of the Pricing Statement for the completion and return of this Application form and that this application has been made in accordance therewith. Capitalized terms used in the Application Form shall bear the meanings ascribed to them in the Prospectus.

    For cases that investors bought over the counter, FIs countered that the Pricing Statement and Prospectus were on the website and investors have read and understand the risk before purchasing. FI only execute orders and does not gives advise.

    For cases when there is no prospectus given, FIs that it was so hot that they ran out of prospectus but prospectus is on website.

    For cases which prospectus was given on the same day investors signed the application form, FIs said that investors have read from somewhere before they signed the minibond application.

    My FI start with a letter P... This is the kind of organization that gives financial institution a dirty name.

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  10. For those who swindle other people without a proper consideration, they will have their retribution in the next world. And this will be worse for those who still believe and insist they are right and defend themselves by engaging expensive and first class lawyers to protect them. For those investors even if you lose in this case, take hope that there will be retribution and those who conned you of your money (including those who are helping to defend them now) will have to pay you back with compound interest. And they will be your servants and slaves for free until the debt is fully repaid. Don't believe in Karma, when the time comes, your regret will be too late.

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  11. 11.59am Oct 23-Important point to consider in Misrepresntation (in Prospectus etc). It appears wrong information has been stated in the Prospectus. That being so, whatever you signed in the Minibond application form will be rendered invalid.

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  12. If HN5 investors loses their case against DBS,then the opposition party should ask at the next election why Banks can make careless mistake, and S,pore investors cannot. HK HN5 investors did not sign the same contract, so whatever the outcome, it should have no impact on them

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