Saturday, January 10, 2009

SCMP:Deadline issued for investmen

10 Jan 2009
Enoch Yiu and Maria Chan

The Hong Kong Monetary Authority told banks yesterday to implement seven consumer protection measures concerning the sale of investment products, and to formulate plans to separate their deposit-taking and retail securities business before the end of March.

The measures are part of a range of proposals suggested in separate reports disclosed on Thursday by the authority and the Securities and Futures Commission on last year’s Lehman Brothers minibond fiasco. On the same day, Financial Secretary John Tsang Chun-wah ordered “an immediate review” of Hong Kong’s financial regulatory structure.

The authority sent a circular to all banks yesterday requiring them to immediately add “health-warning” statements to their sales material on retail derivative products to warn of their risks. It told them to immediately introduce adequate controls to ensure sales staff were not solely rewarded for sales performance.

By the end of March, banks must instal audio systems to record client conversations on investment products sales, as well as introduce a “mystery shopper” programme – in which undercover staff monitor the behaviour of those selling investment products.

In addition, the authority told banks to formulate plans to separate their deposit-taking and investment products sales functions. Both reports said it was a conflict for bank tellers to handle deposits and sales. But the regulators have different ideas on how to solve the problem.

The authority report said banks should use separate counters and staff in a branch to sell investment products. But the SFC suggested banks be banned from using their branch networks at all for these financial instruments. Rather, they should set up a separate subsidiary, using different offices and staff.

The proposed reforms come in the wake of the collapse of the US bank Lehman Brothers in September, a crisis that left 43,700 Hong Kong investors holding derivatives it issued or guaranteed, but which had lost much or all of their value.

Many claimed they were misled by bank tellers, who sold the products as alternatives to time deposits or low-risk bonds when, in fact, they were risky credit-linked derivatives.

Raymond So Wai-man, an associate professor of finance at Chinese University, supported the idea that banks should separate deposit-taking and investment products sales.

“When bank tellers make use of depositors’ financial information and cross-sell them investment products, customers may be confused between investment and deposit taking,” he said. Peter Wong Tung-shun, chairman of the Hong Kong Association of Banks

But Peter Wong Tung-shun, chairman of the Hong Kong Association of Banks, said some banks were very small and it might not be easy to have separate counters.

Mr Wong said banks might face higher operating costs after adopting the suggested proposals. “It’s hard to say whether banks have to pass on the cost to consumers,” he said.

The authority and the SFC reports both noted that Britain, Singapore and Australia had “cooling off” periods of 14 to 30 days on some investment products in which customers can change their minds.

In Hong Kong, there is no such cooling off period. However, the Hong Kong Federation of Insurers does have a cancellation period in which customers can cancel their policies up to 21days after applying.

Chan Kin-por, lawmaker for the insurance sector, said this had helped to reduce complaints. He said 10 to 15 per cent of policies sold were cancelled in the cooling off period.

Life in Singapore (3)

Here is the average rating based on 25 and 100 responses.
Rating 1=very unhappy, 3=neutral, 5 = very happy

25 resp100 resp
Law and order4.083.95
Multi-racial culture3.523.47
Work colleagues3.323.32
Quality of life3.303.04
Time with family3.082.98
Adequate wages2.922.77
Education system2.802.69
Time to enjoy2.682.61
Transport system2.842.51
Foreign workers2.642.39
Government leaders2.642.34
National Service2.382.32
Taxes, GST, charges2.241.96
Cost of living 1.961.87
Overall score3.00 2.87

The ratings for most of the items were lower based on a larger group of respondents. The inital batch had a higher proportion of the older and higher income respondents, which gives a relatively higher rating.

BBC: The financial cost of Redundancies

Making redundancies could lead to a significant financial loss for both employer and employee, an expert warns.

SCMP:More claims for compensation by investors to be heard in court

9 Jan 2009

The Small Claims Tribunal may refer to the District Court more of the compensation cases filed with it by investors in financial derivatives linked to collapsed US bank Lehman Brothers. Seventeen investors yesterday brought cases against four banks that sold them minibonds and similar derivatives. Representatives of two of the banks, DBS and Bank of China, requested that the District Court hear the cases. They were adjourned until March 23, when the tribunal will announce whether or not it will refer the cases. It is considering whether to transfer to the court 13 similar cases. The tribunal handles claims for up to HK$50,000.

Friday, January 09, 2009

SCMP:Regulators' reports on Lehman minibond fiasco f

9 Jan 2009
Enoch Yiu, Maria Chan and Paggie Leung

Legislators and brokers are disappointed with regulators’ reports into the lessons learned from the Lehman Brothers minibond scandal.

The reports by the Securities and Futures Commission and the Hong Kong Monetary Authority carry recommendations including having a cooling-off period in which investors can cancel their investments, and tightening banks’ techniques in selling investment products.

The HKMA also recommends it exclusively regulate banks’ securities business, a role it shares with the SFC.

Kenny Lee Yiu-sun, the chairman of the Hong Kong Stockbrokers Association, said there was a danger the cooling-off measure could be abused. He said some people who lost money because of market movements instead of mis-selling might take advantage of such measures.

“There should be some preventive measures if the recommendation is implemented,” Mr Lee said. He disagreed with giving the HKMA the sole role of regulating banks selling securities products.

Lawmaker Kam Nai-wai, who has actively helped Lehman minibond investors fight to get their money back, expressed dismay at the report: “It does not include any help to existing victims, as there are no measures addressing their concerns.”

However, Mr Kam supported recommendations including establishing a financial services ombudsman and not allowing banks to sell investment products over deposit counters.

Peter Chan Kwong-yue, the chairman of the Allied Victims of Lehman Products, said the reports failed to solve the key problems.

“They are just speaking after the fact,” Mr Chan said. “Someone gets shot by an arrow and [the HKMA and SFC] are not going to save the injured but ask where the arrow came from to avoid getting shot in the future. It’s nonsense to talk about this now.”

Asked about the plan to give the HKMA more authority to regulate banks, Mr Chan said it could help prevent incidents similar to the “misselling” of Lehman minibonds.

A senior banker said it would be clearer if the HKMA took on the role of regulating banks’ non-banking business, but it would be difficult to implement the cooling-off period.

Billy Mak Sui-choi, an associate professor in the department of finance at the Hong Kong Baptist University, agreed the HKMA taking on a sole role was one way to improve the current two-regulator model.

“Regulators who are responsible for the supervision will have to bear all the responsibility, and they can’t blame the other.” Mr Mak said a cooling-off period would allow customers who buy products impulsively to reconsider their decision, helping minimise future disputes.

A spokesman said the SFC would work with the government and HKMA to improve the regulatory structure and investor protection.

HK Legco fire set for finance chiefs after holidays

Legislator Raymond Ho Chung-tai said the Legislative Council probe on the Lehman Brothers minibonds saga will restart after the Lunar New Year.

Monetary Authority chief executive Joseph Yam Chi-kwong and Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung will be the first officials to be summoned, Ho said.

They will be followed by Financial Secretary John Tsang Chun-wah and Securities and Futures Commission chief executive Martin Wheatley.

Ho expects the hearings to last six to nine months.

New business ideas

A reader of my blog is curious about my intention to publish a survey about booking for a taxi by SMS.

I am developing a new business to allow customers to book for a taxi using SMS for $1. The technology is almost ready. My survey indicate that many commuters are interested to use this service. My challenge now is to enrol taxi drivers to join this service.

I also want to develop a new business to offer surveys to SMEs at a modest cost. This allows them to gather information from their customers, business associates and employees. It helps them to improve their business.

The cost of a survey is $100. It is affordable. The value of the information is worth a lot more. Some people are familiar with the use of Survey Monkey. They can get the survey done for free. But other business owners, who are not familar with this software, have the option to pay $100 to get this survey done for them.

The curious people may also ask - why am I developing these new businessses, when I am quite well off and able to retire. I hope to pass the businesses to younger people, so that they have meaningful jobs and a good future.

HK Govt;s report on Lehman Brothers

Keeping seniors at work

Prime Minister Lee Hsien Loong spoke at the Reinventing Retirement Asia Conference organised by the Council of The Third Age. He urged “no let up in keeping seniors at work”. He said that outmoded social attitudes and systems have to change, and that seniors should continue to work beyond the customary retirement age. 

I agree.

Read the rest of the article here:

HK: Minibond saga sparks rethink of bank rules

Enoch Yiu and Maria Chan
Jan 09, 2009
Financial Secretary John Tsang Chun-wah yesterday ordered “ an immediate review” of Hong Kong’s financial regulatory structure after both the Securities and Futures Commission and the Monetary Authority issued reports on last year’s Lehman Brothers minibond fiasco.

The government will first focus on “ administrative measures” to improve existing regulations and better protect investors. These would include a cooling-off period for buyers and restricting the sale of investment products at bank branches.

“Later we will carry out a structural review that may be required for improving the regulatory structure and protecting investors as well as other measures that need to be implemented through legislation or legislative amendment,” Mr Tsang said.

The SFC wants laws changed to give it the power to order financial intermediaries to compensate investors in the event of misselling or other irregularities.

In the longer term, consideration should be given to establishing a financial services ombudsman, both regulators say.

A government source said the administration would soon issue a consultation paper on how and when to implement short-term measures.

In the longer term, the government wanted to review the entire regulatory structure for banks’ securities businesses. This would include whether to allow banks to use their branch networks and teller staff to sell investment products.

Mr Tsang ordered the review after the government released reports submitted by the HKMA and the SFC on the minibond crisis.

When US bank Lehman Brothers collapsed in September, 43,700 Hong Kong investors were left holding derivatives it had issued or guaranteed but which had lost much or all of their value. Most were minibonds, which, despite their name, are complex, credit-linked derivatives. Investors claim banks and brokers mis-sold the products as low-risk.

The SFC and HKMA called for tighter oversight of the sale of financial products but rejected – at least in the short run – a call for a single regulator to oversee their sale.

At present banks and their securities businesses are regulated by the HKMA. The SFC regulates brokers but is also responsible for investigating and sanctioning bank staff who sell investment products.

The HKMA report recommended that all bank security business be brought under its supervision.

Both the SFC and HKMA reports said having the same bank branch sell investment products and handle client deposits created a conflict of interest.

The SFC said banks may consider establishing a clear-cut division between their banking and securities services by registering separate subsidiaries or affiliates with the SFC.

“ This is not the only way, however, that such separations of functions can be achieved,” the SFC report said.

There could be “a clear demarcation of premises and staff to avoid confusing customers as to the nature of the services being offered”.

Both reports called for introducing a cooling-off period for investors within which they could cancel their investments, as well as a requirement that intermediaries disclose the commissions they receive for selling such products.

The SFC would also require all investments to contain a brief description of the product and include a “risk reminder” for investors.

Both reports rejected calls to ban the sale of investment products without regulatory approval.

Wednesday, January 07, 2009

HK regulator: HK suffered a mis-selling issue

7 Jan 2009

HONG KONG: Hong Kong's securities regulator on Wednesday insisted the city's monitoring system had stood up to the financial crisis, despite criticism complex products were wrongly sold to vulnerable investors.

"Hong Kong's system has broadly worked well," said Martin Wheatley, chief executive officer of the Securities and Futures Commission (SFC). "We have not had a systemic failure."

Wheatley said the fact that Hong Kong had so far avoided the collapse of any major financial institutions or a huge fraud on the scale of disgraced US financier Bernard Madoff showed its regulatory regime had worked well.

Madoff was arrested on December 11 after allegedly admitting he had run a multi-billion dollar pyramid fraud in which individual investors, banks, charities and universities lost vast sums of money.

Wheatley conceded the city had suffered from a "mis-selling issue" over the sale of so-called minibonds backed by failed US bank Lehman Brothers.

However, he said it was too early to say if the banks who sold the products or the regulators were to blame.

Critics have accused the city's regulatory bodies of failing to protect investors from the derivative-backed products.

"We have got a problem with retail selling, we need to put that right," he said at Hong Kong's Foreign Correspondents' Club.

More than 40,000 Hong Kong investors – including many retirees – had put a total of 15.7 billion Hong Kong dollars ($2.0 billion US dollars) of their savings into minibonds and other complex products backed by Lehmans.

The collapse of the Wall Street giant in September meant the value of their investments dropped dramatically, which has sparked protests across the city from investors who said they were mis-sold the products.

The SFC and the city's de factor central bank, the Hong Kong Monetary Authority, are investigating hundreds of cases related to the sale of the bonds.

Constructive total loss of vehicle

Dear Mr Tan,

I bought a comprehensive motor insurance on my vehicle. Unfortunately, I met an accident and the the insurance company informed me that they are only willing to pay me based on the OMV of my car (PARF and COE $28,800/-) value plus cash of $1,000/- ( approx $30,000/-). My vehicle is coming to 5 years old, the cost of repair is estimated to be around $15,000/-.

They claim that it is no longer economical to repair the car. May I know my position in this situation.

Under the insurance policy contract, the insurance company has the option to pay the current market value of the vehicle, instead of repairing it. This is called a "constructive total loss".

Usually, if you get the current market value, you will be able to buy a vehicle of similar age and condition as your insured vehicle. If you find that it is not possible to get a replacement vehicle, you can discuss with the insurance company to find a better solution.

Life in Singapore

How do you feel about life in Singapore?

Tuesday, January 06, 2009

Thought for the day - OB markers

"The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum."

-- Noam Chomsky (1928- ) Institute Professor Emeritus of Linguistics

Contributed by Ho Cheow Seng

Survey – a service to business

1. Introduction

Knowledge is everything. It is important for a business to know what its customers, employees and other stakeholders think and what drives their behaviour and action.

A survey is useful in getting information that can help you to make the right decisions.

We provide a service to help you to design the survey questions and to give you a link that you can send to your target audience. They click on the link to reply to the survey. It is easy.

We will give you a weekly progress report until the survey is closed.

2. Cost
The cost is modest. You pay a fee of $1 per survey reply, subject to a minimum of $100 per survey. There is no additional charge to create the survey form of up to 15 questions. For each additional question, there is a charge of $3.

3. Contact us
If you are interested in this service, send an e-mail to with the following:

Your name:
Your company name:
Your e-mail:
Your mobile nr:

A list of survey questions

Thought of the day - Democracy

"We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both."

- Justice Louis D. Brandeis
(1856-1941) US Supreme Court Justice

Contributed by Ho Cheow Seng

Monday, January 05, 2009

Feeder service


Website to post results of surveys

I wish to ask for a volunteer to manage a blog to post the results of the surveys. I need the survey results to be presented in a chart (where appropriate) and to write some comments. This person should be able to use an appropriate software (e.g. WordPress or Blogger).  If you are interested to spend time on a vountary basis, send an e-mail to 

A survey is useful, in spite of its limitations

I am actively using surveys in this blog. I find the results to be useful, as follows:

> It collects the views of a larger number of persons (instead of one person's views)
> Usually 25 replies are sufficient, as results are usually close to a larger sample
> The respondents are usually random and generally unbiased.

There are obvious limitations - hence the results have to be used with caution. Furthermore, it is important to phrase the questions fairly, so as to obtain useful answers.

Some people argue that it is important to select a proper sample. I agree, but this is costly and difficult to achieve. In the absense of this budget and luxury, a simple sample survey on the internet is better than nothing. As someone said, "knowledge is everything".

I wish to encourage people to use sample surveys to gather information for business and social decision.

Partial retreat from globalisation

RBS's shift towards its home market is a microcosm of what most banks are doing all over the world.

And as banks do their patriotic duty and direct their increasingly precious and scare capital resources towards their domestic markets, the amount of credit available in the world as a whole is being compressed.

What's going on can be seen as a partial retreat from globalisation in the financial economy.

The scale and longevity of that retreat in this new year will determine all our economic fortunes, wherever we may be in the world.

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