Saturday, May 02, 2009

Party Whip in Parliament

Mr. Tan Kin Lian
Can you write a simple an article on how the PARTY WHIP works in parliament voting. I am interested and puzzled. My understanding is that all PAP MP must vote according to party line, regardless the MP’s constituencies view or the MP’s personal view on the subject being put to vote.

My simple understanding is as follows:

[1] MP is the representative of his constituencies. His vote speaks for the people who vote for him. We can see in US or UK that senators or MP would not vote simply it is party line. They vote in accordance to their constituency. For example, I could be a right-winged conservative, but my constituency is gay by large majority. When I am called to vote, I have to respect my constituencies’ wishes. If I don’t subscribe to this “democratic process” then I have to quit as MP or go elsewhere and win others vote to be an MP.

[2] The vote count is a statistical and historical record of the decision making process. The ratio of the majority will be a precious guide to how policy is implemented and how future decision making would to be made. For example, if a bill is passed with large majority then we know it is with the people, and it can be implemented with higher conviction and pace. However, if a bill is passed with slim majority, it would have to be executed with great compassion, care, circumspect, gentleness etc, because there is still a large minority who think otherwise.

[3] I think it is inconsistent when a person debate against a bill, and voted for it eventually. I find it hard to understand and reconcile. For example, if a MP were to speak against building of Casino, he has to vote against, when the vote is being called.

Can you write something to educate me, because I find that Singaporeans need to know more about how it works and the principal behind this policy.


REPLY (revised)
You are right about the practice in Singapore and in the USA. In Singapoer, the MP has to vote according to the party line (unless the whip is lifted - which is seldom allowed). In the US, the Congressman votes according to his personal conscience (usually guided by the views of his constituents) and is not bound to vote according to the Party line. 

However, apart from Singapore, I know that the whip is also practiced in the UK. In this system, the concept is that the people vote for the policies of the party in power. The MPs are obliged to vote for the policies of the ruling party, as decided by the top leadership. This is to prevent a MP changing party and toppling the Government. In some countries, this is considered to be necessary to prevent a MP being bought over by money politics.

In my view, the US system is better. It ensures that the laws in the country better reflect the wishes and aspirations of the population. It also encourages greater transparency and discussion on the issues affecting the future of the country. It allows the citizens to be better engaged.

Crisis of Credit Visualised

Dear Mr. Tan
How are you? I am a regular visitor to your blog. Just thought I would share this nice link, The Crisis of Credit Visualized. Very nice and easy to understand animation. May be your visitors to the blog might enjoy it too.

Looking for a tailor

Dear Mr Tan
I am looking for a tailor to help me do some work for my sofa. I will buy all the material and travel to the fellow's place, as long as he/she can take my instruction to do the work. I wonder if you could find a way (eg publicising on your blog on through the part time match portal) to help me find such a person.

Any contact? Send email to

Thursday, April 30, 2009

The difference between rich and poor

Complaints to FIDREC

If your claim for compensation has been rejected by the financial institution, you have to file a complaint with FIDREC within 6 months of the rejection letter. If you pass this deadline, FIDREC will not entertain your complaint.

It cost only $50 to get FIDREC to adjudicate your complaint. It is worth spending this money. If you need assistance to strengthen your case in preparing your complaint with FIDREC, someone (who is knowledgeable about this matter) is willing to do it for a modest fee. You can send your request to


Asian culture

I am looking for a word that best describe the dress, musical instrument, cuisine, dance, sport of each Asian country. Please suggest suitable words. Example:

National costume
kimono, humbong, sarong,

bulgogi, sushi, dim sum, satay, prata,

Musical instruments
er hu, zitar

Singaporeans need to overcome negative traits

Read my article in The Online Citizen and the comments of other readers.

SCMP:Working behind the scenes for the good of all

Beijing is sparing no effort to help the Hong Kong government reduce the number of disgruntled Lehman Brothers minibonds holders likely to take to the streets on July 1. An informed source said Bank of China (Hong Kong), one of the major banks still at loggerheads with victims over compensation, had been asked to seek a settlement by the end of June. He said Beijing was in a position to sway BOCHK's decision.

Wednesday, April 29, 2009

The Standard:Banks sold minibonds even as Lehman sank

Sealed findings of a report into the sale of Lehman Brothers minibonds reveal that banks continued to push the ill-fated products and recommend them to vulnerable customers up to a month before the bank collapsed.

The deleted sections of the Hong Kong Monetary Authority report, embargoed since December, show 87 of 238 complaints that institutions continued to sell Lehman minibonds even as the bank's credit quality deteriorated during August and September last year.

It also cites 102 complaints that banks sold Lehman minibonds to vulnerable customers including the elderly and illiterate, 15 cases of customer risk appetite being incorrectly assessed due to computer system error and 34 of mistakes in documentation. The HKMA had agreed to give censored parts of the report only to a Legislative Council subcommittee probing the Lehman fiasco for closed-door discussion, but legislators insisted on revealing them to the public.

It had warned legislators not to reveal details of the censored material as it could be incorrect and lawmakers were bound to discuss the issue at yesterday's hearing, subcommittee chairman Raymond Ho Chung-tai said.

``The disclosure of the omitted part may have a negative impact on people taking civil action and the Securities and Futures Commission in negotiating with sellers of Lehman products,'' HKMA chief executive Joseph Yam Chi-kwong told legislators at his third hearing on the controversy.

``Any legal challenge due to the disclosure of the full report before investigations are completed is the last thing we want to see.''

Yam will attend another hearing on May 8 and the subcommittee has summoned his deputy Choi Yiu-kwan to appear on May 26.

The Hong Kong Association of Banks has expressed concern over the disclosure in a letter to the subcommittee, Ho added.

Yam said there was a rise in complaints related to structured product sales last year, and that although the HKMA recorded 178 cases between 2003 and 2008, only one institution was punished.

``We are not trying to harbor banks. We take the cases seriously and will not let [banks] go if misselling is confirmed,'' he said.

Survey: Financial advise

Financial advisers are required to make a financial needs analysis of their client and to have a suitable basis for giving their advice on implementing a financial plan?

How is this advise given? 

Many clients have approached me for advice, because they are confused with what the adviser told them. This is most unsatisfactory. The financial adviser earned $1,000 or more in commission and did not give a satisfactory explanation.  

I suggest that the advise should be given in simple language in a format that is understandable by the client.

I also suggest that a set of the documents supporting the advise should be given to the client. The client can give the advise to another person for a second opinion. This will ensure that the quality of the advice given by the first adviser is satisfactory and conforms with some best good practice standard.

At present, the financial adviser is required to lodge their advice to the advisory firm and a supervisor is required to audit the advice. As the supervisor works for the same firm, this does not give sufficient protection to the consumer on the quality of advice and the suitability of the products.

What are your views on this matter? Particpate in this survey.

Tuesday, April 28, 2009

A considerate person

I visited Nanyang Junior College to give a talk to the students. After arriving at the school, I found several empty Visitors parking lots next to the main entrance. The remaining lots, presumably used by the teachers, were all occupied.

It is so easy to find these parking lots. This is a wonderful welcome to any visitor to the school. 

The principal was considerate in giving priority to the visitors. He also made sure that there were sufficient lots reserved for the visitors. 

I have visited many other places where all the parking lots were occupied by the staff. Some of the empty lots were "reserved for the staff". These places do not consider the visitors or customers to be important, and were accorded low priority.

I hope that more people in Singapore can be considerate, like the principal of Nanyang Junior College.

Tan Kin Lian

HK Council enters minibond fray

The Consumer Council for the first time will use its Consumer Legal Fund to help a Lehman Brothers minibond investor sue a bank to recover losses amounting to HK$500,000. Johannes Chan Man-mun, chair of the action fund, yesterday said the case has the potential to be used as a test case to clarify important legal principles and establish precedents for better consumer protection.

He said it was chosen as it involved four major factual and legal issues found in the buying of Lehman Brothers- related products.

"It involves misrepresentation, the exemption clause in the bank, inadequate disclosure of material facts, and the fiduciary relationship between the bank and its consumers."

He declined to disclose any details except that the case does not involve elderly people or the underprivileged.

Chan said they have to be very careful in bringing the case to court as public money is involved, but he is optimistic about the outcome.

He said the litigation might take 1 to two years before being heard at the High Court, and perhaps two years if it goes to the Court of Final Appeal.

Asked if the case will end up like 11 of the 82 applications for legal assistance that were withdrawn after the bank decided to settle, Chan said settlement would be a good thing for the consumer to get at least part of the money back.

The 11 applications were withdrawn after settlement that involved about HK$4.8 million.

He said litigation can begin as early as one or two months from now, as the investor had signed and returned an agreement with the Consumer Legal Action Fund yesterday.

The council up to last Friday received 11,229 complaints related to Lehman Brothers, with 624 out of 943 cases processed reaching settlement with the banks involving HK$217.8 million.

According to the council, the remaining 319 cases are unresolved as the banks have declined to settle.

The council was criticized for taking so long to process the applications after the collapse of the US firm in September last year. 

Monday, April 27, 2009

Hong Kong Legislative Hearing - Blacked Out Portion Release

Lehman probe 'uncovers five suspect areas'
Minibonds 'mis-selling' revealed

Parts of a report into the Lehman Brothers minibonds saga withheld from the public revealed five categories of suspected mis-selling, a source said yesterday.
These mainly involve the selling of such products to unsuitable investors, the source, who is close to the legislature, said.

The observations were included in a report by the Hong Kong Monetary Authority sent to the financial secretary in January, but were blacked out from the reports disclosed to the public.

Eight pages of the report, which had been blacked out, featured summary observations of more than 200 cases the authority investigated, the source said. Observations on those cases seemed to agree with claims by victims that many had been sold minibonds, but the risks were not fully explained. The report identified the practice of selling Lehman Brothers minibonds to people who were over 65, illiterate or had only primary school education as the most common type of suspected mis-selling.

Hong Kong investors lost billions of dollars on minibonds guaranteed by Lehman when the US investment bank went bankrupt in September. Despite their name, Lehman minibonds are not corporate bonds but complex, high-risk derivatives.
Another category of suspected mis-selling involved the marketing of minibonds to investors just as their fixed time deposits matured, which may have misled them into thinking minibonds were equally low-risk.

The report also identified cases of minibonds being sold in August and September as the extent of the subprime mortgage crisis in the US was becoming clear. The report questioned whether there had been sufficient market analysis before the minibonds were sold. It also noted documentation irregularities such as missing signatures, and indications of an inadequate risk analysis system.

Yesterday, the chairman of the legislature's subcommittee investigating the minibonds saga, Raymond Ho Chung-tai, said its members had unanimously decided there was no justification for the blackout.

He said members would now use this information in their continued questioning of the monetary authority's chief executive, Joseph Yam Chi-kwong, on Tuesday and may include the information in its own report. However, the source said there was a possibility the authority may wish to initiate judicial proceedings against such a disclosure.

An authority spokesman said it had no comment, but the chairman of the Hong Kong Association of Banks warned that disclosure could affect Hong Kong's status as an international financial services centre. "If there is customer information there - it might affect Hong Kong's status as an international financial centre, because if you disclose customer information, then those customers may no longer want to do business in Hong Kong," said Peter Wong Tung-shun, who is also HSBC's executive director. He said the association would send a letter to the authority to reflect these concerns.
Peter Chan Kwong-yue, chairman of the Allied Victims of Lehman Products, welcomed the disclosure, and said he hoped it set a precedent for the banks to disclose their own internal investigations.

"It also sends an important message because it is a slap in the face of Joseph Yam," he said, referring to the chief executive of the monetary authority

Land banking and property scams

Read this.

Creating or destroying value?

Business should create products that give value to customers. If the cost is $X and the value to the customer is $Y, then the business is entitled to keep the difference to cover its marketing cost, expenses and profit.

For tangible products, the customer can assess the value of $Y by looking at the price of similar products. 

For financial products where the future value is uncertain, such as shares, structured products, life insurance and land banking products, it is difficult for the customer to know the real value. This allows the experts (i.e. financial advisers or businesses) to exploit the ignorance of the consumer by giving misleading advice.

The technique is to give the promise of a future value that is not likely to arise. For example, that the asset will appreciate in value. Usually, this is based on looking at the price movement in the past and selecting a period that shows the most favourable results. This is misleading.

All businesses, if it is runned well, will give a modest rate of return. If inflation is 2% per year, a return of 5% is reasonable. If the business projects a return of 15%, it is not reasonable. The business is taking excessive risk, e.g. through leveraging, or playing a speculative bubble, such as the US housing market (funded by subprime mortgages).

The promoters of these financial products take in a lot of money from investors by making unachieveable promises. They take away a large portion of their money in marketing expenses and profit. The leave the investors with assets that have depleted in value. Eventually, the investors have to realise their investments at a big loss.

Look at the history of many time share, land banking, structured products and life insurance products. While some of these products, give good value, the majority of these products destroy value for the investors.

Be careful about these types of financial products. Do not believe that the assets will appreciate in value. Often, there is someone behind that will cream off your gains and leave you with a poor yield.

Tan Kin Lian


The case for public transport

Read this.

Sunday, April 26, 2009

UK: Call to help vulnerable customers

Read this.

UK: Banks face fine for poor service

I hope that MAS will implement similar measures in Singapore. Read this.

China Daily: Secret Lehman report to be aired

HONG KONG: The Legislative Council (LegCo) subcommittee inquiring into the Lehman Brothers minibonds saga Friday decided to ignore the Hong Kong Monetary Authority (HKMA) request to keep parts of the authority's report confidential.

Subcommittee chairman Raymond Ho Chung-tai told reporters after a meeting Friday that the subcommittee disagreed with HKMA chief Joseph Yam's argument that disclosing the portion would violate public interest, the Banking Ordinance, and affect the authority's investigation.

"The chapter six (the portion in question) of the report is not targeting at any individual bank and person. It only contains some general information," he said. "We believe that disclosing the information will help the investigation. The disclosure will only create positive impact, but not negative ones. It is more appropriate to disclose."

It is expected that the concerned portion is related to the problems observed by the HKMA in 238 cases.

The problems can be classified into five categories. Half of the cases are related to the sales of the products to elderly, persons with low education, or those who invested excessively in the products. Some of the cases involved inaccurate assessment of clients' capability to bear risk, others concern lack of signatures on documents.

But the HKMA has not reached any conclusion on these cases, and the Securities and Futures Commission is still following up.

The LegCo subcommittee will have an open hearing Tuesday, which will have Yam continue his testimony.

Kam Nai-wai, a subcommittee member, said a special meeting will be held should the HKMA launch a judicial review against the disclosure.

He said disclosing the information will help investors who may have been victimized by unethical sales practices, to settle with banks.

"The public will know what the HKMA has found over the past months concerning the sales practices of banks. The public and the victims of the saga will know what constitutes bad sales practice, and know what practices are adopted by the banks," he said. "This helps us find out the truth."

Chan Kwong-yue, spokesman for the Alliance of Lehman Brothers Victims, supported disclosing the report.

"We will know more about the structural bad sales practices of banks," he said. "We will then know what kind of bad practices are recognized by the HKMA."

But Hong Kong Association of Banks chairman Peter Wong had reservations about disclosing the information.

"Clients' personal information may be contained in the report. This will affect Hong Kong's role as an international financial center because clients will not do business in Hong Kong if their information is at risk of being leaked," he said. "At this stage, we cannot see how the disclosure will help the tackling of the incident."

A spokesman of HKMA declined to comment.

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