Friday, July 31, 2009
SCMP:Investors set for legal fight over lost millions
30 July 2009
The legal sector is bracing for a flood of litigation as a growing number of investors take their bankers to court in efforts to recover huge losses resulting from high-risk financial products.
On Tuesday, 77-year-old Chan Wai-yee filed a writ and statement of claim against Swiss-based investment bank UBS for allegedly advising her to buy an equity accumulator package which resulted in her losing HK$260 million.
Solicitor Bonita Chan Bow-ye of Hastings & Co, the law firm which represents the elderly Chan, said yesterday the company is also handling several other similar cases, and that it was likely more investors will follow suit.
``After seeing some investors taking their cases to court, others who are in a similar situation may consider doing the same, so it's very likely we will see more lawsuits concerning these high- risk financial products,'' Bonita Chan said.
A senior partner of ONC Lawyers, Ludwig Ng Siu-wing, told The Standard he is now handling several cases involving mainland investors who claim they had been advised by their Hong Kong bankers to buy equity accumulators months before last year's market crunch, resulting in losses totaling tens of millions of dollars.
However, Ng said not many law firms were willing to handle such cases, as they not only involved the novelty of financial products but also the potential conflict of interest between the banks and the law firms.
``Equity accumulators have become common only in the past few years, and the subject is still quite new to some lawyers,'' Ng said. ``In addition, several major law firms have close business ties with the banks, such as preparing legal documents for mortgages, and such firms may be reluctant to take up such cases.''
Ng said minibond investors were a different matter.
``Equity accumulators are for experienced investors, and where the transaction is through private bankers who normally serve only the very rich. It also means their investments in the accumulator would be huge, running into tens of millions of dollars. So those investors are a completely different group from those who subscribed to minibonds,'' Ng explained.
Last week, the Securities and Futures Commission announced a settlement with 16 banks for them to buy back all outstanding Lehman Brothers minibonds at 60 to 70 percent of their original value. The deal reached put an end to a 10-month saga.
Solicitor Henry Chiu Tuen-ting of Henry Chiu & Partners said the key element in such disputes would be whether the banks clearly explained and honestly disclosed the possible upside and downside of the stock market.
The legal sector is bracing for a flood of litigation as a growing number of investors take their bankers to court in efforts to recover huge losses resulting from high-risk financial products.
On Tuesday, 77-year-old Chan Wai-yee filed a writ and statement of claim against Swiss-based investment bank UBS for allegedly advising her to buy an equity accumulator package which resulted in her losing HK$260 million.
Solicitor Bonita Chan Bow-ye of Hastings & Co, the law firm which represents the elderly Chan, said yesterday the company is also handling several other similar cases, and that it was likely more investors will follow suit.
``After seeing some investors taking their cases to court, others who are in a similar situation may consider doing the same, so it's very likely we will see more lawsuits concerning these high- risk financial products,'' Bonita Chan said.
A senior partner of ONC Lawyers, Ludwig Ng Siu-wing, told The Standard he is now handling several cases involving mainland investors who claim they had been advised by their Hong Kong bankers to buy equity accumulators months before last year's market crunch, resulting in losses totaling tens of millions of dollars.
However, Ng said not many law firms were willing to handle such cases, as they not only involved the novelty of financial products but also the potential conflict of interest between the banks and the law firms.
``Equity accumulators have become common only in the past few years, and the subject is still quite new to some lawyers,'' Ng said. ``In addition, several major law firms have close business ties with the banks, such as preparing legal documents for mortgages, and such firms may be reluctant to take up such cases.''
Ng said minibond investors were a different matter.
``Equity accumulators are for experienced investors, and where the transaction is through private bankers who normally serve only the very rich. It also means their investments in the accumulator would be huge, running into tens of millions of dollars. So those investors are a completely different group from those who subscribed to minibonds,'' Ng explained.
Last week, the Securities and Futures Commission announced a settlement with 16 banks for them to buy back all outstanding Lehman Brothers minibonds at 60 to 70 percent of their original value. The deal reached put an end to a 10-month saga.
Solicitor Henry Chiu Tuen-ting of Henry Chiu & Partners said the key element in such disputes would be whether the banks clearly explained and honestly disclosed the possible upside and downside of the stock market.
Features of life insurance policies
Hi Mr Tan,
Can you tell me what are the features for these insurance policies?
1) Limited pyament whole life insurance
2) Regular prenium investment-linked policies
3) Anticipated Endowment Insurance
REPLY
I will only give a brief explanation here. Please search Google for a more detailed explanation.
A limited payment whole life policy requires you to pay premium for a certain number of years and be insured for the whole of life. If you pay premium for a shorter period, the annual premium is higher.
A regular premium investment linked policy requires you to pay a regular premium over many years. The premium is invested in an investment fund. You will get the value of the invested units.
An anticipated endowment policy pays the maturity benefit in installments during the term. For example, if you insure for 50,000 over 20 years under an anticipated endowment policy, the $50,000 is paid to you in installments over the 20 years. The annual premium for an anticipated endowment policy is much higher than an ordinary endowment policy.
A life insurance policy may take away as much as two years of your premium to pay commission to the agent. This is too much to be taken away. If you pay a premium of $300 a month, two years of premium amount to $7,200. This is the money taken away from you to pay the agent.
Can you tell me what are the features for these insurance policies?
1) Limited pyament whole life insurance
2) Regular prenium investment-linked policies
3) Anticipated Endowment Insurance
REPLY
I will only give a brief explanation here. Please search Google for a more detailed explanation.
A limited payment whole life policy requires you to pay premium for a certain number of years and be insured for the whole of life. If you pay premium for a shorter period, the annual premium is higher.
A regular premium investment linked policy requires you to pay a regular premium over many years. The premium is invested in an investment fund. You will get the value of the invested units.
An anticipated endowment policy pays the maturity benefit in installments during the term. For example, if you insure for 50,000 over 20 years under an anticipated endowment policy, the $50,000 is paid to you in installments over the 20 years. The annual premium for an anticipated endowment policy is much higher than an ordinary endowment policy.
A life insurance policy may take away as much as two years of your premium to pay commission to the agent. This is too much to be taken away. If you pay a premium of $300 a month, two years of premium amount to $7,200. This is the money taken away from you to pay the agent.
I advise people not to buy all of these types of insurance policies, including critical illness policy, which pays high commission. It is all right to buy term insurance policy (where the premium is low) or a single premium policy, where the commisison is less than 3%.
All the best.
All the best.
Health care realities
Article in New York Times
Quote: ... private markets for health insurance, left to their own devices, work very badly: insurers deny as many claims as possible, and they also try to avoid covering people who are likely to need care. Horror stories are legion: the insurance company that refused to pay for urgently needed cancer surgery because of questions about the patient’s acne treatment; the healthy young woman denied coverage because she briefly saw a psychologist after breaking up with her boyfriend.
Quote: ... private markets for health insurance, left to their own devices, work very badly: insurers deny as many claims as possible, and they also try to avoid covering people who are likely to need care. Horror stories are legion: the insurance company that refused to pay for urgently needed cancer surgery because of questions about the patient’s acne treatment; the healthy young woman denied coverage because she briefly saw a psychologist after breaking up with her boyfriend.
Permits required to appeal to the public for funds
Source: http://www.guidemesingapore.com/business/c656-singapore-non-profit-organization-part2.htm
For fund-raising appeal through door-to-door collection or soliciting in public places, the House to House and Street Collection Permit must be obtained from the Police. A licence is not needed if it is a private collection that is confined to friends or relatives, appeals made through the telephone or the media such as the Internet and newspapers, appeal letters by post or approaching individual donors.
For fund-raising appeal through door-to-door collection or soliciting in public places, the House to House and Street Collection Permit must be obtained from the Police. A licence is not needed if it is a private collection that is confined to friends or relatives, appeals made through the telephone or the media such as the Internet and newspapers, appeal letters by post or approaching individual donors.
Petition to PM on credit linked note (6)
Petition.
Update: 522 signatures as at 10 PM on 24 July. On the way to target of 1,000 signatures.
Update: 590 signatures as at midnight of 27 July. The pace of signatures has slowed down. Please pass the word around for more signatures to reach the target.
Update: 522 signatures as at 10 PM on 24 July. On the way to target of 1,000 signatures.
Update: 590 signatures as at midnight of 27 July. The pace of signatures has slowed down. Please pass the word around for more signatures to reach the target.
Pelosi lashes out against insurance companies
WASHINGTON (Reuters) - U.S. House of Representatives Speaker Nancy Pelosi on Thursday ramped up her criticism of insurance companies, accusing them of unethical behavior and working to kill a plan to create a new government-run health plan.
"It's almost immoral what they are doing," Pelosi said to reporters, referring to insurance companies. "Of course they've been immoral all along in how they have treated the people that they insure," she said, adding, "They are the villains. They have been part of the problem in a major way. They are doing everything in their power to stop a public option from happening."
(Reporting by Richard Cowan, Editing by Sandra Maler)
"It's almost immoral what they are doing," Pelosi said to reporters, referring to insurance companies. "Of course they've been immoral all along in how they have treated the people that they insure," she said, adding, "They are the villains. They have been part of the problem in a major way. They are doing everything in their power to stop a public option from happening."
(Reporting by Richard Cowan, Editing by Sandra Maler)
Thursday, July 30, 2009
Promote the use of car sharing
Car sharing can give you the same convenience of private use of a car, but at a fraction of the cost. Read how it works here.
No parking space in HDB estates
Have you wondered why HDB estates are congested with cars, and it is difficult to find a parking space when you visit someone in HDB during the day? Find the answer here.
Online Donation towards Gathering on 22 August
If you wish to meet an online donation towards the expenses of the Gathering of 22 August, please make an internet banking or fund transfer to this account:
POSB Saving 508-01812-6
For internet banking, please give the reference "22 AUG". For funds transfer, please send an e-mail to kinlian@gmail.com giving details of your payment.
POSB Saving 508-01812-6
For internet banking, please give the reference "22 AUG". For funds transfer, please send an e-mail to kinlian@gmail.com giving details of your payment.
Waiting for the stockmarket to bottom
A few months ago, when the ST index was around 1,500, some people commented that they will buy when it reached 1,200. That was their target for the stockmarket to bottom out.
But, it did not reach that level. Instead, the ST index had recovered 1,100 points (more than 70%) over the past few months. Those who waited for the stockmarket to reach 1,200 missed the boat.
Lesson 1: Do not be greedy. If you find the stocks to be of good value, you should buy and keep for the long term.
I bought my shares when the stockmarket was around 2,500. I did not sell the shares when they lost nearly half of its value. I kept them for the long term. These shares have since recovered in value (nearly).
Lesson 2: Avoid trying to catch the right time to sell or buy. If you are not sure, keep the shares for the long term, provided that they are blue chip shares. Do not sell, when the share price is depressed due to liquidity or fear.
But, it did not reach that level. Instead, the ST index had recovered 1,100 points (more than 70%) over the past few months. Those who waited for the stockmarket to reach 1,200 missed the boat.
Lesson 1: Do not be greedy. If you find the stocks to be of good value, you should buy and keep for the long term.
I bought my shares when the stockmarket was around 2,500. I did not sell the shares when they lost nearly half of its value. I kept them for the long term. These shares have since recovered in value (nearly).
Lesson 2: Avoid trying to catch the right time to sell or buy. If you are not sure, keep the shares for the long term, provided that they are blue chip shares. Do not sell, when the share price is depressed due to liquidity or fear.
Wednesday, July 29, 2009
50% compensation for Minibond
Hi Mr. Tan
Thank you very much for helping the CLN victims. Your Blog has been my lifeline for the past few months. I have signed your petition to PM Lee.
I invested $X in Minibond. I have filed my case with FIDREC. Upon mediation, FI offerred 20%. I rejected and went for adjudication. FI then offered 35%. I submitted additional documents.
Later, the FIDREC case manager informed me that the FI offerred 50%, the amount I initially asked for. The final offer of 50% made me shocked, very angry and felt very bullied again. I wanted to go ahead with the adjudication. Can I ask for 100% compensation? Can I accept the compensation, as I already signed the Petition?
REPLY
It is all right for you to accept the compensation, although you signed the Petition. I suggest that you should ask for compensation of 50% and any balance on maturity (in case the matuirty sum exceeds 50%). Some of the Minibond actually has value more than 50%.
Lesson: It is quite bad for the financial institution to make it so difficult and stressful for the customer to get fair compensation.
Thank you very much for helping the CLN victims. Your Blog has been my lifeline for the past few months. I have signed your petition to PM Lee.
I invested $X in Minibond. I have filed my case with FIDREC. Upon mediation, FI offerred 20%. I rejected and went for adjudication. FI then offered 35%. I submitted additional documents.
Later, the FIDREC case manager informed me that the FI offerred 50%, the amount I initially asked for. The final offer of 50% made me shocked, very angry and felt very bullied again. I wanted to go ahead with the adjudication. Can I ask for 100% compensation? Can I accept the compensation, as I already signed the Petition?
REPLY
It is all right for you to accept the compensation, although you signed the Petition. I suggest that you should ask for compensation of 50% and any balance on maturity (in case the matuirty sum exceeds 50%). Some of the Minibond actually has value more than 50%.
Lesson: It is quite bad for the financial institution to make it so difficult and stressful for the customer to get fair compensation.
Company Y not wanting to pay out my insurance claims
Dear Mr. Tan,
I was diagnosed and operated upon for my brain cancer. The cancer is classified as terminal. With the doctor's recommendations & letters, CPF paid all my savings into my bank account. Company X initially refused to allow me to claim my DPS but after I send them the CPF statement - they paid me as well.
I did a similar claim with Company Y for 3 policies. For more than a year, they have been giving excuses after excuses in not wanting to pay me by saying the requirement for us to pay a claim for Total & Permanent Disability is:-
"totally & permanently disability so that life assured cannot engage in any occupation, business or activity which pays any income"
OR
"suffers total and irrecoverable loss of effective use of
- both eyes; or
- any 2 limbs at or above the wrist or ankle;
- or one eye and any one limb at or above the wrist or ankle"
Company Y is adamant in not wanting to pay me - I even got a letter from my last employer as to why they could not hire me back and they verbally told me they need more proof of further rejection letters. I had paid my insurance premiums monthly for the last 23 years without any default to date.
I hope you can take advise me on how best to approach Company Y.
REPLY
You can lodge a complaint with the Insurance Commissioner's Office in MAS. Show them evidence of payment by CPF and Company X. MAS will ask Company Y to justify their delay.
You can also make a complaint to Fidrec, www.fidrec.com.sg. As your claim exceed $100,000, you can select one or two policies that fall within this limit to lodge your complaint.
Lesson: Insurance companies usually make it difficult for the customer to claim under its permanent disability of critical illness cover, especially for large sums. This is why I recommend against insuring for large sums under critical illness. There is no point in paying so much premium and to face difficulty in making a claim.
I was diagnosed and operated upon for my brain cancer. The cancer is classified as terminal. With the doctor's recommendations & letters, CPF paid all my savings into my bank account. Company X initially refused to allow me to claim my DPS but after I send them the CPF statement - they paid me as well.
I did a similar claim with Company Y for 3 policies. For more than a year, they have been giving excuses after excuses in not wanting to pay me by saying the requirement for us to pay a claim for Total & Permanent Disability is:-
"totally & permanently disability so that life assured cannot engage in any occupation, business or activity which pays any income"
OR
"suffers total and irrecoverable loss of effective use of
- both eyes; or
- any 2 limbs at or above the wrist or ankle;
- or one eye and any one limb at or above the wrist or ankle"
Company Y is adamant in not wanting to pay me - I even got a letter from my last employer as to why they could not hire me back and they verbally told me they need more proof of further rejection letters. I had paid my insurance premiums monthly for the last 23 years without any default to date.
I hope you can take advise me on how best to approach Company Y.
REPLY
You can lodge a complaint with the Insurance Commissioner's Office in MAS. Show them evidence of payment by CPF and Company X. MAS will ask Company Y to justify their delay.
You can also make a complaint to Fidrec, www.fidrec.com.sg. As your claim exceed $100,000, you can select one or two policies that fall within this limit to lodge your complaint.
Lesson: Insurance companies usually make it difficult for the customer to claim under its permanent disability of critical illness cover, especially for large sums. This is why I recommend against insuring for large sums under critical illness. There is no point in paying so much premium and to face difficulty in making a claim.
Gathering on 22 August at Hong Lim Park (2)
The gathering of investors of the credit-linked notes will be held as follows:
Venue: Hong Lim Park
Date: Saturday 22 Aug 09
Time: 5 pm to 6.30 pm.
There will be signing of the Petition asking the help of the Prime Minister to get a settlement similar to Hong Kong for investors of the credit-linked notes. The online Petition has gathered 600 signatures. The physical signing is for investors who were not able to sign the online Petition.
There will be a donation box for investors to make a contribution towards the expenses of the Gathering. Any excess will be used towards an advertisement on the Petition (if there are sufficient money) or contributed to the newly formed Financial Services Consumer Association (FISCA). Any deficit will be underwritten by some well-wishers.
Venue: Hong Lim Park
Date: Saturday 22 Aug 09
Time: 5 pm to 6.30 pm.
There will be signing of the Petition asking the help of the Prime Minister to get a settlement similar to Hong Kong for investors of the credit-linked notes. The online Petition has gathered 600 signatures. The physical signing is for investors who were not able to sign the online Petition.
There will be a donation box for investors to make a contribution towards the expenses of the Gathering. Any excess will be used towards an advertisement on the Petition (if there are sufficient money) or contributed to the newly formed Financial Services Consumer Association (FISCA). Any deficit will be underwritten by some well-wishers.
Books and puzzles
I like to introduce you to my books and puzzles. They are good for children, adults and seniors. They develop logic, intelligence and exercise the mind. Have hours of fun and enjoyment.
More details are found here:
www.easyapps.sg/ishop
More details are found here:
www.easyapps.sg/ishop
The Standard:Bank wiped out my $260m
29 July 2009
An elderly woman who claims to have lost nearly HK$260 million on high-risk financial products is taking a Swiss- based investment bank to court.
Chan Wai-yee, 77, says UBS advisers talked her into buying an equity accumulator package just months before last year's market crunch.
The High Court writ filed by Chan comes less than a week after 16 Hong Kong banks agreed to buy back Lehman Brothers minibonds at 60-70 percent of their original value.
She claims she did not understand the documents she signed because they were in English, and no one from UBS informed her of the risks and nature of the investments.
The writ states that Chan was a client of Hang Seng Bank for four decades, and she opened a Prestige account there in January 2003. She was advised on investments by managers Wong Mei- lun and Shirley Cheng.
Chan says her nest egg was accumulated through hard work, and she had limited experience in stock investments. As she did not understand English, she relied on advice from Wong and Cheng.
She was only interested in low-risk investments because she wanted to preserve her capital, Chan says.
So she never went into any risky investments while her money was with Hang Seng Bank.
Then, during the market boom in mid-2007, Wong and Cheng left Hang Seng Bank to work for UBS.
Chan claims that Wong then approached her and invited her to move her assets to UBS.
She signed various documents from time to time to open an account at UBS, but never indicated to Wong, Cheng or any staff member at UBS that she was interested in changing her investment strategy.
In June 2007, Chan signed different documents, all in English, that included a client acknowledgement form, an "acceptance to be treated as a professional investor" and a "request for subscription of equity-linked notes and blocs."
Chan then transferred shares and cash from her Hang Seng account to UBS, totaling HK$260 million.
In September 2007, Chan says, Wong telephoned and persuaded her to buy a financial product known as an UBS OTC Equity Accumulator.
She claims to have been "induced" into 25 equity accumulator transactions between September 2007 and February 2008.
Last October, a total of nine equity accumulators had not been knocked out, meaning that the stock-price ceiling set in the contract with the bank had not been breached.
After taking losses of more than HK$200 million, she told UBS she wanted to terminate all investments.
As of July 23 this year, her UBS account balance was only HK$1.6 million.
Besides recovering the money, she is seeking interest, damages and costs.
An elderly woman who claims to have lost nearly HK$260 million on high-risk financial products is taking a Swiss- based investment bank to court.
Chan Wai-yee, 77, says UBS advisers talked her into buying an equity accumulator package just months before last year's market crunch.
The High Court writ filed by Chan comes less than a week after 16 Hong Kong banks agreed to buy back Lehman Brothers minibonds at 60-70 percent of their original value.
She claims she did not understand the documents she signed because they were in English, and no one from UBS informed her of the risks and nature of the investments.
The writ states that Chan was a client of Hang Seng Bank for four decades, and she opened a Prestige account there in January 2003. She was advised on investments by managers Wong Mei- lun and Shirley Cheng.
Chan says her nest egg was accumulated through hard work, and she had limited experience in stock investments. As she did not understand English, she relied on advice from Wong and Cheng.
She was only interested in low-risk investments because she wanted to preserve her capital, Chan says.
So she never went into any risky investments while her money was with Hang Seng Bank.
Then, during the market boom in mid-2007, Wong and Cheng left Hang Seng Bank to work for UBS.
Chan claims that Wong then approached her and invited her to move her assets to UBS.
She signed various documents from time to time to open an account at UBS, but never indicated to Wong, Cheng or any staff member at UBS that she was interested in changing her investment strategy.
In June 2007, Chan signed different documents, all in English, that included a client acknowledgement form, an "acceptance to be treated as a professional investor" and a "request for subscription of equity-linked notes and blocs."
Chan then transferred shares and cash from her Hang Seng account to UBS, totaling HK$260 million.
In September 2007, Chan says, Wong telephoned and persuaded her to buy a financial product known as an UBS OTC Equity Accumulator.
She claims to have been "induced" into 25 equity accumulator transactions between September 2007 and February 2008.
Last October, a total of nine equity accumulators had not been knocked out, meaning that the stock-price ceiling set in the contract with the bank had not been breached.
After taking losses of more than HK$200 million, she told UBS she wanted to terminate all investments.
As of July 23 this year, her UBS account balance was only HK$1.6 million.
Besides recovering the money, she is seeking interest, damages and costs.
NJ sues Merrill Lynch over $300 mln stock purchase
NEW YORK, July 28 (Reuters) - New Jersey sued Merrill Lynch for selling its pensions $300 million of preferred stock in January 2008 "based on misleading information" about the brokerage's finances, the state attorney general said on Tuesday.
Anne Milgram, the state attorney general, said in a statement that the lawsuit, filed in the Law Division of state Superior Court in Hudson County, also names Bank of America Corpas a defendant.
Bank of America acquired Merrill Lynch last year and is named as "a successor entity," Milgram said.
Anne Milgram, the state attorney general, said in a statement that the lawsuit, filed in the Law Division of state Superior Court in Hudson County, also names Bank of America Corp
Bank of America acquired Merrill Lynch last year and is named as "a successor entity," Milgram said.
Tuesday, July 28, 2009
For the benefit and welfare of the people
In his talk and the answers to questions from the floor, Dr. Boediono (Vice President Designate of Indonesia) said that decisions will be taken for the benefit and welfare of the people.
When asked about the policy on privatisation and the use of natural resources, he said that the key criteria is to improve efficiency and ensure that the outcome will be for the benefit of the ordinary people.
He also said that Indonesia has been transformed into a democratic country and that the recent general election has been completed peacefuly and fairly. The test of democracy is its ability to improve the lives of the people.
Indonesia has gone a long way in improving its governance structure to reflect the will of the people. Watch out for a printed copy of his talk, when it is reported in the mainstream newspapers.
When asked about the policy on privatisation and the use of natural resources, he said that the key criteria is to improve efficiency and ensure that the outcome will be for the benefit of the ordinary people.
He also said that Indonesia has been transformed into a democratic country and that the recent general election has been completed peacefuly and fairly. The test of democracy is its ability to improve the lives of the people.
Indonesia has gone a long way in improving its governance structure to reflect the will of the people. Watch out for a printed copy of his talk, when it is reported in the mainstream newspapers.
Honesty in Politics
I attended a talk given by Professor Dr. Boediono, Vice President Designate of Indonesia arranged by the Rajaratnam School of International Studies in Singapore.
One Singapore minister asked the question to Dr. Boediono, "What is your experience during the election campaign? How much of your success is due to hard politics and how much do to soft politics?" He used an Indonesian term to describe soft politics, which appealled to human emotions.
Dr. Boediono replied, "I do not know what is hard politics and what is soft politics. I only know what is correct politics, and that is being honest."
I like this answer. It confirms that politics does not have to be manipulating public opinion or the election process. It is possible to be honest and sincere and win over the trust of the people.
One Singapore minister asked the question to Dr. Boediono, "What is your experience during the election campaign? How much of your success is due to hard politics and how much do to soft politics?" He used an Indonesian term to describe soft politics, which appealled to human emotions.
Dr. Boediono replied, "I do not know what is hard politics and what is soft politics. I only know what is correct politics, and that is being honest."
I like this answer. It confirms that politics does not have to be manipulating public opinion or the election process. It is possible to be honest and sincere and win over the trust of the people.
What is the future for this country?
QUOTE:
If you, MAS people, the best educated and smartest people in Singapore, allowed such unfair things to continue, I won't cry for my money, but cry for your future. If the best educated, smartest people are not looking for justice, what is the future for this country?
GD
Read this letter.
If you, MAS people, the best educated and smartest people in Singapore, allowed such unfair things to continue, I won't cry for my money, but cry for your future. If the best educated, smartest people are not looking for justice, what is the future for this country?
GD
Read this letter.
Free market - success and failure
The free market works for certain products which are physical, transparent and easy to understand. It has produced better quality products at lower prices.
The free market has failed to work well for many services, such as financial, medical and legal services. The consumers require an expert to advise on these matters. If the experts are allowed to charge any fee and define their own standard, it is likely to lead to exploitation of consumers.
These services need to be regulated to protect the interest of consumers. It also needs a strong consumer association to help the consumers to understand and exercise their rights, and to ensure fair treatment of consumers.
In the past years, these professional services are regulated by the authority and self-regulated by the professional bodies.
The standards of regulation and self-regulation has dropped in recent years during the era of the free market. The authority believed that consumers can take care of themselves and choose the advisers who can serve them best. This view goes against empircal evidence. Many consumers are fleeced by some unscrupulous so-called experts.
The role of government is to govern. It cannot be delegated to the "free market". The government has to ensure honest and fair behaviour for the benefit of society. It has to set the example for businesses and the people to follow. It is time to re-think the role of the free market.
Tan Kin Lian
The free market has failed to work well for many services, such as financial, medical and legal services. The consumers require an expert to advise on these matters. If the experts are allowed to charge any fee and define their own standard, it is likely to lead to exploitation of consumers.
These services need to be regulated to protect the interest of consumers. It also needs a strong consumer association to help the consumers to understand and exercise their rights, and to ensure fair treatment of consumers.
In the past years, these professional services are regulated by the authority and self-regulated by the professional bodies.
The standards of regulation and self-regulation has dropped in recent years during the era of the free market. The authority believed that consumers can take care of themselves and choose the advisers who can serve them best. This view goes against empircal evidence. Many consumers are fleeced by some unscrupulous so-called experts.
The role of government is to govern. It cannot be delegated to the "free market". The government has to ensure honest and fair behaviour for the benefit of society. It has to set the example for businesses and the people to follow. It is time to re-think the role of the free market.
Tan Kin Lian
Reuters: Investors dump brokers to go it alone online
Article.
Quote: "I will never again trust anyone who is commission-driven to manage my portfolio," said Mallah. "If they're not making money off you, they have no use for you."
Quote: "I will never again trust anyone who is commission-driven to manage my portfolio," said Mallah. "If they're not making money off you, they have no use for you."
Lehman victims international/ planning for Sep. 15
Planning for the protests on the Lehman anniversary on Sep. 15 is progressing in Germany. We are actively discussing activities and locations in our forum here: http://lehmanschaden.19.forumer.com/viewtopic.php?t=2170 (all in German, sorry about that...)
We want to stage one or two larger events in Frankfurt (that's the banking center in Germany and that's where Lehman had their offices) and/or Düsseldorf (that's where Citibank Germany is headquartered, they sold 75% of all Lehman bonds to individual investors over here). Other cities may stage small events or vigils on that day, especially for people who cannot/will not travel. Many of the victims are elderly...
I would like to find out which other cities/countries are willing to co-ordinate a joint protest on Sep. 15. The aim is to maximize our joint press coverage and make clear that our fate is a global phenomenon and not just a local/regional aberration. The banks (and Lehman) screwed little people everywhere!!!
Please state which city/country you represent and how many people you could mobilize. Any city/country would do their own planning, we would just co-ordinate stuff like press releases and maybe some big banners.
Please forward this e-mail to anyone you know that represents Lehman victims in other places. As far as I know, we now have the following cities/countries on this distribution list:
- Hong Kong SAR
- Taiwan (?)
- Singapore
- Spain
- Switzerland
- UK
- Germany
I'm looking forward to hearing from you!
LS from Germany
Web: http://www.lehman-zertifikateschaden..biz
Forum: http://forum.lehman-zertifikateschaden.biz
We want to stage one or two larger events in Frankfurt (that's the banking center in Germany and that's where Lehman had their offices) and/or Düsseldorf (that's where Citibank Germany is headquartered, they sold 75% of all Lehman bonds to individual investors over here). Other cities may stage small events or vigils on that day, especially for people who cannot/will not travel. Many of the victims are elderly...
I would like to find out which other cities/countries are willing to co-ordinate a joint protest on Sep. 15. The aim is to maximize our joint press coverage and make clear that our fate is a global phenomenon and not just a local/regional aberration. The banks (and Lehman) screwed little people everywhere!!!
Please state which city/country you represent and how many people you could mobilize. Any city/country would do their own planning, we would just co-ordinate stuff like press releases and maybe some big banners.
Please forward this e-mail to anyone you know that represents Lehman victims in other places. As far as I know, we now have the following cities/countries on this distribution list:
- Hong Kong SAR
- Taiwan (?)
- Singapore
- Spain
- Switzerland
- UK
- Germany
I'm looking forward to hearing from you!
LS from Germany
Web: http://www.lehman-zertifikateschaden..biz
Forum: http://forum.lehman-zertifikateschaden.biz
Monday, July 27, 2009
The Standard:61pc of minibond investors undecided on offer
27 July 2009
Investors who bought Lehman Brothers minibonds appear to be softening their stance on the banks' repurchase scheme.
According to the preliminary results of a survey conducted by the Democratic Party at a meeting yesterday, 61 percent of 431 investors are now undecided on whether or not to accept the banks' scheme, while 27 percent plan to reject the offer and just 11 percent will accept it. Previously the investors were overwhelmingly against accepting the plan.
Some 29,000 investors _ more than 90 percent of Hong Kong minibond investors _ will be refunded about 70 percent of their original investments, financial regulators said last week.
``I will not pursue litigation as I don't want to get entangled with the bank,'' an investor surnamed Lee said at yesterday's meeting.
The political party estimated more than 1,200 minibond investors attended the two sessions it held.
Investors also criticized the Hong Kong Monetary Authority and the Securities and Futures Commission for not making clear the requirements for claiming their money back. ``It's confusing as an HKMA staffer told me on phone I am a professional investor if I've invested HK$8 million,'' an investor surnamed Yu said. ``However, another person from the HKMA said the next day that it depends on whether we have signed documents to describe ourselves as professional investors.''
On concern over the definition of ``professional investors,'' HKMA executive director Raymond Li Ling-cheung said on Saturday that investors with more than HK$8 million in investments will not be classified as ``professional'' as long as they have not signed any documents to say they are professional investors.
``I advised investors not to make their final decision in a hurry as they have 60 days to consider the offer after banks inform them in early August,'' said legislator Kam Nai-wai.
Meanwhile, a representative of a group of Lehman underlying equity- linked notes investors said they hope to meet Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung today and they will hold a meeting themselves on August 2, according to Sing Tao Daily, sister publication of The Standard.
A spokesman for the secretary said yesterday: ``Resources from the two regulators could focus on misselling complaints of other non-minibond structured products.''
Investors who bought Lehman Brothers minibonds appear to be softening their stance on the banks' repurchase scheme.
According to the preliminary results of a survey conducted by the Democratic Party at a meeting yesterday, 61 percent of 431 investors are now undecided on whether or not to accept the banks' scheme, while 27 percent plan to reject the offer and just 11 percent will accept it. Previously the investors were overwhelmingly against accepting the plan.
Some 29,000 investors _ more than 90 percent of Hong Kong minibond investors _ will be refunded about 70 percent of their original investments, financial regulators said last week.
``I will not pursue litigation as I don't want to get entangled with the bank,'' an investor surnamed Lee said at yesterday's meeting.
The political party estimated more than 1,200 minibond investors attended the two sessions it held.
Investors also criticized the Hong Kong Monetary Authority and the Securities and Futures Commission for not making clear the requirements for claiming their money back. ``It's confusing as an HKMA staffer told me on phone I am a professional investor if I've invested HK$8 million,'' an investor surnamed Yu said. ``However, another person from the HKMA said the next day that it depends on whether we have signed documents to describe ourselves as professional investors.''
On concern over the definition of ``professional investors,'' HKMA executive director Raymond Li Ling-cheung said on Saturday that investors with more than HK$8 million in investments will not be classified as ``professional'' as long as they have not signed any documents to say they are professional investors.
``I advised investors not to make their final decision in a hurry as they have 60 days to consider the offer after banks inform them in early August,'' said legislator Kam Nai-wai.
Meanwhile, a representative of a group of Lehman underlying equity- linked notes investors said they hope to meet Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung today and they will hold a meeting themselves on August 2, according to Sing Tao Daily, sister publication of The Standard.
A spokesman for the secretary said yesterday: ``Resources from the two regulators could focus on misselling complaints of other non-minibond structured products.''
TODAY:We should follow HK's example ; Protect individuals, not just the banks
27 July 2009
WHILE the Lehman Minibonds affair is far from over, a final solution to the problem of the ill-fated notes linked to the now-failed American investment bank appears to be nearer in Hong Kong than in Singapore.
Last week, Hong Kong’s Securities and Futures Commission (SFC) announced BOC Hong Kong Holdings and 15 other financial institutions in the Special Administration Region had agreed to pay at least US$0.60 ($0.86) on the dollar to the nearly 30,000 people who invested in the notes.
The total compensation in Hong Kong, where some US$1.8 billion worth of the notes were sold, will amount to about HK$6.3 billion ($1.17 billion). The final compensation will however depend on the amount of collateral the banks can recover from Lehman’s liquidators. And according to Hong Kong’s Financial Secretary John Tsang, investors could get back 70 per cent or more of their original investments.
By comparison, compensation to the nearly 10,000 people here who invested some $520 million in structured notes like the Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes amounted to far less — just over $105 million. In fact, the compensation ranged from a mere 1 per cent of the amount sold as in the case of stockbrokers UOB Kay Hian to the 67 per cent, or some $58 million paid out by Hong Leong Finance to those who complained that they had been misled into buying the notes.
Despite acknowledgment by the Monetary Authority of Singapore (MAS) that there had been at least some mis-selling by the institutions concerned, those investors who have not been offered any compensation have been told to either continue with the three-step dispute resolution process recommended by the MAS, or take legal action on their own, a step a number have since taken. Its findings on the matter were disappointing for many, to say the least.
Worse still, the MAS has also come out to say that the findings of its recent report on the matter, under which some 10 financial institutions were punished, did not automatically mean the institutions are legally liable despite the tacit acknowledgment of mis-selling. The 10 institutions concerned, which included Singapore’s largest bank, DBS Bank, and Hong Leong Finance, have been barred from selling complex financial instruments for periods of up to two years.
It appears the authorities here were more concerned about protecting the system rather than the individual.
The 10 institutions were found guilty of at least one of three failings — misclassifying the rather complex notes they were selling as lower-risk products than they really were; not providing accurate and complete information about the structured notes to sales staff; and not ensuring that the sales teams were adequately trained to sell the notes.
Many felt the punishment meted out was merely a slap on the wrist.
While some investors, especially the elderly and the more ignorant, were able to secure full compensation, the authorities here appear to have relied more on moral suasion rather than have exerted any real pressure on a settlement.
So, why wasn’t the Hong Kong model followed? After all, it isn’t as if the institutions here do not have the capacity to have been more generous with their payouts.
For sure, not all the investors were as ignorant as they made out to be. Many were led by greed to buy the notes by the relatively-high returns they promised. Others did not even bother to assess the risks involved in buying these instruments.
But the authorities must also accept some blame in not adequately monitoring the institutions and the people who sold these highly complex and risky products, which even many bankers did not fully understand.
It is ironic that Hong Kong, one of the greatest bastions of free-wheeling and dealing, was able to wrest a better deal for the victims of the Lehman Minibonds than Singapore, which has a reputation for having a better regulated financial environment.
WHILE the Lehman Minibonds affair is far from over, a final solution to the problem of the ill-fated notes linked to the now-failed American investment bank appears to be nearer in Hong Kong than in Singapore.
Last week, Hong Kong’s Securities and Futures Commission (SFC) announced BOC Hong Kong Holdings and 15 other financial institutions in the Special Administration Region had agreed to pay at least US$0.60 ($0.86) on the dollar to the nearly 30,000 people who invested in the notes.
The total compensation in Hong Kong, where some US$1.8 billion worth of the notes were sold, will amount to about HK$6.3 billion ($1.17 billion). The final compensation will however depend on the amount of collateral the banks can recover from Lehman’s liquidators. And according to Hong Kong’s Financial Secretary John Tsang, investors could get back 70 per cent or more of their original investments.
By comparison, compensation to the nearly 10,000 people here who invested some $520 million in structured notes like the Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes amounted to far less — just over $105 million. In fact, the compensation ranged from a mere 1 per cent of the amount sold as in the case of stockbrokers UOB Kay Hian to the 67 per cent, or some $58 million paid out by Hong Leong Finance to those who complained that they had been misled into buying the notes.
Despite acknowledgment by the Monetary Authority of Singapore (MAS) that there had been at least some mis-selling by the institutions concerned, those investors who have not been offered any compensation have been told to either continue with the three-step dispute resolution process recommended by the MAS, or take legal action on their own, a step a number have since taken. Its findings on the matter were disappointing for many, to say the least.
Worse still, the MAS has also come out to say that the findings of its recent report on the matter, under which some 10 financial institutions were punished, did not automatically mean the institutions are legally liable despite the tacit acknowledgment of mis-selling. The 10 institutions concerned, which included Singapore’s largest bank, DBS Bank, and Hong Leong Finance, have been barred from selling complex financial instruments for periods of up to two years.
It appears the authorities here were more concerned about protecting the system rather than the individual.
The 10 institutions were found guilty of at least one of three failings — misclassifying the rather complex notes they were selling as lower-risk products than they really were; not providing accurate and complete information about the structured notes to sales staff; and not ensuring that the sales teams were adequately trained to sell the notes.
Many felt the punishment meted out was merely a slap on the wrist.
While some investors, especially the elderly and the more ignorant, were able to secure full compensation, the authorities here appear to have relied more on moral suasion rather than have exerted any real pressure on a settlement.
So, why wasn’t the Hong Kong model followed? After all, it isn’t as if the institutions here do not have the capacity to have been more generous with their payouts.
For sure, not all the investors were as ignorant as they made out to be. Many were led by greed to buy the notes by the relatively-high returns they promised. Others did not even bother to assess the risks involved in buying these instruments.
But the authorities must also accept some blame in not adequately monitoring the institutions and the people who sold these highly complex and risky products, which even many bankers did not fully understand.
It is ironic that Hong Kong, one of the greatest bastions of free-wheeling and dealing, was able to wrest a better deal for the victims of the Lehman Minibonds than Singapore, which has a reputation for having a better regulated financial environment.
Honesty and fairness
It is important for our society to be operated on the principles of honesty and fairness. The minibond crisis has raised many issues of deep concerns to me, and many other people in Singapore.
When I organised the Petition last September, it was very clear that the financial institutions had failed in their conduct as required under the Securities and Futures Act and the Financial Advisers Act. The Petition, signed by more than 1,000 people, asked the authority to carry out an investigation and take appropriate actions under these law.
After a protracted period, which left many investors in deep anguish, the investigation report was published. The punishment meted to the financial institutions was light. Many investors, who lost large sums of money, were not compensated. This raised serious doubts on the question of fairness and justice in our society. It seems that the ordinary people are at the mercy of the powerful people and institutions.
Hong Kong took a different approach. The authority exercised its power and influence to get the financial institutions to make compensation of 60% or more, to the investors. The amount that is being compensated is many times of the compensation in Singapore. The situation is similar, in respect of wrong doings by the financial institutions.
The Hong Kong settlement is scantily covered in our local media, although it is a matter of great importance, not only to the investors who are affected and their families, but to the other people who are not affected. It shows two different approaches taken by two states on a similar issue.
This raise another serious issue of honesty and transparency. Why is such an important issue being swept under the carpet and not reported in the mainstream media? People are not blind. They can read the news in the internet and the blog. They have ears and can listen to gossips in the coffee shops and elsewhere.
I hope that the authority will reflect on this matter and re-approach it on the principles of fairness and honesty. It concerns the future of our country, the people and our children.
Tan Kin Lian
When I organised the Petition last September, it was very clear that the financial institutions had failed in their conduct as required under the Securities and Futures Act and the Financial Advisers Act. The Petition, signed by more than 1,000 people, asked the authority to carry out an investigation and take appropriate actions under these law.
After a protracted period, which left many investors in deep anguish, the investigation report was published. The punishment meted to the financial institutions was light. Many investors, who lost large sums of money, were not compensated. This raised serious doubts on the question of fairness and justice in our society. It seems that the ordinary people are at the mercy of the powerful people and institutions.
Hong Kong took a different approach. The authority exercised its power and influence to get the financial institutions to make compensation of 60% or more, to the investors. The amount that is being compensated is many times of the compensation in Singapore. The situation is similar, in respect of wrong doings by the financial institutions.
The Hong Kong settlement is scantily covered in our local media, although it is a matter of great importance, not only to the investors who are affected and their families, but to the other people who are not affected. It shows two different approaches taken by two states on a similar issue.
This raise another serious issue of honesty and transparency. Why is such an important issue being swept under the carpet and not reported in the mainstream media? People are not blind. They can read the news in the internet and the blog. They have ears and can listen to gossips in the coffee shops and elsewhere.
I hope that the authority will reflect on this matter and re-approach it on the principles of fairness and honesty. It concerns the future of our country, the people and our children.
Tan Kin Lian
SCMP:Monetary Authority director clarifies minibond deal rules
6 July 2009
Investors who bought Lehman Brothers minibonds will receive compensation even if they have more than HK$8 million in investments - as long as they have not signed any documents describing themselves as professional investors, the Monetary Authority executive director says.
Raymond Li Ling-cheung's comments yesterday came after a number of minibonds buyers raised questions over whether they would be eligible for a payout under a deal agreed with 16 Hong Kong banks which sold minibonds guaranteed by Lehman Brothers.
In the days since the announcement of the settlement, which applies only to buyers classified as "individual investors", the definition of "professional investor" has been widely debated. Those who had made five or more investments in structured products such as minibonds over the past five years would be considered professionals. Corporate investors would not be covered by the settlement.
Mr Li moved to clear up some of the questions yesterday.
"The definition of professional investors is very clear in the law," he said. "It does not say you must be a professional investor when you have HK$8 million in the bank.
"If the bank classifies you as professional investor, an agreement should follow and the bank must tell you that you are classified as a professional investor and obtain your approval. It is not mandatory to say you are a professional investor when you have HK$8 million.
"If you want to know whether you're classified as a professional investor or not, you had better ask the bank."
The Securities and Futures Commission, the Monetary Authority and 16 distributing banks jointly announced on Wednesday that they had reached an agreement in relation to the compensation payout of Lehman Brothers-linked minibonds from eligible customers.
The agreement means that 90 per cent of investors will get backup to 70 per cent of their money. The banks will repay at least HK$6.3 billion to 29,000 people who bought minibonds in what is likely to be the world's largest compensation package for retail investors.
More than 33,000 Hong Kong investors bought HK$12 billion worth of high-risk minibonds that became virtually worthless when Lehman collapsed last September.
Minibonds are not corporate bonds, but consist of high-risk credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
The banks will send letters to investors next month, the investors will have 60 days to decide if they want to accept the deal. Those aged under 65 will receive 60 per cent of the value of their initial investment. Those over 65 will get 70 per cent back.
The Democratic Party will meet with minibonds investors today to discuss progress on the issue.
Investors who bought Lehman Brothers minibonds will receive compensation even if they have more than HK$8 million in investments - as long as they have not signed any documents describing themselves as professional investors, the Monetary Authority executive director says.
Raymond Li Ling-cheung's comments yesterday came after a number of minibonds buyers raised questions over whether they would be eligible for a payout under a deal agreed with 16 Hong Kong banks which sold minibonds guaranteed by Lehman Brothers.
In the days since the announcement of the settlement, which applies only to buyers classified as "individual investors", the definition of "professional investor" has been widely debated. Those who had made five or more investments in structured products such as minibonds over the past five years would be considered professionals. Corporate investors would not be covered by the settlement.
Mr Li moved to clear up some of the questions yesterday.
"The definition of professional investors is very clear in the law," he said. "It does not say you must be a professional investor when you have HK$8 million in the bank.
"If the bank classifies you as professional investor, an agreement should follow and the bank must tell you that you are classified as a professional investor and obtain your approval. It is not mandatory to say you are a professional investor when you have HK$8 million.
"If you want to know whether you're classified as a professional investor or not, you had better ask the bank."
The Securities and Futures Commission, the Monetary Authority and 16 distributing banks jointly announced on Wednesday that they had reached an agreement in relation to the compensation payout of Lehman Brothers-linked minibonds from eligible customers.
The agreement means that 90 per cent of investors will get backup to 70 per cent of their money. The banks will repay at least HK$6.3 billion to 29,000 people who bought minibonds in what is likely to be the world's largest compensation package for retail investors.
More than 33,000 Hong Kong investors bought HK$12 billion worth of high-risk minibonds that became virtually worthless when Lehman collapsed last September.
Minibonds are not corporate bonds, but consist of high-risk credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
The banks will send letters to investors next month, the investors will have 60 days to decide if they want to accept the deal. Those aged under 65 will receive 60 per cent of the value of their initial investment. Those over 65 will get 70 per cent back.
The Democratic Party will meet with minibonds investors today to discuss progress on the issue.
Advice on individual shares
Dear Tan Kin Lian,
I had bought a China counter Sino Environment Tech shear by using my CPF investment account. But now the shear price drop to 30 % and looks the company is having some internal problem. They did not announce the 1st Qtr result and all investment funds also selling there holding. Could you advice me is it wise decision to sell and investment other counter instead of loosing all?
I had bought a China counter Sino Environment Tech shear by using my CPF investment account. But now the shear price drop to 30 % and looks the company is having some internal problem. They did not announce the 1st Qtr result and all investment funds also selling there holding. Could you advice me is it wise decision to sell and investment other counter instead of loosing all?
REPLY
I do not give advice on individual shares. Sorry.
I do not give advice on individual shares. Sorry.
Pensioner Health Benefits
Hi Sir,
Someone I know is a civil servant who is currently under the Pension Scheme. She is considering purchasing medical insurance. She is 50 years old. She did not opt to switch to the CPF Scheme when the change was offered.
I understand that pensioners are provided good medical coverage. Is my friend adequately covered for her hospitalisation and medical needs? I have tried to find out more details about the health benefits offered under the pension scheme but so far have been unable to find out what I need to know.
REPLY
Your friend, the civil servant, should ask the employer. I do not know the answer because the medical benefit scheme are different for different categories of civil servants and have changed many times in past years.
Always ask the right source, and not someone else.
Someone I know is a civil servant who is currently under the Pension Scheme. She is considering purchasing medical insurance. She is 50 years old. She did not opt to switch to the CPF Scheme when the change was offered.
I understand that pensioners are provided good medical coverage. Is my friend adequately covered for her hospitalisation and medical needs? I have tried to find out more details about the health benefits offered under the pension scheme but so far have been unable to find out what I need to know.
REPLY
Your friend, the civil servant, should ask the employer. I do not know the answer because the medical benefit scheme are different for different categories of civil servants and have changed many times in past years.
Always ask the right source, and not someone else.
Sunday, July 26, 2009
Interest rate on 25 July 2009
Here is an update of the interest rate on savings account and fixed deposit as at 25 July 2009. It is for your easy reference. Hope you find it useful. As the interest rate changes, please verify with the financial institution.
Winners of Intelligence Quiz and Name The Shape contests
Congratulations to the following winners:
Intelligence Quiz: Siew Hon Foong SXXXX993E
Name The Shape: Tina Wee SXXXX439B
Books can be ordered here.
Intelligence Quiz: Siew Hon Foong SXXXX993E
Name The Shape: Tina Wee SXXXX439B
Books can be ordered here.
Saturday, July 25, 2009
Develop your mind
Develop your mind (and your children's mind) with the following books:
TKL intelligence quiz
TKL shape quiz
TKL sudoku
Available from www.easyapps.sg/iShop or www.easysearch.sg
TKL intelligence quiz
TKL shape quiz
TKL sudoku
Available from www.easyapps.sg/iShop or www.easysearch.sg
SCMP:Lehman inquiry to call SFC chief again
25 July 2009
The Legislative Council subcommittee investigating the Lehman Brothers minibond debacle will again summon the head of the Securities and Futures Commission to explain the HK$6.3 billion deal to repay thousands of investors.
Speaking after a closed-door meeting yesterday, the subcommittee's chairman, Raymond Ho Chung-tai, said it decided to summon the regulator's chief executive, Martin Wheatley, for an open hearing as early as Friday or early next month.
"It's because after announcing the repurchase proposal, we need to understand the deal thoroughly {hellip} and ask about the terms, which are unclear," Mr Ho said.
The 16 banks that sold Lehman Brothers minibonds will send letters to investors early next month, and investors will have 60 days to decide whether to accept the deal.
Mr Ho said the legislators therefore hoped to hold the hearing as soon as possible to obtain more information about the repurchase arrangement. The subcommittee also decided that Financial Secretary John Tsang Chun-wah would be the next to be summoned, Mr Ho said.
The SFC announced on Wednesday the HK$6.3 billion buyout deal, which covers 29,000 investors of Lehman Brothers minibonds.
Under the agreement, those who are over 65 years old will get 70 per cent of the value of their initial investment back, while those below 65 will get 60 per cent back. They will receive at least a further 10 per cent of their initial investment from the residual value of the collateral. Despite their name, minibonds are not corporate bonds but credit-linked derivatives whose worth depends on the health of the underlying assets.
Mr Ho said the subcommittee members had also agreed to extend the area of investigation to include investors' protection, the complaint mechanism and the penalty system for any violation of the law during the selling of financial products.
The subcommittee chairman reiterated that the agreement would not interrupt the subcommittee investigating the matter.
"Unlike previous Legco inquiries, this time the incident is developing and we need to make plans accordingly. But it will not halt our investigation," he said.
Although the subcommittee decided earlier to take a break next month, Mr Ho said that as a result of the latest development, meetings would continue during the summer as long as there were enough lawmakers on hand.
"A lot of members have told me they won't be in Hong Kong in August. But because this is something which has got very wide public attention and interest, we will try our best to find enough members," he said.
The Legislative Council subcommittee investigating the Lehman Brothers minibond debacle will again summon the head of the Securities and Futures Commission to explain the HK$6.3 billion deal to repay thousands of investors.
Speaking after a closed-door meeting yesterday, the subcommittee's chairman, Raymond Ho Chung-tai, said it decided to summon the regulator's chief executive, Martin Wheatley, for an open hearing as early as Friday or early next month.
"It's because after announcing the repurchase proposal, we need to understand the deal thoroughly {hellip} and ask about the terms, which are unclear," Mr Ho said.
The 16 banks that sold Lehman Brothers minibonds will send letters to investors early next month, and investors will have 60 days to decide whether to accept the deal.
Mr Ho said the legislators therefore hoped to hold the hearing as soon as possible to obtain more information about the repurchase arrangement. The subcommittee also decided that Financial Secretary John Tsang Chun-wah would be the next to be summoned, Mr Ho said.
The SFC announced on Wednesday the HK$6.3 billion buyout deal, which covers 29,000 investors of Lehman Brothers minibonds.
Under the agreement, those who are over 65 years old will get 70 per cent of the value of their initial investment back, while those below 65 will get 60 per cent back. They will receive at least a further 10 per cent of their initial investment from the residual value of the collateral. Despite their name, minibonds are not corporate bonds but credit-linked derivatives whose worth depends on the health of the underlying assets.
Mr Ho said the subcommittee members had also agreed to extend the area of investigation to include investors' protection, the complaint mechanism and the penalty system for any violation of the law during the selling of financial products.
The subcommittee chairman reiterated that the agreement would not interrupt the subcommittee investigating the matter.
"Unlike previous Legco inquiries, this time the incident is developing and we need to make plans accordingly. But it will not halt our investigation," he said.
Although the subcommittee decided earlier to take a break next month, Mr Ho said that as a result of the latest development, meetings would continue during the summer as long as there were enough lawmakers on hand.
"A lot of members have told me they won't be in Hong Kong in August. But because this is something which has got very wide public attention and interest, we will try our best to find enough members," he said.
Broadcast this message: Petition
Please broadcast this message to your contacts by email, Facebook and other social networks:
"Mr. Tan Kin Lian is organising a Petition to the Prime Minister to ask him to assist the investors to get similar compensation given to investors in Hong Kong. Please inform the people who are affected by the credit-linked notes to sign the Petition. The blog is www.tankinlian.blogspot.com".
"Mr. Tan Kin Lian is organising a Petition to the Prime Minister to ask him to assist the investors to get similar compensation given to investors in Hong Kong. Please inform the people who are affected by the credit-linked notes to sign the Petition. The blog is www.tankinlian.blogspot.com".
Cheated in a good reputation country
Dear (MAS officer)
I would like to share a story with your MAS people.
20 years ago, my father finished his army service and got a big sum money for his army service in China. The amount is equal to 5 years salary. He bought 10 years China government bond (国库券）with that money from a national bank. He thought China government bond was very safe and he only want to use it for his children's education need in the future. He locked those coupon with much care.
10 years later, when the bond matured, he brought the coupon to bank to cash out, the teller told him the coupon were faked. He can not get anything. What a big shock for him and his family. The teller from national bank sold him the faked coupon. The bank told him they could not find the teller any more. He was not the only unlucky person. Actually there are quite a lot of people faced the same. They together tried to ask help from bank, government, press, and law firm. Finally, a lawyer want to take their case. However, somebody threaten the lawyer and the press. The press stopped reporting their story and lawyer didn't dare to take their case.
His daughter thought this was a place without justice. She studied very hard to got in a good university and later left the place for what she thought was a better country.
However, what happened to her? She fell into the same trap. She didn't suspect that the famous Singapore financial institution would cheat people's money also. She clearly told the FI officer she needed government bond only as she was very conservative and she needed the money for her father's medical need. Her father is paralyzed now. However, The RM sold her toxic complicated product with a faked name "Bond".
She was worse hurt. Her father had to accept the unfair things that happened in a developing country. For her, she didn't prepared for such unfair things in this good reputation country.
If you, MAS people, the best educated and smartest people in Singapore, allowed such unfair things to continue, I won't cry for my money, but cry for your future. If the best educated, smartest people are not looking for justice, what is the future for this country?
Best Regard!
GD
I would like to share a story with your MAS people.
20 years ago, my father finished his army service and got a big sum money for his army service in China. The amount is equal to 5 years salary. He bought 10 years China government bond (国库券）with that money from a national bank. He thought China government bond was very safe and he only want to use it for his children's education need in the future. He locked those coupon with much care.
10 years later, when the bond matured, he brought the coupon to bank to cash out, the teller told him the coupon were faked. He can not get anything. What a big shock for him and his family. The teller from national bank sold him the faked coupon. The bank told him they could not find the teller any more. He was not the only unlucky person. Actually there are quite a lot of people faced the same. They together tried to ask help from bank, government, press, and law firm. Finally, a lawyer want to take their case. However, somebody threaten the lawyer and the press. The press stopped reporting their story and lawyer didn't dare to take their case.
His daughter thought this was a place without justice. She studied very hard to got in a good university and later left the place for what she thought was a better country.
However, what happened to her? She fell into the same trap. She didn't suspect that the famous Singapore financial institution would cheat people's money also. She clearly told the FI officer she needed government bond only as she was very conservative and she needed the money for her father's medical need. Her father is paralyzed now. However, The RM sold her toxic complicated product with a faked name "Bond".
She was worse hurt. Her father had to accept the unfair things that happened in a developing country. For her, she didn't prepared for such unfair things in this good reputation country.
If you, MAS people, the best educated and smartest people in Singapore, allowed such unfair things to continue, I won't cry for my money, but cry for your future. If the best educated, smartest people are not looking for justice, what is the future for this country?
Best Regard!
GD
Friday, July 24, 2009
Journalists refused to cover the Petition
I sent an email to notify the journalists on two occasions about the Petition concerning the credit linked notes. There were about 10 journalists in my mailing list. They have covered the credit linked notes previously.
None of the journalists replied to me. They also did not cover this effort. There was total silence on their part. This is a sad state of affairs.
None of the journalists replied to me. They also did not cover this effort. There was total silence on their part. This is a sad state of affairs.
Pinnacle Notes - many series in trouble
Hi Kin Lian,
Please post the latest valuation (July24)of the following series of Pinnacles Notes. The situation is now very critical for holders of these notes.
Series 9 & 10 are already kaput, 1 & 3 may be gone too, and 2,6 & 7 are almost worthless at 0.3% or less(they were at 2% a fortnight ago!) and Series 5 at 1.8%, barely alive and hanging by their skin.
Only remaining 4 Series are fairly safe at this time.
Yet MAS unlike its HK counterpart is expecting each and every investor to fight it out on a case-by-case basis with his FI distributor when it has already found the FIs guilty of near-systemic or firm-wide errors and faults. MAS is indeed prescribing a slow and painful death for the investors who are the victims in toiling through processes of complaints, FIDREC and/or legal actions, while the guilty are merely given what is effectively an enforced but cost-free and painless holiday.
In the light of the latest empathetic resolution led by HK's authority, I think the Petition ought to updated appropriately to add more punch.
SB
Please post the latest valuation (July24)of the following series of Pinnacles Notes. The situation is now very critical for holders of these notes.
Series 9 & 10 are already kaput, 1 & 3 may be gone too, and 2,6 & 7 are almost worthless at 0.3% or less(they were at 2% a fortnight ago!) and Series 5 at 1.8%, barely alive and hanging by their skin.
Only remaining 4 Series are fairly safe at this time.
Yet MAS unlike its HK counterpart is expecting each and every investor to fight it out on a case-by-case basis with his FI distributor when it has already found the FIs guilty of near-systemic or firm-wide errors and faults. MAS is indeed prescribing a slow and painful death for the investors who are the victims in toiling through processes of complaints, FIDREC and/or legal actions, while the guilty are merely given what is effectively an enforced but cost-free and painless holiday.
In the light of the latest empathetic resolution led by HK's authority, I think the Petition ought to updated appropriately to add more punch.
SB
CPF Life - does it need to be compulsory?
Hi Mr Tan,
Thanks for willing to spend time to write on CPF Life. We all understand the NEED to have CPF Life. But I would like to have an unbiased view on this plan which is made compulsory for everybody.
Our government is taking a significant portion of our hard-earned CPF money and place us on this plan. Is this a reasonable deal for us or simply we have no choice but to swallow this bitter pill?
Among the options available in this CPF Life, is it just choose based on "whether I want to leave some money for our younger generation" and thus opt for "receive minimum payout when I am alive"?
Is it really true that since CPF Board will be administering this annuity plan, it is better and reliable than those offered by insurers which definitely have more experience in this area?
JL
Thanks for willing to spend time to write on CPF Life. We all understand the NEED to have CPF Life. But I would like to have an unbiased view on this plan which is made compulsory for everybody.
Our government is taking a significant portion of our hard-earned CPF money and place us on this plan. Is this a reasonable deal for us or simply we have no choice but to swallow this bitter pill?
Among the options available in this CPF Life, is it just choose based on "whether I want to leave some money for our younger generation" and thus opt for "receive minimum payout when I am alive"?
Is it really true that since CPF Board will be administering this annuity plan, it is better and reliable than those offered by insurers which definitely have more experience in this area?
JL
SCMP:Minibond decision heartens investors similarly burned
24 July 2009
The watershed decision forcing banks to pay more than HK$6 billion compensation to Lehman minibond victims has given hope to thousands of investors burned in meltdowns of similar structured products.
The Securities and Futures Commission (SFC) ordered 16 banks, including Bank of China (Hong Kong) and Bank of East Asia, to return up to 70 per cent of money invested in minibonds to investors because bank staff sold the complex derivatives as low-risk.
The banking regulator, the Hong Kong Monetary Authority, will now deal with 9,000 other complaints of mis-selling of structured products. These are likely to include gripes about worthless Constellation Notes, sold by DBS Bank, and Octave Notes, sold by 17 banks and designed by Morgan Stanley.
"We will investigate if there is any mis-selling in these complaints. Our target is to complete all the cases by March," HKMA executive director Raymond Li Ling-cheung said.
Democratic Party chairman Albert Ho Chun-yan said: "Octave Notes and Constellation investors now have a stronger case for compensation."
Like minibonds, Constellation Notes were derivative products - financial bets - linked to the financial health of Lehman Brothers. Their buyers wagered that no companies in a group that included Lehman would go bust.
Investors were wiped out when the US bank failed last September.
Out of a series of 18 derivative-based Octave Notes, three required buyers to strike similar bets that Lehman would not fail. Buyers lost everything after the bank's demise.
Many investors who attended meetings organised by the Democratic Party claimed they had no idea they were buying derivatives. Instead, they claimed they were told the notes were comparable to time deposits or simple corporate bonds.
Shelley So, a Constellation investor, said DBS staff told her the notes were "for extra income, because we do not earn very much". In 2006, she and her husband poured US$130,000 into the product. The couple had instructed lawyers to try to get their money back.
DBS declined to comment.
About 4,000 Hong Kong people bought HK$2.4 billion worth of Constellation Notes. Octave Notes were sold to more than 8,000 people, who invested HK$1.8 billion.
Meanwhile, dozens of Lehman minibond investors protested outside the SFC yesterday, saying the new payout proposal was not acceptable and they wanted all of their investment principal back.
The watershed decision forcing banks to pay more than HK$6 billion compensation to Lehman minibond victims has given hope to thousands of investors burned in meltdowns of similar structured products.
The Securities and Futures Commission (SFC) ordered 16 banks, including Bank of China (Hong Kong) and Bank of East Asia, to return up to 70 per cent of money invested in minibonds to investors because bank staff sold the complex derivatives as low-risk.
The banking regulator, the Hong Kong Monetary Authority, will now deal with 9,000 other complaints of mis-selling of structured products. These are likely to include gripes about worthless Constellation Notes, sold by DBS Bank, and Octave Notes, sold by 17 banks and designed by Morgan Stanley.
"We will investigate if there is any mis-selling in these complaints. Our target is to complete all the cases by March," HKMA executive director Raymond Li Ling-cheung said.
Democratic Party chairman Albert Ho Chun-yan said: "Octave Notes and Constellation investors now have a stronger case for compensation."
Like minibonds, Constellation Notes were derivative products - financial bets - linked to the financial health of Lehman Brothers. Their buyers wagered that no companies in a group that included Lehman would go bust.
Investors were wiped out when the US bank failed last September.
Out of a series of 18 derivative-based Octave Notes, three required buyers to strike similar bets that Lehman would not fail. Buyers lost everything after the bank's demise.
Many investors who attended meetings organised by the Democratic Party claimed they had no idea they were buying derivatives. Instead, they claimed they were told the notes were comparable to time deposits or simple corporate bonds.
Shelley So, a Constellation investor, said DBS staff told her the notes were "for extra income, because we do not earn very much". In 2006, she and her husband poured US$130,000 into the product. The couple had instructed lawyers to try to get their money back.
DBS declined to comment.
About 4,000 Hong Kong people bought HK$2.4 billion worth of Constellation Notes. Octave Notes were sold to more than 8,000 people, who invested HK$1.8 billion.
Meanwhile, dozens of Lehman minibond investors protested outside the SFC yesterday, saying the new payout proposal was not acceptable and they wanted all of their investment principal back.
The Standard:Protests ease, investors come to terms with offer
24 July 2009
Regular investors started coming to terms with the Lehman minibond compensation offer yesterday, with only a handful of elderly investors protesting outside the Securities and Futures Commission offices.
Some of those protesting said they were inclined to accept the offer, although they held out a sliver of hope that they would get more.
``I have no money to use. My wife and I only have this pension, I can only accept the 60 percent compensation and use it,'' said an investor surnamed Chan.
Another investor said he prefers to reinvest the settlement amount to make more money. ``It's better to get back some money to invest in stocks. As the entanglement goes, chances are you won't be able to get it back some five years later,'' he said. ``Making up for the loss from stocks now is just the same.''
Consumer Council chairman Anthony Cheung Bing-leung advised investors to evaluate their individual situations before deciding whether or not to accept the buyback proposals by the regulators and banks. ``If the investors are willing to accept it, we will be pleased. But we also respect whatever decisions the investors make in the end,'' Cheung said. The council has received about 12,000 complaints from investors so far, including about 50 cases applying to the legal fund.
Customers of DBS Bank (Hong Kong), who bought Constellation credit-linked notes linked to Lehman, are still fighting for more compensation from the bank. They are not covered under the repurchase scheme as what they bought was not minibonds.
Bank shares surged yesterday as investors were relieved that the uncertainty on the minibond compensation plan was removed. Bank of East Asia (0023) jumped 3.3 percent to HK$25.10, while Bank of China (Hong Kong) (2388) rose 2.5 percent to HK$15.54.
Bank of Communications (3328) said yesterday it would have to pay a total of HK$204.54 million in investor compensation. It said the minibond repurchases will have ``minimal impact'' on financial results.
Dah Sing Banking Group (2356) said it would need to pay up to HK$444 million in compensation, plus HK$20 million in ``top-up payments'' and HK$22 million in legal-fund contributions.
Regular investors started coming to terms with the Lehman minibond compensation offer yesterday, with only a handful of elderly investors protesting outside the Securities and Futures Commission offices.
Some of those protesting said they were inclined to accept the offer, although they held out a sliver of hope that they would get more.
``I have no money to use. My wife and I only have this pension, I can only accept the 60 percent compensation and use it,'' said an investor surnamed Chan.
Another investor said he prefers to reinvest the settlement amount to make more money. ``It's better to get back some money to invest in stocks. As the entanglement goes, chances are you won't be able to get it back some five years later,'' he said. ``Making up for the loss from stocks now is just the same.''
Consumer Council chairman Anthony Cheung Bing-leung advised investors to evaluate their individual situations before deciding whether or not to accept the buyback proposals by the regulators and banks. ``If the investors are willing to accept it, we will be pleased. But we also respect whatever decisions the investors make in the end,'' Cheung said. The council has received about 12,000 complaints from investors so far, including about 50 cases applying to the legal fund.
Customers of DBS Bank (Hong Kong), who bought Constellation credit-linked notes linked to Lehman, are still fighting for more compensation from the bank. They are not covered under the repurchase scheme as what they bought was not minibonds.
Bank shares surged yesterday as investors were relieved that the uncertainty on the minibond compensation plan was removed. Bank of East Asia (0023) jumped 3.3 percent to HK$25.10, while Bank of China (Hong Kong) (2388) rose 2.5 percent to HK$15.54.
Bank of Communications (3328) said yesterday it would have to pay a total of HK$204.54 million in investor compensation. It said the minibond repurchases will have ``minimal impact'' on financial results.
Dah Sing Banking Group (2356) said it would need to pay up to HK$444 million in compensation, plus HK$20 million in ``top-up payments'' and HK$22 million in legal-fund contributions.
China Daily:Investors continue minibond fight
24 July 2009
HONG KONG: A complaint arising from the sale of Lehman Brothers minibonds is headed for the courts. At the same time the Consumer Council will continue assisting those hit hard when the minibonds and other dicey financial instruments became worthless.
The watchdog has received about 12,000 related complaints since the US investment bank collapsed last September causing astronomical losses to investors.
Apart from the one case that has been set for litigation, about 50 other cases are under review for possible legal action.
Investors burnt in the minibonds collapse have accused local banks of malpractice and deception in their efforts to sell the complex investment tools. Many of those who were hurt are elderly. Many don't have education sufficient to provide them a clear grasp on what happened to their money.
Speaking at a Consumer Council seminar yesterday, Secretary for Financial Services and the Treasury Chan Ka-keung urged sellers and financial consultants to expound fully the risk of investment products to investors and to assess actual needs in order to protect the consumers' rights.
They should not "hard sell" products, Chan said.
Meanwhile, Consumer Council chairman Anthony Cheung reminded consumers that it is they who must decide whether to accept the buy-back scheme.
Regulators and 16 banks set up the compensation package which was announced on Wednesday. Investors could receive between 60 and 70 percent of the principal they invested. But "experienced" and "professional" investors will not be eligible.
"The package is proposed by the Securities and Futures Commission (SFC), the Hong Kong Monetary Authority and banks. It is up to consumers to make final judgment. Everyone is under different circumstances," he said at a seminar yesterday.
Lawmaker Kam Nai-wai who has helped to champion the cause of investors pressed for the 16 banks to disclose the valuation of minibond collateral for investors in order to help the investors to consider whether they should accept the buy-back package.
Some minibond holders staged a sit-in at the headquarters of the SFC yesterday expressing their dissatisfaction with the compensation package. The protestors demanded full restitution, not partial.
Some said they had no alternative but to accept the offer. They need money to live. Some were confused, saying they had no idea whether they are entitled to compensation.
Local actress Meg Lam Kin-ming invested about HK$10 million in the minibonds and other investment tools. She may not be able to get back the principal, as a "professional investor" is one with over HK$8 million investment portfolio.
"What is the judgment of an investor as 'professional'? Does it mean buying lots of investment products before? I have no idea at all," said Lam.
HONG KONG: A complaint arising from the sale of Lehman Brothers minibonds is headed for the courts. At the same time the Consumer Council will continue assisting those hit hard when the minibonds and other dicey financial instruments became worthless.
The watchdog has received about 12,000 related complaints since the US investment bank collapsed last September causing astronomical losses to investors.
Apart from the one case that has been set for litigation, about 50 other cases are under review for possible legal action.
Investors burnt in the minibonds collapse have accused local banks of malpractice and deception in their efforts to sell the complex investment tools. Many of those who were hurt are elderly. Many don't have education sufficient to provide them a clear grasp on what happened to their money.
Speaking at a Consumer Council seminar yesterday, Secretary for Financial Services and the Treasury Chan Ka-keung urged sellers and financial consultants to expound fully the risk of investment products to investors and to assess actual needs in order to protect the consumers' rights.
They should not "hard sell" products, Chan said.
Meanwhile, Consumer Council chairman Anthony Cheung reminded consumers that it is they who must decide whether to accept the buy-back scheme.
Regulators and 16 banks set up the compensation package which was announced on Wednesday. Investors could receive between 60 and 70 percent of the principal they invested. But "experienced" and "professional" investors will not be eligible.
"The package is proposed by the Securities and Futures Commission (SFC), the Hong Kong Monetary Authority and banks. It is up to consumers to make final judgment. Everyone is under different circumstances," he said at a seminar yesterday.
Lawmaker Kam Nai-wai who has helped to champion the cause of investors pressed for the 16 banks to disclose the valuation of minibond collateral for investors in order to help the investors to consider whether they should accept the buy-back package.
Some minibond holders staged a sit-in at the headquarters of the SFC yesterday expressing their dissatisfaction with the compensation package. The protestors demanded full restitution, not partial.
Some said they had no alternative but to accept the offer. They need money to live. Some were confused, saying they had no idea whether they are entitled to compensation.
Local actress Meg Lam Kin-ming invested about HK$10 million in the minibonds and other investment tools. She may not be able to get back the principal, as a "professional investor" is one with over HK$8 million investment portfolio.
"What is the judgment of an investor as 'professional'? Does it mean buying lots of investment products before? I have no idea at all," said Lam.
Parliament Answers to Lehman Structure Products - 20 July 2009
Dear Mr. Tan,
QUOTE: MAS’ role is not to judge the merits of the product being offered. Rather, MAS checks that the issuer discloses the features and risks of the product, and that there are no false or misleading statements. MAS does so based on the information provided by the issuer and its advisers.
The most significant point from the above statement of the Deputy Chairman is "MAS does so based on information provided by the issuer and its advisers".
If subsequently the court find that the prospectus and pricing statements:
* fail to disclose the features and risks of the product and
* there are false and misleading statements
the investor is able to claim for full recovery of the investment.
QUOTE: MAS’ role is not to judge the merits of the product being offered. Rather, MAS checks that the issuer discloses the features and risks of the product, and that there are no false or misleading statements. MAS does so based on the information provided by the issuer and its advisers.
The most significant point from the above statement of the Deputy Chairman is "MAS does so based on information provided by the issuer and its advisers".
If subsequently the court find that the prospectus and pricing statements:
* fail to disclose the features and risks of the product and
* there are false and misleading statements
the investor is able to claim for full recovery of the investment.
SCMP:Some sympathy for the devils
24 July 2009
It's deeply unfashionable to feel any sympathy for bankers these days.
In Hong Kong, they have been exposed as no better than back-alley thieves, cruelly mugging harmless old grannies, stealing their savings and leaving them with purses stuffed with nothing but worthless Lehman Brothers minibonds.
That's pretty much the narrative as it's been told to us. But you have to wonder how accurate that interpretation of the minibond story is. And you have to doubt whether Wednesday's settlement, in which 16 banks agreed to pay minibond investors back at least 60 cents in the dollar, is really as great a deal as it's been made out.
With minibonds sold to senile, illiterate and mentally handicapped savers, there were clear breaches of the regulations in some cases. Those investors should be paid back at 100 cents in the dollar, not 60, and the offending banks should be hammered with stiff penalties to boot, not allowed to escape additional punishment.
But those cases are in the minority. For the most part, minibonds were bought by people who went into their banks with eyes open and who knew exactly what they were after: higher returns.
As the first chart below shows, interest rates on bank time deposits have collapsed in recent years, falling from double-digit levels in the early 1980s to rates as low as zero in the early years of this decade.
As a result, depositors turned into eager buyers of complex structured instruments that promised a higher rate of return than plain vanilla time deposits.
Yet as anyone who isn't senile, illiterate or mentally handicapped can work out for themselves, a product that offers a yield of 5 per cent or more when interest rates are at zero must come with considerably more risk of loss than a simple time deposit. You don't need to understand one-touch options or credit default swaps to work that one out. It's a clear case of caveat emptor: buyer beware.
There is a strong argument to be made that savers who bought minibonds because they demanded higher returns should have to bear their losses. They invested in risky securities and were unlucky enough to have them blow up in their faces. That's tough. But it is hard to see why one group of investors - the banks' shareholders - should be forced to bail out another - the minibond buyers - simply because the second group made a bad decision.
On the other hand, the banks were hardly blameless. Until the mid-1990s, profits were relatively easy to come by. Demand for loans was brisk, and Hong Kong's loan to deposit ratio rose as high as 180 per cent.
The 1997 Asian crisis changed all that. As the second chart below shows, loan demand dried up even as deposits kept mounting. The loan to deposit ratio tumbled, falling to within a whisker of 50 per cent in recent years, brutally squeezing bank's interest income.
In response, Hong Kong banks ramped up their sales of securities, pushing structured products like minibonds to their depositors in order to capture lucrative commission income. Many went for the hard sell, sacrificing long-term customer relationships to boost short-term profits.
Yet although that's dumb and although many of the instruments sold were wildly unsuitable for ordinary retail investors, what the banks did - for the most part - was perfectly legal. It is unclear why they should be punished for it.
But the real problem with the minibond settlement is not so much its injustice, but the precedent it sets.
Securities and Futures Commission chief Martin Wheatley called Wednesday's deal "a watershed in the regulation of financial services in Hong Kong". He's not kidding. In pushing for a blanket bail-out of minibond investors, the regulators have served notice that from now on investors who lose money will be bailed out if only they make a loud enough noise about it.
So, expect a flood of compensation demands from investors who have taken losses on other structured products, on warrants or hedge funds. The list is endless.
Worse, Wednesday's agreement will only encourage investors to take excessive risks in the future, safe in the knowledge that if they end up out of pocket, they will be able to cry "mis-selling" and force the banks to refund their money. The minibond deal badly skews the balance of risk and reward for investors, introducing a hefty dose of moral hazard that stands to inflict severe damage on Hong Kong's financial services industry.
So although it's not fashionable to feel sorry for bankers, perhaps they do deserve some small sympathy in this case.
It's deeply unfashionable to feel any sympathy for bankers these days.
In Hong Kong, they have been exposed as no better than back-alley thieves, cruelly mugging harmless old grannies, stealing their savings and leaving them with purses stuffed with nothing but worthless Lehman Brothers minibonds.
That's pretty much the narrative as it's been told to us. But you have to wonder how accurate that interpretation of the minibond story is. And you have to doubt whether Wednesday's settlement, in which 16 banks agreed to pay minibond investors back at least 60 cents in the dollar, is really as great a deal as it's been made out.
With minibonds sold to senile, illiterate and mentally handicapped savers, there were clear breaches of the regulations in some cases. Those investors should be paid back at 100 cents in the dollar, not 60, and the offending banks should be hammered with stiff penalties to boot, not allowed to escape additional punishment.
But those cases are in the minority. For the most part, minibonds were bought by people who went into their banks with eyes open and who knew exactly what they were after: higher returns.
As the first chart below shows, interest rates on bank time deposits have collapsed in recent years, falling from double-digit levels in the early 1980s to rates as low as zero in the early years of this decade.
As a result, depositors turned into eager buyers of complex structured instruments that promised a higher rate of return than plain vanilla time deposits.
Yet as anyone who isn't senile, illiterate or mentally handicapped can work out for themselves, a product that offers a yield of 5 per cent or more when interest rates are at zero must come with considerably more risk of loss than a simple time deposit. You don't need to understand one-touch options or credit default swaps to work that one out. It's a clear case of caveat emptor: buyer beware.
There is a strong argument to be made that savers who bought minibonds because they demanded higher returns should have to bear their losses. They invested in risky securities and were unlucky enough to have them blow up in their faces. That's tough. But it is hard to see why one group of investors - the banks' shareholders - should be forced to bail out another - the minibond buyers - simply because the second group made a bad decision.
On the other hand, the banks were hardly blameless. Until the mid-1990s, profits were relatively easy to come by. Demand for loans was brisk, and Hong Kong's loan to deposit ratio rose as high as 180 per cent.
The 1997 Asian crisis changed all that. As the second chart below shows, loan demand dried up even as deposits kept mounting. The loan to deposit ratio tumbled, falling to within a whisker of 50 per cent in recent years, brutally squeezing bank's interest income.
In response, Hong Kong banks ramped up their sales of securities, pushing structured products like minibonds to their depositors in order to capture lucrative commission income. Many went for the hard sell, sacrificing long-term customer relationships to boost short-term profits.
Yet although that's dumb and although many of the instruments sold were wildly unsuitable for ordinary retail investors, what the banks did - for the most part - was perfectly legal. It is unclear why they should be punished for it.
But the real problem with the minibond settlement is not so much its injustice, but the precedent it sets.
Securities and Futures Commission chief Martin Wheatley called Wednesday's deal "a watershed in the regulation of financial services in Hong Kong". He's not kidding. In pushing for a blanket bail-out of minibond investors, the regulators have served notice that from now on investors who lose money will be bailed out if only they make a loud enough noise about it.
So, expect a flood of compensation demands from investors who have taken losses on other structured products, on warrants or hedge funds. The list is endless.
Worse, Wednesday's agreement will only encourage investors to take excessive risks in the future, safe in the knowledge that if they end up out of pocket, they will be able to cry "mis-selling" and force the banks to refund their money. The minibond deal badly skews the balance of risk and reward for investors, introducing a hefty dose of moral hazard that stands to inflict severe damage on Hong Kong's financial services industry.
So although it's not fashionable to feel sorry for bankers, perhaps they do deserve some small sympathy in this case.
CPF Life
There are some comments about CPF Life. I will be doing some research about it and will write my views later. If you have specific offers for CPF Life, please send them to me for analysis.
Coverage of HK settlement
I was surprised that ther was no coverage of the HK settlement of the minibonds in the Straits Times today (Friday). I do not know if there were any coverage during the past two days. What about the other newspapers? Did they cover the HK settlement agreed between the regulators and the 16 banks?
Please help me to check your newspapers (Strait Times, Today, MyPaper, Zaobao, Wanbao) for the past few days and report your findings here.
Please help me to check your newspapers (Strait Times, Today, MyPaper, Zaobao, Wanbao) for the past few days and report your findings here.
Thursday, July 23, 2009
The Emperor's Clothes and Singapore
Read this article.
Share your views about this article and the findings of the survey. Does the survey reflect a small proportion of unhappy Singaporeans, or is a wider reflection of the views of many people?
Share your views about this article and the findings of the survey. Does the survey reflect a small proportion of unhappy Singaporeans, or is a wider reflection of the views of many people?
SCMP:How swift lobbying ended a dispute that had dragged on for 10 months
23 July 2009
A 20-day lobbying effort by government officials and bankers has ended a 10-month dispute between banks and investors over settling the Lehman Brothers minibonds issue.
"The past 10 months have been very tough - especially the last 20 days," a banking source said.
The 16 lenders yesterday sealed the HK$6.3 billion agreement with the Securities and Futures Commission and the Monetary Authority to pay back 29,000 investors.
The SFC, the HKMA and banking sources all denied that political pressure forced the agreement, although the Legislative Council is questioning the heads of both regulatory bodies and bankers over more than 20,000 complaints from investors about the conduct of banks in selling the minibonds.
Shortly after Lehman Brothers collapsed last September, the government proposed that banks buy back minibonds from investors - similar to the current agreement. But it took 10 months for the deal to unfold, as banks were initially concerned that it might attract legal challenges from the liquidators of Lehman Brothers.
Since then, the SFC persuaded two brokers - Sun Hung Kai Financial and KGI Asia - to repay investors fully. But until yesterday, it had yet to clinch a deal with the 16 banks that sold the minibonds.
The turning point came only 20 days ago, after Bank of China (Hong Kong) came up with an agreement similar to the deal agreed yesterday. Then the other 15 banks joined forces to negotiate with the SFC as a group.
Bankers said the sector's legislator, David Li Kwok-po, chairman and chief executive of the Bank of East Asia, was one of the most active in lobbying the SFC and the HKMA to accept the deal.
"This is the best deal possible, with the greatest sincerity from the banks. There is upside and no downside in this deal," one banker said. "We want to leave this all behind us, to move on and look forward."
Secretary for Financial Services and the Treasury Chan Ka-keung said: "I hope the settlement scheme {hellip} will help investors return to their normal lives."
A 20-day lobbying effort by government officials and bankers has ended a 10-month dispute between banks and investors over settling the Lehman Brothers minibonds issue.
"The past 10 months have been very tough - especially the last 20 days," a banking source said.
The 16 lenders yesterday sealed the HK$6.3 billion agreement with the Securities and Futures Commission and the Monetary Authority to pay back 29,000 investors.
The SFC, the HKMA and banking sources all denied that political pressure forced the agreement, although the Legislative Council is questioning the heads of both regulatory bodies and bankers over more than 20,000 complaints from investors about the conduct of banks in selling the minibonds.
Shortly after Lehman Brothers collapsed last September, the government proposed that banks buy back minibonds from investors - similar to the current agreement. But it took 10 months for the deal to unfold, as banks were initially concerned that it might attract legal challenges from the liquidators of Lehman Brothers.
Since then, the SFC persuaded two brokers - Sun Hung Kai Financial and KGI Asia - to repay investors fully. But until yesterday, it had yet to clinch a deal with the 16 banks that sold the minibonds.
The turning point came only 20 days ago, after Bank of China (Hong Kong) came up with an agreement similar to the deal agreed yesterday. Then the other 15 banks joined forces to negotiate with the SFC as a group.
Bankers said the sector's legislator, David Li Kwok-po, chairman and chief executive of the Bank of East Asia, was one of the most active in lobbying the SFC and the HKMA to accept the deal.
"This is the best deal possible, with the greatest sincerity from the banks. There is upside and no downside in this deal," one banker said. "We want to leave this all behind us, to move on and look forward."
Secretary for Financial Services and the Treasury Chan Ka-keung said: "I hope the settlement scheme {hellip} will help investors return to their normal lives."
SCMP:Legco inquiry to proceed despite agreement on compensation
23 July 2009
A proposed deal to settle all investor claims against banks involved in the Lehman Brothers minibond debacle will not derail attempts by the Legislative Council to get to the bottom of the unprecedented case.
Raymond Ho Chung-tai, chairman of the Legco subcommittee investigating the minibond saga, declined to comment on the settlement deal but said the investigation would continue.
The subcommittee was set up to examine issues relating to the way banks sold the structured investments to clients and not to help investors seek compensation, Mr Ho said. He said it would publish its findings in a report by next year at the earliest.
Similarly, the Consumer Council will proceed with its application to the consumer legal action fund to bring a case to court against a financial institution that sold a Lehman-related product to an investor. But a spokesman for the council said investors should seriously consider the settlement deal.
Some lawmakers, including Regina Ip Lau Suk-yee and Jeffery Lam Kin-fung, said the deal was acceptable. "The deal is quite good and covers a lot of the investors," Mrs Ip said. "Banks here are more generous than those in Singapore." On average, investors in Singapore got back only 32.2 per cent of their investment, she said.
But Democrat legislator Kam Nai-wai called on the government to get the banks to first reveal the remaining value of the Lehman products' underlying assets. Mr Kam insisted it was unfair to investors if they had to decide whether or not to accept the deal before knowing what the collateral of their investment was worth.
Minibonds are not corporate bonds, but consist of high-risk credit-linked derivatives. They are marketed as a proxy investment in well-known firms.
A Ms Lau, who sunk US$100,000 of her grandfather's savings into Lehman minibonds, said the settlement offer did not adequately reflect the banks' responsibility to investors. She said she felt the banks were trying to absolve themselves without shouldering responsibility by paying off investors through the settlement deal. "I still haven't told my grandfather that the money is in Lehman minibonds," Ms Lau said. "I'm afraid he wouldn't be able to take the news if I told him."
Kitty Lai, who poured HK$6 million into minibonds, flatly rejected the deal and accused the government and regulators of siding with the banks.
"You cannot trust the government or the Hong Kong Monetary Authority. Sometimes, when I think about this, I just want to kill myself," Ms Lai said.
To Kam-leung, whose 66-year-old father purchased Lehman minibonds from the Bank of Communications, said his family would accept the deal even though they felt it was unreasonable.
"It's because we don't want it to drag on. And we only invested HK$120,000, which is a comparatively small amount," he said. "My father suffers from diabetes and the minibond issue has troubled us for months. We also bear part of the responsibility because my father trusted the bank staff and didn't consult us before signing the documents."
A proposed deal to settle all investor claims against banks involved in the Lehman Brothers minibond debacle will not derail attempts by the Legislative Council to get to the bottom of the unprecedented case.
Raymond Ho Chung-tai, chairman of the Legco subcommittee investigating the minibond saga, declined to comment on the settlement deal but said the investigation would continue.
The subcommittee was set up to examine issues relating to the way banks sold the structured investments to clients and not to help investors seek compensation, Mr Ho said. He said it would publish its findings in a report by next year at the earliest.
Similarly, the Consumer Council will proceed with its application to the consumer legal action fund to bring a case to court against a financial institution that sold a Lehman-related product to an investor. But a spokesman for the council said investors should seriously consider the settlement deal.
Some lawmakers, including Regina Ip Lau Suk-yee and Jeffery Lam Kin-fung, said the deal was acceptable. "The deal is quite good and covers a lot of the investors," Mrs Ip said. "Banks here are more generous than those in Singapore." On average, investors in Singapore got back only 32.2 per cent of their investment, she said.
But Democrat legislator Kam Nai-wai called on the government to get the banks to first reveal the remaining value of the Lehman products' underlying assets. Mr Kam insisted it was unfair to investors if they had to decide whether or not to accept the deal before knowing what the collateral of their investment was worth.
Minibonds are not corporate bonds, but consist of high-risk credit-linked derivatives. They are marketed as a proxy investment in well-known firms.
A Ms Lau, who sunk US$100,000 of her grandfather's savings into Lehman minibonds, said the settlement offer did not adequately reflect the banks' responsibility to investors. She said she felt the banks were trying to absolve themselves without shouldering responsibility by paying off investors through the settlement deal. "I still haven't told my grandfather that the money is in Lehman minibonds," Ms Lau said. "I'm afraid he wouldn't be able to take the news if I told him."
Kitty Lai, who poured HK$6 million into minibonds, flatly rejected the deal and accused the government and regulators of siding with the banks.
"You cannot trust the government or the Hong Kong Monetary Authority. Sometimes, when I think about this, I just want to kill myself," Ms Lai said.
To Kam-leung, whose 66-year-old father purchased Lehman minibonds from the Bank of Communications, said his family would accept the deal even though they felt it was unreasonable.
"It's because we don't want it to drag on. And we only invested HK$120,000, which is a comparatively small amount," he said. "My father suffers from diabetes and the minibond issue has troubled us for months. We also bear part of the responsibility because my father trusted the bank staff and didn't consult us before signing the documents."
SCMP:The right rules, and the facts to invest prudently
23 July 2009
The proposed settlement brokered by the Securities and Futures Commission offers a swift and practical way to resolve the long-running minibond controversy. It will not settle all outstanding claims, but it is a realistic solution that should help most retail investors recover up to 70 per cent of their investments, and possibly more, depending on market conditions. No doubt some will still reject it, having clamoured for a 100 per cent refund. But those who want to put the stressful matter behind them can now do so on generally fair terms.
Banks responsible for selling the complex products stand to lose most. But in return for their agreement to settle, regulators will drop all investigations against them. The banks are more willing to settle now because recent market rallies have pushed up the value of the collateral tied to the products. That should help lessen their losses and recover more money for investors.
The deal, therefore, is a compromise that will hopefully bring this sorry saga to an end. But lessons need to be learned if we are to avoid a repeat. The episode has exposed cracks in the regulatory system and lax monitoring. It turns out that many complex financial products proffered by banks are not regulated by the commission or the Monetary Authority. Financial institutions need to be reined in by closing such loopholes. A strong argument can be made that complicated derivative instruments such as minibonds should not be sold to ordinary investors.
On the other hand, investors cannot be absolved of all responsibility. They cannot plead ignorance and demand a refund every time they lose their shirts. Without doubt, some elderly clients and victims of blatant mis-selling deserve to have all their money back. But the majority of minibond investors simply made a bad investment and should accept some losses. There needs to be more of a culture of risk awareness. If something looks too good to be true, it probably is. The latest offer is, nonetheless, an improvement on banks' original proposal to buy back the minibonds at their market value, which is a fraction of what investors paid for them.
The minibonds are just one of many types of derivative instruments being sold to ordinary investors that have caused catastrophic losses during the market downturn. The notorious "accumulators" have caused much grief, but because most who bought them were high-net-worth individuals, regulators have been unwilling to get involved. Already, buyers of so-called Octave Notes - complex derivatives that have gone bust like the minibonds - are demanding compensation. The minibond settlement may offer a template to resolve their dispute as well, and perhaps others. But the line has to be drawn somewhere. Only where there is evidence of abuses should compensation be paid.
Generally, there should be broader markets and greater choices for investors. However, financial institutions should not use this as a pretext to sell fiendishly complex derivative products to gullible investors. Forcing banks to establish better complaint channels for clients and disclose investment information in simple language are moves in the right direction. A strong regulatory regime must not allow problems to fall through the cracks - and ensure people have the information they need to make appropriate investment choices. Greater transparency needs to be enforced in banks' dealings with clients. The financial crisis has forced many jurisdictions around the world to reform their regulatory systems. Hong Kong too needs to follow suit - and make sure it gets it right this time.
The proposed settlement brokered by the Securities and Futures Commission offers a swift and practical way to resolve the long-running minibond controversy. It will not settle all outstanding claims, but it is a realistic solution that should help most retail investors recover up to 70 per cent of their investments, and possibly more, depending on market conditions. No doubt some will still reject it, having clamoured for a 100 per cent refund. But those who want to put the stressful matter behind them can now do so on generally fair terms.
Banks responsible for selling the complex products stand to lose most. But in return for their agreement to settle, regulators will drop all investigations against them. The banks are more willing to settle now because recent market rallies have pushed up the value of the collateral tied to the products. That should help lessen their losses and recover more money for investors.
The deal, therefore, is a compromise that will hopefully bring this sorry saga to an end. But lessons need to be learned if we are to avoid a repeat. The episode has exposed cracks in the regulatory system and lax monitoring. It turns out that many complex financial products proffered by banks are not regulated by the commission or the Monetary Authority. Financial institutions need to be reined in by closing such loopholes. A strong argument can be made that complicated derivative instruments such as minibonds should not be sold to ordinary investors.
On the other hand, investors cannot be absolved of all responsibility. They cannot plead ignorance and demand a refund every time they lose their shirts. Without doubt, some elderly clients and victims of blatant mis-selling deserve to have all their money back. But the majority of minibond investors simply made a bad investment and should accept some losses. There needs to be more of a culture of risk awareness. If something looks too good to be true, it probably is. The latest offer is, nonetheless, an improvement on banks' original proposal to buy back the minibonds at their market value, which is a fraction of what investors paid for them.
The minibonds are just one of many types of derivative instruments being sold to ordinary investors that have caused catastrophic losses during the market downturn. The notorious "accumulators" have caused much grief, but because most who bought them were high-net-worth individuals, regulators have been unwilling to get involved. Already, buyers of so-called Octave Notes - complex derivatives that have gone bust like the minibonds - are demanding compensation. The minibond settlement may offer a template to resolve their dispute as well, and perhaps others. But the line has to be drawn somewhere. Only where there is evidence of abuses should compensation be paid.
Generally, there should be broader markets and greater choices for investors. However, financial institutions should not use this as a pretext to sell fiendishly complex derivative products to gullible investors. Forcing banks to establish better complaint channels for clients and disclose investment information in simple language are moves in the right direction. A strong regulatory regime must not allow problems to fall through the cracks - and ensure people have the information they need to make appropriate investment choices. Greater transparency needs to be enforced in banks' dealings with clients. The financial crisis has forced many jurisdictions around the world to reform their regulatory systems. Hong Kong too needs to follow suit - and make sure it gets it right this time.
The Standard:Deal tones down minibond anger
23 July 2009
The tone of the beleaguered holders of Lehman minibonds has now softened, but many said yesterday they still find the compensation deal unacceptable.
A 74-year-old minibond investor surnamed Yiu said he wants the government to make the banks repay him 100 percent.
``I was about to renew my time deposit on November 2, 2007, when CITIC Ka Wah Bank cheated me to switch to equity-linked products,'' Yiu said.
Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the compensation agreement was ``not acceptable at all.''
``This is not making sense,'' Chan said. ``The guy who drafted up this agreement _ either he is doing some very tricky thing, or he does not understand Hong Kong people at all.''
One hundred members of the Alliance protested all day yesterday outside the office of the Securities and Futures Commission.
Alliance member Ng Shing-fung said he thinks the banks will still be able to make a profit after compensating minibond investors, so he will refuse to accept the proposal. ``They are simply cheating us once more,'' said Ng, 63.
Raymond So Wai-man, an associate professor of finance at Chinese University of Hong Kong, urged individual investors to take the compensation, as the value of minibond collateral could fall further. ``The monetary value of your minibond has effectively been locked up,'' So said. ``Not getting back the money, you cannot invest even when there is a better investment opportunity.''
Independent lawmaker Priscilla Leung Mei-fun said minibond holders should seriously consider the proposal because they will have to resort to lawsuits to get full compensation. Sixty percent compensation is a fair baseline, Leung said.
Chan said the problem is the settlement agreement does not apply to so- called ``experienced investors,'' defined as people who had invested in leveraged or structured products five times in the three years before buying minibonds.
Even conservative investors in Hong Kong may have been convinced by banks to put their money into a foreign exchange-linked deposit, he said.
``I tell you, Martin Wheatley has no sense about the Hong Kong people,'' Chan said. ``First he says `minibonds' does not mean `bonds,' then he comes up with this agreement.''
However, Chan admitted the basic framework of the agreement seems ``reasonable at first glance. But when you think more about it, it gives you the sense investors are being trapped.''
Chan estimated about half the members of his group may qualify as ``experienced investors'' and would not be eligible for compensation. He said the Alliance will meet Sunday to decide whether to pursue further action.
Minibond investor Wong Kin-ming, 54, said he thinks the government is treating the public unfairly. ``Government policies are two-sided,'' Wong added. ``Sun Hung Kai just paid us all back.''
The tone of the beleaguered holders of Lehman minibonds has now softened, but many said yesterday they still find the compensation deal unacceptable.
A 74-year-old minibond investor surnamed Yiu said he wants the government to make the banks repay him 100 percent.
``I was about to renew my time deposit on November 2, 2007, when CITIC Ka Wah Bank cheated me to switch to equity-linked products,'' Yiu said.
Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the compensation agreement was ``not acceptable at all.''
``This is not making sense,'' Chan said. ``The guy who drafted up this agreement _ either he is doing some very tricky thing, or he does not understand Hong Kong people at all.''
One hundred members of the Alliance protested all day yesterday outside the office of the Securities and Futures Commission.
Alliance member Ng Shing-fung said he thinks the banks will still be able to make a profit after compensating minibond investors, so he will refuse to accept the proposal. ``They are simply cheating us once more,'' said Ng, 63.
Raymond So Wai-man, an associate professor of finance at Chinese University of Hong Kong, urged individual investors to take the compensation, as the value of minibond collateral could fall further. ``The monetary value of your minibond has effectively been locked up,'' So said. ``Not getting back the money, you cannot invest even when there is a better investment opportunity.''
Independent lawmaker Priscilla Leung Mei-fun said minibond holders should seriously consider the proposal because they will have to resort to lawsuits to get full compensation. Sixty percent compensation is a fair baseline, Leung said.
Chan said the problem is the settlement agreement does not apply to so- called ``experienced investors,'' defined as people who had invested in leveraged or structured products five times in the three years before buying minibonds.
Even conservative investors in Hong Kong may have been convinced by banks to put their money into a foreign exchange-linked deposit, he said.
``I tell you, Martin Wheatley has no sense about the Hong Kong people,'' Chan said. ``First he says `minibonds' does not mean `bonds,' then he comes up with this agreement.''
However, Chan admitted the basic framework of the agreement seems ``reasonable at first glance. But when you think more about it, it gives you the sense investors are being trapped.''
Chan estimated about half the members of his group may qualify as ``experienced investors'' and would not be eligible for compensation. He said the Alliance will meet Sunday to decide whether to pursue further action.
Minibond investor Wong Kin-ming, 54, said he thinks the government is treating the public unfairly. ``Government policies are two-sided,'' Wong added. ``Sun Hung Kai just paid us all back.''
The Standard:Nightmare nears end
23 July 2009
Banks have agreed to splash out more than HK$6 billion to buy back all outstanding Lehman Brothers minibonds.
By doing so, they seek an end to a saga that has run for more than 10 months, sparking deep anger and distress among investors.
The 16 banks that sold the complex products will offer about 29,000 Hong Kong investors - more than 90 percent of those in the SAR who bought the high- risk derivatives linked to the collapsed US bank - an average 70 percent of their investments.
That means banks need to pay out around HK$6.3 billion to repurchase the minibonds.
The scandal, which began last September, has fueled street protests and had senior financial officials testifying before the Legislative Council.
The deal announced yesterday was thrashed out with the banks by the Securities and Futures Commission and the Hong Kong Monetary Authority. It will "provide substantial benefits for the vast majority of customers holding minibonds that would not otherwise be received by them,'' said Martin Wheatley, chief executive of the Securities and Futures Commission, who described the deal as a "good compromise.'' Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung agreed. "Those accepting the offers will be relieved of the delay and uncertainty in going through the liquidation process,'' Chan said.
A bank must pay a price equal to 60 percent of the principal of the original investment for investors below the age of 65, and 70 percent for those aged 65 or more as at July 1. They can retain any coupon payments already received.
Once the underlying collateral is recovered by the banks, each of them will make a further payment of initially up to 10 percent of the principal of the minibonds to customers below the age of 65.
And if recoveries exceed 70 percent, the banks will pay the entire excess amount to those who have accepted the offer, which could take some investors' settlements to 100 percent.
For example, assuming an investment of HK$100 and the product's collateral is worth HK$40, an investor will first receive HK$60 and then another HK$10 for the collateral recovered, taking the total settlement to HK$70.
If the collateral is worth HK$80, the investor will get HK$80. If the collateral is worth HK$100, the investor will be refunded in full.
Banks will make available a total of HK$200 million to the trustee of the minibonds to assist in the recovery of the underlying collateral for each outstanding series of the product. Those who have already reached a settlement with the banks will not qualify for the buyback. However, the banks will make ex-gratia payments to those whose settlements were less than they would receive under the deal announced yesterday. Banks need to inform customers about the offer ``in an expeditious manner'' and put money in their accounts within 30 days of the offer being accepted, according to the HKMA.
Professional investors, including non-individual and experienced investors, are not qualified under the repurchase offer, Wheatley said.
The regulators will call off investigations into the sale and distribution of minibonds by the banks in respect of investors accepting the offer. But authorities will continue investigations if there are claims of deception or other crimes. ``We intend to allocate resources to handle non-Lehman complaints,'' said Choi Yiu-kwan, HKMA deputy chief executive.
Each of the banks will also engage an independent reviewer to examine systems and processes relating to the sale of structured products and then report to authorities. The banks must also commit to the implementation of all recommendations by the reviewer.
A qualified third party also has to be engaged to review and enhance complaint-handling procedures.
``The distributing banks should draw lessons from this incident and properly implement the agreement reached with the regulatory authorities'' on selling structured investment products, Ceajer Chan said.
Speaking on behalf of the banks, David Li Kwok-po, chairman of the Bank of East Asia (0023), said the agreement demonstrates their ``unwavering commitment'' to Hong Kong and the welfare of customers.
Ahead of the repurchase agreement by banks, only brokerages Sun Hung Kai Investment Services and KGI Asia had fully refunded their clients. That occurred earlier this year. As of July 16, the HKMA had received 21,490 complaints concerning Lehman-related products, including minibonds.
Banks have agreed to splash out more than HK$6 billion to buy back all outstanding Lehman Brothers minibonds.
By doing so, they seek an end to a saga that has run for more than 10 months, sparking deep anger and distress among investors.
The 16 banks that sold the complex products will offer about 29,000 Hong Kong investors - more than 90 percent of those in the SAR who bought the high- risk derivatives linked to the collapsed US bank - an average 70 percent of their investments.
That means banks need to pay out around HK$6.3 billion to repurchase the minibonds.
The scandal, which began last September, has fueled street protests and had senior financial officials testifying before the Legislative Council.
The deal announced yesterday was thrashed out with the banks by the Securities and Futures Commission and the Hong Kong Monetary Authority. It will "provide substantial benefits for the vast majority of customers holding minibonds that would not otherwise be received by them,'' said Martin Wheatley, chief executive of the Securities and Futures Commission, who described the deal as a "good compromise.'' Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung agreed. "Those accepting the offers will be relieved of the delay and uncertainty in going through the liquidation process,'' Chan said.
A bank must pay a price equal to 60 percent of the principal of the original investment for investors below the age of 65, and 70 percent for those aged 65 or more as at July 1. They can retain any coupon payments already received.
Once the underlying collateral is recovered by the banks, each of them will make a further payment of initially up to 10 percent of the principal of the minibonds to customers below the age of 65.
And if recoveries exceed 70 percent, the banks will pay the entire excess amount to those who have accepted the offer, which could take some investors' settlements to 100 percent.
For example, assuming an investment of HK$100 and the product's collateral is worth HK$40, an investor will first receive HK$60 and then another HK$10 for the collateral recovered, taking the total settlement to HK$70.
If the collateral is worth HK$80, the investor will get HK$80. If the collateral is worth HK$100, the investor will be refunded in full.
Banks will make available a total of HK$200 million to the trustee of the minibonds to assist in the recovery of the underlying collateral for each outstanding series of the product. Those who have already reached a settlement with the banks will not qualify for the buyback. However, the banks will make ex-gratia payments to those whose settlements were less than they would receive under the deal announced yesterday. Banks need to inform customers about the offer ``in an expeditious manner'' and put money in their accounts within 30 days of the offer being accepted, according to the HKMA.
Professional investors, including non-individual and experienced investors, are not qualified under the repurchase offer, Wheatley said.
The regulators will call off investigations into the sale and distribution of minibonds by the banks in respect of investors accepting the offer. But authorities will continue investigations if there are claims of deception or other crimes. ``We intend to allocate resources to handle non-Lehman complaints,'' said Choi Yiu-kwan, HKMA deputy chief executive.
Each of the banks will also engage an independent reviewer to examine systems and processes relating to the sale of structured products and then report to authorities. The banks must also commit to the implementation of all recommendations by the reviewer.
A qualified third party also has to be engaged to review and enhance complaint-handling procedures.
``The distributing banks should draw lessons from this incident and properly implement the agreement reached with the regulatory authorities'' on selling structured investment products, Ceajer Chan said.
Speaking on behalf of the banks, David Li Kwok-po, chairman of the Bank of East Asia (0023), said the agreement demonstrates their ``unwavering commitment'' to Hong Kong and the welfare of customers.
Ahead of the repurchase agreement by banks, only brokerages Sun Hung Kai Investment Services and KGI Asia had fully refunded their clients. That occurred earlier this year. As of July 16, the HKMA had received 21,490 complaints concerning Lehman-related products, including minibonds.
Help Minibond investors to secure the collateral
Mr. Tan
If govt is reluctant to force FI to compensate like what happen in Hk, perhaps you can suggest that it takes the leader role to help Minibond investors to secure the Collateral [GE capital bonds etc] which has up to 70% value for the benefits of the investors.
This is a concrete action that would help all to investors - whether they are compensated or not. Don't forget, many investors are compensated just 10%.
If you read bullet point 3, "banks will make available an amount equivalent to the amount of commission income received by it as a distributor of the outstanding Minibonds to the trustee of the Minibonds to assist in the recovery of the underlying collateral for each outstanding series of Minibonds"
Regards
Steve
If govt is reluctant to force FI to compensate like what happen in Hk, perhaps you can suggest that it takes the leader role to help Minibond investors to secure the Collateral [GE capital bonds etc] which has up to 70% value for the benefits of the investors.
This is a concrete action that would help all to investors - whether they are compensated or not. Don't forget, many investors are compensated just 10%.
If you read bullet point 3, "banks will make available an amount equivalent to the amount of commission income received by it as a distributor of the outstanding Minibonds to the trustee of the Minibonds to assist in the recovery of the underlying collateral for each outstanding series of Minibonds"
Regards
Steve
Petition to Prime Minister (5)
389 people have signed the Petition and provided their full particulars. This is much better than the optimists (including me) had earlier hoped. Our initial target was only 300 signatures. Some pessimists poured cold water on this effort.
Please help to get more people to sign the Petition and achieve the new target of 1,000 signatures.
Q&A US Health Reform
The BBC news website explains the Obama administration's attempts to reform the American healthcare system
http://news.bbc.co.uk/2/hi/americas/8160058.stm
http://news.bbc.co.uk/2/hi/americas/8160058.stm
Wednesday, July 22, 2009
The Petition is NOT a futile effort
Another blog described my effort to help the investors get a fair settlement as "futile". It is a sad state of affairs that we have a government that ignores the plight and appeal of the people. It is equally sad that we have many cynics who stand by and pass discouraging remarks.
Many signatories know that the petition may be ignored, as it has happened in the past. But, they are willing to come forward to have their voices heard. It is important that their signatures be placed on the record.
The situation has now changed, and it may warrant a re-consideration by our government. All investors in Hong Kong are being compensated at a minimum of 60% to 70% of the invested sum. I believe that the investors in Singpore should be treated on a similar basis, as the systemic mis-selling is similar in both territories.
I hope that everyone will take a positive approach and help to pass the message to all investors to sign the petition.
The petition is intended to include all investors, including those who have bought from the security firms. They have also been advised, either directly or indirectly, by the sales representatives who acted for the security firms. I hope that these investors will read the Petition more widely and come forwqrd to sign it.
Tan Kin Lian
Many signatories know that the petition may be ignored, as it has happened in the past. But, they are willing to come forward to have their voices heard. It is important that their signatures be placed on the record.
The situation has now changed, and it may warrant a re-consideration by our government. All investors in Hong Kong are being compensated at a minimum of 60% to 70% of the invested sum. I believe that the investors in Singpore should be treated on a similar basis, as the systemic mis-selling is similar in both territories.
I hope that everyone will take a positive approach and help to pass the message to all investors to sign the petition.
The petition is intended to include all investors, including those who have bought from the security firms. They have also been advised, either directly or indirectly, by the sales representatives who acted for the security firms. I hope that these investors will read the Petition more widely and come forwqrd to sign it.
Tan Kin Lian
Gathering in Hong Lim Park on 22 Aug 09
I confirm that there will be a gathering in Hong Lim Park on 22 Aug 09 from 5 pm to 6.30 pm. We will arrange for the Petition to be signed, for those who have not signed the online Petition. This Petition is addressed to the Prime Minister. We will arrange for a few people to speak on this issue. Please encourage more people to show up for bigger impact.
So far, I am the only speaker. If you are able to speak, please send an email to me at kinlian@gmail.com. I like to ask the coordinators of the class actions to speak and give an update. You may be able to attract more investors to join the class action.
So far, I am the only speaker. If you are able to speak, please send an email to me at kinlian@gmail.com. I like to ask the coordinators of the class actions to speak and give an update. You may be able to attract more investors to join the class action.
355 people have signed the online Petition to the Prime Minister on the credit-linked notes. We are now aiming for 1,000 signatures. Please pass the word around.
Minibond - misconceptions and unfair criticisms
Dear Mr. Tan,
I would like to respond to the following misconceptions and unfair criticisms:
1) The fixed deposit is about 1.5% in 2007 and you get 5% from minibond. You should have known better. So high differential. Still claims risk?
It is not fair to use 12 months fixed deposit rate because minibond is for 5 years. There are many low risk products offer 4% to 6% returns from the market. E.g. DBS6%NCPS, UOB5.05%NCPS, OCBC5.1%NCPS, OCBC4.2%NCPS…. If we compare the minibond with the OCBC 4.2% and 4.5% preference shares available from the stock market, which we can sell the shares anytime if we need cash, the 5% offered by minibond is not attractive because we can’t touch the money for 5 years.
2) High return high risk, since you get 5%, the risk should be high.
Many financial experts agreed that the reasonable return from long term investments (5 to 10 years) should be around 4% to 6%. A 5% return from minibond should not be considered as high as it is a long term (5 years) investment. All high risk investments are on short term basis, who would want to invest into a long term high risk product?
3) Who ask them to invest blindly on a product which they don’t understand?
Misled by the newspaper advertisements and sales brochures, many investors thought they were buying a five-year bond issued by the six leading banks. It turned out that it is a very complex product which even the sales people from the financial institutions are unable to explain clearly.
4) As a responsible investor, you should have read the prospectus before making the investment.
The minibond prospectus summary is as misleading as the sales brochures. The other parts of the prospectus give plenty of information on the credit ratings of the six leading banks which reinforce the believing that it is a bond issued by the banks.
It is also not realistic to expect an ordinary investor to understand fully the entire prospectus before making an investment. For example, of the tens of thousands of OCBC preferences shares investors, how many of them really read and understand fully the entire prospectus of the preference shares before making the investment?
5) Who would expect Lehman brothers to go bankrupt? (i.e. the risk is low at the time of selling) It is unfortunate that Lehman did fail. You have to accept it and move on.
Minibond is not a bond issued by Lehman or by the six banks. It is a high risk long term complex structure product. Who would dare to invest in a high risk product for 5 years?
Pang
I would like to respond to the following misconceptions and unfair criticisms:
1) The fixed deposit is about 1.5% in 2007 and you get 5% from minibond. You should have known better. So high differential. Still claims risk?
It is not fair to use 12 months fixed deposit rate because minibond is for 5 years. There are many low risk products offer 4% to 6% returns from the market. E.g. DBS6%NCPS, UOB5.05%NCPS, OCBC5.1%NCPS, OCBC4.2%NCPS…. If we compare the minibond with the OCBC 4.2% and 4.5% preference shares available from the stock market, which we can sell the shares anytime if we need cash, the 5% offered by minibond is not attractive because we can’t touch the money for 5 years.
2) High return high risk, since you get 5%, the risk should be high.
Many financial experts agreed that the reasonable return from long term investments (5 to 10 years) should be around 4% to 6%. A 5% return from minibond should not be considered as high as it is a long term (5 years) investment. All high risk investments are on short term basis, who would want to invest into a long term high risk product?
3) Who ask them to invest blindly on a product which they don’t understand?
Misled by the newspaper advertisements and sales brochures, many investors thought they were buying a five-year bond issued by the six leading banks. It turned out that it is a very complex product which even the sales people from the financial institutions are unable to explain clearly.
4) As a responsible investor, you should have read the prospectus before making the investment.
The minibond prospectus summary is as misleading as the sales brochures. The other parts of the prospectus give plenty of information on the credit ratings of the six leading banks which reinforce the believing that it is a bond issued by the banks.
It is also not realistic to expect an ordinary investor to understand fully the entire prospectus before making an investment. For example, of the tens of thousands of OCBC preferences shares investors, how many of them really read and understand fully the entire prospectus of the preference shares before making the investment?
5) Who would expect Lehman brothers to go bankrupt? (i.e. the risk is low at the time of selling) It is unfortunate that Lehman did fail. You have to accept it and move on.
Minibond is not a bond issued by Lehman or by the six banks. It is a high risk long term complex structure product. Who would dare to invest in a high risk product for 5 years?
Pang
SCMP:Investors want full refund, not 70pc
22 July 2009
Scores of minibond investors who lost their money when Lehman Brothers went bankrupt are holding out for full compensation of their principal sum and insist a proposed pay-off of up to 70 per cent is unacceptable.
A Ms Siu, 52, who declined to give her full name, purchased HK$6 million worth of Lehman minibonds from Bank of China (Hong Kong) and flatly rejected the proposal.
"This is not all right," she said. "I will continue to fight [for a full refund]."
She did not rule out accepting a 60 per cent pay-off and then taking the bank to court to recoup the rest of her investment. But she was not optimistic.
"Why can't the banks follow what Sun Hung Kai [Financial] did? How come the banks are not able to do something securities firms could?" she said.
Ms Siu said she planned to join about 100 investors at a protest at the Bank of China headquarters on Friday.
Bank of China sold most of the Lehman-linked minibonds in Hong Kong and many of the other banks are expected to follow whatever settlement terms are agreed by it. But a settlement deal offering just 60 to 70 per cent compensation is expected to be a tough sell to angry investors, who were emboldened in their fight by the 100 per cent pay-off arrangement agreed between more than 300 investors and brokerages Sun Hung Kai Financial and KGI Asia.
Democrat legislator Kam Nai-wai said whether the buy-back proposal was adopted would largely hinge on how many investors agreed to it. It was hard to predict how well received the settlement deal would be among the investors. Mr Kam said he planned to get their feedback on Sunday.
"As for the banks, if the proposed settlement cannot save them from trouble [from compensation seekers], it was not wise to take it," he said.
The Securities and Futures Commission should also explain why banks could escape from full responsibility while some securities firms could not, Mr Kam said.
Scores of minibond investors who lost their money when Lehman Brothers went bankrupt are holding out for full compensation of their principal sum and insist a proposed pay-off of up to 70 per cent is unacceptable.
A Ms Siu, 52, who declined to give her full name, purchased HK$6 million worth of Lehman minibonds from Bank of China (Hong Kong) and flatly rejected the proposal.
"This is not all right," she said. "I will continue to fight [for a full refund]."
She did not rule out accepting a 60 per cent pay-off and then taking the bank to court to recoup the rest of her investment. But she was not optimistic.
"Why can't the banks follow what Sun Hung Kai [Financial] did? How come the banks are not able to do something securities firms could?" she said.
Ms Siu said she planned to join about 100 investors at a protest at the Bank of China headquarters on Friday.
Bank of China sold most of the Lehman-linked minibonds in Hong Kong and many of the other banks are expected to follow whatever settlement terms are agreed by it. But a settlement deal offering just 60 to 70 per cent compensation is expected to be a tough sell to angry investors, who were emboldened in their fight by the 100 per cent pay-off arrangement agreed between more than 300 investors and brokerages Sun Hung Kai Financial and KGI Asia.
Democrat legislator Kam Nai-wai said whether the buy-back proposal was adopted would largely hinge on how many investors agreed to it. It was hard to predict how well received the settlement deal would be among the investors. Mr Kam said he planned to get their feedback on Sunday.
"As for the banks, if the proposed settlement cannot save them from trouble [from compensation seekers], it was not wise to take it," he said.
The Securities and Futures Commission should also explain why banks could escape from full responsibility while some securities firms could not, Mr Kam said.
Investing in gold
Dear Mr. Tan
Since bank interest rates have been very low recently, a friend has recommended me to invest in gold. The buying and selling of gold is through this company. The company’s website is (link deleted)
REPLY
I do not know if this organisation is reliable. You should not invest in any organisation that you are not familiar with. If you wish to invest with this organisation, you must do your research well. Some banks in Singapore offer similar facilities for you to invest in gold. I think that UOB is one of them. I suggest that you find out more about their offer.
If you wish to invest in gold, make sure that it is not more than 10% of your total savings. And hold it as a long term investment.
Since bank interest rates have been very low recently, a friend has recommended me to invest in gold. The buying and selling of gold is through this company. The company’s website is (link deleted)
REPLY
I do not know if this organisation is reliable. You should not invest in any organisation that you are not familiar with. If you wish to invest with this organisation, you must do your research well. Some banks in Singapore offer similar facilities for you to invest in gold. I think that UOB is one of them. I suggest that you find out more about their offer.
If you wish to invest in gold, make sure that it is not more than 10% of your total savings. And hold it as a long term investment.
Investing in a property for rental
Hi Mr Tan,
My wife and I own a HDB executive apartment, fully paid with CPF and cash.
We have some investments. We are considering to cash them for 20% down payment for a private property. We will rent the property to pay the monthly instalment.
Should we go for a second property or continue investing in equity? We are now in our 40s. It is for retirement use.
Hi
This is a personal view. It is all right to buy a property for one's occupation but not a good idea to invest in a property for rental.
I dislike investing in a physical property for the following reasons:
a) the price is too high
b) the return, after deducting expenses, is too low
c) it is a hassle to rent out the property
d) it does not offer diversifcation.
e) it is highly speculative and depends on making the right decision on timing and choice of property.
Investing in REITS may be a better idea, as it offers the same opportunity to make the same kind of potential gain as physical property, has less hassle in managing the property and offers diversification over several properties.
All the best in your decision!
My wife and I own a HDB executive apartment, fully paid with CPF and cash.
We have some investments. We are considering to cash them for 20% down payment for a private property. We will rent the property to pay the monthly instalment.
Should we go for a second property or continue investing in equity? We are now in our 40s. It is for retirement use.
Hi
This is a personal view. It is all right to buy a property for one's occupation but not a good idea to invest in a property for rental.
I dislike investing in a physical property for the following reasons:
a) the price is too high
b) the return, after deducting expenses, is too low
c) it is a hassle to rent out the property
d) it does not offer diversifcation.
e) it is highly speculative and depends on making the right decision on timing and choice of property.
Investing in REITS may be a better idea, as it offers the same opportunity to make the same kind of potential gain as physical property, has less hassle in managing the property and offers diversification over several properties.
All the best in your decision!
Bird Nest Industry in Kedah, Malaysia
I visited Padang Seria, which is in Kedah and 50 km from Penang Island. It is developing a bird nest industry. Over 100 shophouses have been converted into "bird nest house". The swiflets use the house to build their nests to raise the young swiflets.
My friend told me that a few other towns in Kedah and Johore are also developing this new industry. Bird nest has some medicinal value and is also a delicacy.
I shall be uploading some photos soon.
My friend told me that a few other towns in Kedah and Johore are also developing this new industry. Bird nest has some medicinal value and is also a delicacy.
I shall be uploading some photos soon.
Personal accident insurance
Dear Mr. Tan
I have a personal accident plan, which cost me about $150/annum with a sum assured of $100,000. Is it too expensive? I am in class 2.
REPLY
What is the coverage under the personal accident policy? Some policy covers death, accident, and temporary disablement. To decide whether to continue with this policy, it is best for you to get a quote for a comparable product from another company.
I have a personal accident plan, which cost me about $150/annum with a sum assured of $100,000. Is it too expensive? I am in class 2.
REPLY
What is the coverage under the personal accident policy? Some policy covers death, accident, and temporary disablement. To decide whether to continue with this policy, it is best for you to get a quote for a comparable product from another company.
Existing whole life policy
Dear Mr Tan,
I am looking for an insurance plan to increase my cover. I was looking for some low-cost insurances (due to my increasing expenses), such as decreasing term insurance.
I bought a whole life policy about 2 years ago, paying almost $160 monthly (for 15 years). I read from your blog that this insurance come with a high cost. What should I do with it? Should I terminate it and take the cash? Or I should hold on to it until the cash value is enough to cover the premiums I paid?
I had now decided to take a decreasing term, personal accident and a medishield plan.
REPLY
Please read the FAQ in my website: www.tankinlian.com/faq
For the whole life policy which has been taken for 2 years, it is probably better to continue with the policy, rather than to terminate it. However, you can ask for the cash value in 5 years time to decide on the best option. Read the FAQ on "existing insurance policy".
I am looking for an insurance plan to increase my cover. I was looking for some low-cost insurances (due to my increasing expenses), such as decreasing term insurance.
I bought a whole life policy about 2 years ago, paying almost $160 monthly (for 15 years). I read from your blog that this insurance come with a high cost. What should I do with it? Should I terminate it and take the cash? Or I should hold on to it until the cash value is enough to cover the premiums I paid?
I had now decided to take a decreasing term, personal accident and a medishield plan.
REPLY
Please read the FAQ in my website: www.tankinlian.com/faq
For the whole life policy which has been taken for 2 years, it is probably better to continue with the policy, rather than to terminate it. However, you can ask for the cash value in 5 years time to decide on the best option. Read the FAQ on "existing insurance policy".
Tuesday, July 21, 2009
Petition to Prime Minister (4)
317 people have signed the Petition.
I have sent an email to the journalists of the major papers to inform them about the progress of this Petiion. I hope that some of the journalists are prepared to write about this Petition. (When I launched the Petition a few days ago, I also informed the journalists, but none responded to my e-mail).
I have sent an email to the journalists of the major papers to inform them about the progress of this Petiion. I hope that some of the journalists are prepared to write about this Petition. (When I launched the Petition a few days ago, I also informed the journalists, but none responded to my e-mail).
SCMP:Treat us the same as minibondvictims, say Octave Note buyers
21 July 2009
Investors who bought complex investment products - called Octave Notes - linked to Lehman Brothers have accused the government of offering them no help since the collapse of the US investment bank on September 15.
At a meeting last night at which they agreed to negotiate jointly for compensation, one tearful woman said: "As early as September 16, I already knew that my Octave Notes were worth nothing. But how come the government is only helping Lehman minibond victims?"
She was one of 80 investors at the meeting, which the Democratic Party organised.
A total of 48,000 Hongkongers put HK$20 billion into Lehman Brothers-linked minibonds - which, despite their name, are complex, credit-linked derivatives - and lost most of their money with the bank's collapse. The affair has spawned a Legislative Council inquiry and investigation by the city's two watchdogs of thousands of investor complaints that local banks mis-sold the products.
"We hope to press the government to handle the Octave Notes matter together with the minibond debacle," said Ran Leung So-chun, who bought notes worth US$130,000.
Those at last night's meeting had the same complaint as minibond buyers: bank staff neither properly explained to them the risks in buying the complex products nor performed risk assessments before they agreed to put their money into them.
Octave Notes were issued by US investment bank Morgan Stanley; 16 local banks sold HK$2.1 billion of them to about 8,300 customers between 2004 and 2007.
Like most minibonds, the notes contain synthetic collateralised debt obligations (CDOs) - conceptual products that mimic the financial health of a pool of companies. When these businesses collapse, the CDOs lose value. Many of the Octave Notes were connected to the performance of firms that went bust - among them Lehman Brothers.
Investors who bought complex investment products - called Octave Notes - linked to Lehman Brothers have accused the government of offering them no help since the collapse of the US investment bank on September 15.
At a meeting last night at which they agreed to negotiate jointly for compensation, one tearful woman said: "As early as September 16, I already knew that my Octave Notes were worth nothing. But how come the government is only helping Lehman minibond victims?"
She was one of 80 investors at the meeting, which the Democratic Party organised.
A total of 48,000 Hongkongers put HK$20 billion into Lehman Brothers-linked minibonds - which, despite their name, are complex, credit-linked derivatives - and lost most of their money with the bank's collapse. The affair has spawned a Legislative Council inquiry and investigation by the city's two watchdogs of thousands of investor complaints that local banks mis-sold the products.
"We hope to press the government to handle the Octave Notes matter together with the minibond debacle," said Ran Leung So-chun, who bought notes worth US$130,000.
Those at last night's meeting had the same complaint as minibond buyers: bank staff neither properly explained to them the risks in buying the complex products nor performed risk assessments before they agreed to put their money into them.
Octave Notes were issued by US investment bank Morgan Stanley; 16 local banks sold HK$2.1 billion of them to about 8,300 customers between 2004 and 2007.
Like most minibonds, the notes contain synthetic collateralised debt obligations (CDOs) - conceptual products that mimic the financial health of a pool of companies. When these businesses collapse, the CDOs lose value. Many of the Octave Notes were connected to the performance of firms that went bust - among them Lehman Brothers.
The Standard:Banks facing China claims
21 July 2009
Hong Kong bankers still trying to calm Lehman Brothers minibond investors are likely to face a second wave of claims _ this time from mainlanders.
The banks are expected to reach agreement with the Securities and Futures Commission this week about their settlement with local minibond clients, sources said yesterday.
But a group of mainland accumulator investors will hold a press conference in Hong Kong this week to seek compensation from Hong Kong banks, according to Sing Tao Daily, sister publication of The Standard. ``Some of the victims in our group have started litigation. We will fight against unscrupulous banks until the end,'' a representative of the group said in an e-mail.
Protection of Investors Association president Lui Chi-wah said Hong Kong banks have been promoting high-risk accumulator products in the mainland. Lui predicts the banks will face claims from investors who made losses.
State-run China Central Television ran two episodes recently on how Hong Kong banks sold accumulators to mainland investors. The investor group has set up a website to attract more people. Meanwhile, the 16 banks which sold Lehman minibonds have reached a tentative compromise with the SFC as they are reportedly willing to repay more of the collaterals sold. It was earlier reported that the banks agreed to pay investors 60 percent of the principal. On top of this they may now repay investors 30 percent of the value of collaterals sold, sources told Sing Tao Daily.
Assuming an investment of HK$100, banks will repay HK$60 plus an extra HK$21 if the collaterals are worth HK$70, taking the total settlement amount to HK$81.
A source said the Bank of China HK (2388) and Standard Chartered Bank (2888), the two largest lenders involved in minibonds distribution, were among the lenders seeking more time to agree on a compensation formula.
Hong Kong bankers still trying to calm Lehman Brothers minibond investors are likely to face a second wave of claims _ this time from mainlanders.
The banks are expected to reach agreement with the Securities and Futures Commission this week about their settlement with local minibond clients, sources said yesterday.
But a group of mainland accumulator investors will hold a press conference in Hong Kong this week to seek compensation from Hong Kong banks, according to Sing Tao Daily, sister publication of The Standard. ``Some of the victims in our group have started litigation. We will fight against unscrupulous banks until the end,'' a representative of the group said in an e-mail.
Protection of Investors Association president Lui Chi-wah said Hong Kong banks have been promoting high-risk accumulator products in the mainland. Lui predicts the banks will face claims from investors who made losses.
State-run China Central Television ran two episodes recently on how Hong Kong banks sold accumulators to mainland investors. The investor group has set up a website to attract more people. Meanwhile, the 16 banks which sold Lehman minibonds have reached a tentative compromise with the SFC as they are reportedly willing to repay more of the collaterals sold. It was earlier reported that the banks agreed to pay investors 60 percent of the principal. On top of this they may now repay investors 30 percent of the value of collaterals sold, sources told Sing Tao Daily.
Assuming an investment of HK$100, banks will repay HK$60 plus an extra HK$21 if the collaterals are worth HK$70, taking the total settlement amount to HK$81.
A source said the Bank of China HK (2388) and Standard Chartered Bank (2888), the two largest lenders involved in minibonds distribution, were among the lenders seeking more time to agree on a compensation formula.
Kedah, Malaysia
I am now in Kedah, Malaysia. I arrived on last Saturday. I shall return to Singapore on Wednesday.
Monday, July 20, 2009
Petition to Prime Minister (3)
266 people have signed the online petition to the Prime Minister, asking the PM to help investors get the same type of compensation that is being offered to investors in Hong Kong.
Our target is to get 1,000 signatures by 29 August. Please pass the word around and get the other investors to help. For those who have already signed, please help to get other people to sign as well.
The petition can be found here.
Our target is to get 1,000 signatures by 29 August. Please pass the word around and get the other investors to help. For those who have already signed, please help to get other people to sign as well.
The petition can be found here.
Sunday, July 19, 2009
SCMP: Clear up the mess
18 July 2009
The incessant dispute over compensation for Lehman Brothers minibond victims could seriously tarnish Hong Kong's image as an international financial centre. And without proper closure, protests by victims will continue to be a common sight outside banks in Central. Nearly a year after Lehman collapsed, leaving behind HK$30 billion in now virtually worthless minibonds, some 40,000 local customers are still awaiting a resolution and proper compensation.
After the crisis exploded, all the political parties immediately swung into action to help victims, a special Legislative Council subcommittee was set up to investigate the debacle, and the government also moved quickly last October to push banks to devise suitable buy-back packages.
Despite the slow progress, we are beginning to see some breakthroughs in negotiations. There have been reports that 16 banks are offering to settle with minibond investors for about 60 to 70 per cent of their principal investment. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
But, Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the offer is unacceptable because the underlying assets are worth more than 60 per cent. Investors want to be fully compensated for their principal investments.
About 48,000 Hongkongers lost billions of dollars when the value of minibonds credit-linked to Lehman Brothers plunged after the US investment bank collapsed last year. Critics question whether banks that offer to buy back the minibonds at only 60 or 70 per cent should still have full title to the collateral.
The market values of collateralised debt obligations (CDOs) are determined by numerous factors, and a slight economic rebound in recent months could have pushed up their values. But the question is: does the modest recovery truly reflect the beginning of a bull market? We would do well to remember that we might not have experienced the full impact of the financial crisis.
All things considered, it is doubtful whether the market values of CDOs could retain the 60-70 per cent level for a sustainable period. Market trends are incredibly erratic, thus the buy-back offer is realistic and reasonable. The tug of war over compensation should not be allowed to drag on indefinitely; the longer the process drags on, the fewer benefits investors will receive.
It is understandable that investors want to hold out, hoping for a better deal. But it's baffling to see why the Securities and Futures Commission has been involved in negotiations. It has flatly rejected the offer on behalf of investors and asked banks to pay a higher value of the principal investment.
The minibond crisis has exposed a myriad of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of crisis management in the event of the failure of a large firm. And the SFC must shoulder a fair share of blame.
Frustrated at the lack of compensation, many minibond investors have criticised the lengthy negotiations with the sellers and the lack of clear guidelines from the regulators about handling their complaints. They are also confused as to where they should take their case - the Monetary Authority, which regulates banks, or the SFC, which regulates the securities market.
Still, we cannot ignore the fact that the SFC has failed to police banks and brokers that sold toxic investment products to ill-informed investors. It has been grossly negligent in performing due diligence in regulating Hong Kong's increasingly complex financial markets. And now it has put on a futile political show by assuming the role of saviour, which will benefit no one at best, and damage its reputation and that of the government at worst.
Our regulatory system has failed to evolve with the times, despite the emergence of increasingly obscure and complex financial products.
The ever-increasing amount of cross-sector selling has intensified calls for reform. But the key question is: do we have the will and the wit to move forward?
The incessant dispute over compensation for Lehman Brothers minibond victims could seriously tarnish Hong Kong's image as an international financial centre. And without proper closure, protests by victims will continue to be a common sight outside banks in Central. Nearly a year after Lehman collapsed, leaving behind HK$30 billion in now virtually worthless minibonds, some 40,000 local customers are still awaiting a resolution and proper compensation.
After the crisis exploded, all the political parties immediately swung into action to help victims, a special Legislative Council subcommittee was set up to investigate the debacle, and the government also moved quickly last October to push banks to devise suitable buy-back packages.
Despite the slow progress, we are beginning to see some breakthroughs in negotiations. There have been reports that 16 banks are offering to settle with minibond investors for about 60 to 70 per cent of their principal investment. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
But, Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the offer is unacceptable because the underlying assets are worth more than 60 per cent. Investors want to be fully compensated for their principal investments.
About 48,000 Hongkongers lost billions of dollars when the value of minibonds credit-linked to Lehman Brothers plunged after the US investment bank collapsed last year. Critics question whether banks that offer to buy back the minibonds at only 60 or 70 per cent should still have full title to the collateral.
The market values of collateralised debt obligations (CDOs) are determined by numerous factors, and a slight economic rebound in recent months could have pushed up their values. But the question is: does the modest recovery truly reflect the beginning of a bull market? We would do well to remember that we might not have experienced the full impact of the financial crisis.
All things considered, it is doubtful whether the market values of CDOs could retain the 60-70 per cent level for a sustainable period. Market trends are incredibly erratic, thus the buy-back offer is realistic and reasonable. The tug of war over compensation should not be allowed to drag on indefinitely; the longer the process drags on, the fewer benefits investors will receive.
It is understandable that investors want to hold out, hoping for a better deal. But it's baffling to see why the Securities and Futures Commission has been involved in negotiations. It has flatly rejected the offer on behalf of investors and asked banks to pay a higher value of the principal investment.
The minibond crisis has exposed a myriad of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of crisis management in the event of the failure of a large firm. And the SFC must shoulder a fair share of blame.
Frustrated at the lack of compensation, many minibond investors have criticised the lengthy negotiations with the sellers and the lack of clear guidelines from the regulators about handling their complaints. They are also confused as to where they should take their case - the Monetary Authority, which regulates banks, or the SFC, which regulates the securities market.
Still, we cannot ignore the fact that the SFC has failed to police banks and brokers that sold toxic investment products to ill-informed investors. It has been grossly negligent in performing due diligence in regulating Hong Kong's increasingly complex financial markets. And now it has put on a futile political show by assuming the role of saviour, which will benefit no one at best, and damage its reputation and that of the government at worst.
Our regulatory system has failed to evolve with the times, despite the emergence of increasingly obscure and complex financial products.
The ever-increasing amount of cross-sector selling has intensified calls for reform. But the key question is: do we have the will and the wit to move forward?
Friday, July 17, 2009
6 day detox programme (3)
Here is the final report of my 6 day detox programme. Several of my blog readers and friends have decided to try the programme. I will ask for their assessment and post them here.
TODAY: On the issue of responsibility
MAS was asked about its accountability in the minibonds saga at the press conference:
About the Lehman saga, there were some comments that MAS sort of allowed such instruments to be marketed to consumers. Do you think MAS should take some responsibility?
Mr Heng Swee Keat, managing director of MAS, replied: “I have highlighted a number of things that MAS has been doing in terms of regulation and the supervision of financial institutions (FIs).
“And if you go through the investigation report which has been issued, you will notice that there is a fairly detailed report that goes into the operation of the FIs, and quite a lot of those are operational lapses.
“I emphasised in my remarks that those are the actions that we expect board and senior management of FIs to take, to ensure that guidelines and standards are complied with.”
Would it be fair to say that MAS has no responsibility for the crisis?
Mr Shane Tregillis, MAS deputy managing director of market conduct, said: “We outlined the steps that we took before. In terms of setting the rules, in terms of inspecting, you can clearly outline what we have done since the problems emerged.”
About the Lehman saga, there were some comments that MAS sort of allowed such instruments to be marketed to consumers. Do you think MAS should take some responsibility?
Mr Heng Swee Keat, managing director of MAS, replied: “I have highlighted a number of things that MAS has been doing in terms of regulation and the supervision of financial institutions (FIs).
“And if you go through the investigation report which has been issued, you will notice that there is a fairly detailed report that goes into the operation of the FIs, and quite a lot of those are operational lapses.
“I emphasised in my remarks that those are the actions that we expect board and senior management of FIs to take, to ensure that guidelines and standards are complied with.”
Would it be fair to say that MAS has no responsibility for the crisis?
Mr Shane Tregillis, MAS deputy managing director of market conduct, said: “We outlined the steps that we took before. In terms of setting the rules, in terms of inspecting, you can clearly outline what we have done since the problems emerged.”
MySudoku Contest 17 July
Try the MySudoku contest in My Paper (Wo Bao) today. It appears on Fridays. Rules of the contest can be found here: http://www.tankinlian.com/mysudoku/
The prize is TKL Sudoku Vol 1. This book of challenging puzzles can be bought at: http://www.easyapps.sg/iShop/public/common/Home.aspx
Thursday, July 16, 2009
Petition to Prime Minister (2)
Read this online petition to the Prime Minister of Singapore. It ask the Prime Minister to get the Monetary Authority of Singapore and/or other relevent body to get the financial institutions to offer compensation similar to what is being offered in Hong Kong.
If you agree with the Petition, please sign it and encourage other investors (who have not been compensated) to join in.
The working committee agreed to lodge the Petition is there are at least 300 signatures. If there is insufficient signatures, we will not lodge the Petition.
If you agree with the Petition, please sign it and encourage other investors (who have not been compensated) to join in.
The working committee agreed to lodge the Petition is there are at least 300 signatures. If there is insufficient signatures, we will not lodge the Petition.
This Petition is dated 29 August 2009. We will get additional signatures from investors who attend the gathering on 22 August, especially those who are not able to use the internet.
Shape Quiz book is now ready
The long awaited shape quiz books is now ready. It is quite attractive. Available for only $7.90 here.
Here are two Youtube videos on how 6 year old Cheyenne solve the shape quiz. The quiz is suitable for children, adults and seniors. It is challenging and fun. You can also organise a competition for a group of friends, to see who can get the shape first.
6 day detox programme (2)
I have now completed 5 days out of the 6 day detox programme. The results have been satisfactory. Read my experience here.
Wednesday, July 15, 2009
SCMP:Cleaning up the mess after a big player falls
15 July 2009
In the last part of a series, Enoch Yiu examines proposals on how to deal with future financial failures. The Lehman Brothers minibond crisis showed just how ill-prepared Hong Kong is for the collapse of a new breed of hybrid investment products.
Bank deposits are insured up to HK$100,000, which may soon be raised to HK$500,000. Consumers can recoup up to HK$150,000 in the case of a failed broker, although the investments themselves are not covered. And the insurance industry is considering its own compensation fund in the case of failures.
But crossover products have left consumers without protection. Ten months after Lehman collapsed, leaving behind HK$20 billion in now virtually worthless minibonds, customers are still awaiting a resolution.
Regulators are trying to negotiate compensation. The government is mulling the creation of an ombudsman. Meanwhile, banks are rehearsing ways to handle any collapse, and other industries are looking on with interest.
Many Lehman minibond investors, frustrated at the lack of compensation, criticise the lengthy negotiations with the minibond sellers and the lack of clear guidelines from the regulators about handling their complaints.
They are even confused about where they should take their case - the Hong Kong Monetary Authority, which regulates banks, or the Securities and Futures Commission, which regulates the securities market.
"I did not know where to file my complaint, so I ended up contacting the Democratic Party to help me out," said investor May Chan.
The quick answer: Investors who bought minibonds from banks should go to the HKMA; those that bought them from brokers need to go to the SFC. But the whole process has left investors confused and angry.
In its negotiations with financial institutions, the SFC has so far only been able to prod full compensation for investors out of Sun Hung Kai Financial (HK$85 million) and KGI (HK$1.6 million). The SFC wanted the same compensation from banks but failed. Banks are negotiating with customers on a case-by-case basis.
Bank of China (Hong Kong) reportedly suggested compensation at 60 per cent of the minibond investment. But SFC chief executive Martin Wheatley told legislators last week that it was unacceptable, because banks should pay the higher value of the principal investment.
Permanent Secretary for Financial Services and the Treasury (Financial Services) Au King-chi said the government would consult soon about whether Hong Kong needed to set up a new agency, a financial services ombudsman, to handle complaints and negotiations between banks and customers in disputes like that over the Lehman minibonds.
"The SFC has asked for the power to compel compensation, while the HKMA has not," said Ms Au.
The government will consider the experiences of financial services ombudsmen in Britain, Singapore, Australia and Canada.
But legislator Kam Nai-wai believes an ombudsman would have little effect. "What we need is a real super-regulator that has the power to add tough regulations on banks and brokers that sell investment products to investors. We do not need another complaint channel," he said.
There is also the question of what mechanism should exist to deal with the collapse of a large investment bank or broker. Banks have already held rehearsals. In 2006, Hong Kong introduced its deposit protection scheme - initially set at HK$100,000, with a proposed rise to HK$500,000. A year later, it conducted its first annual rehearsal to deal with failed banks. Another rehearsal was conducted at the end of last year.
"Such an exercise cost several million dollars and a whole week, but it is all worth it," said Raymond Li Ling-cheung, the chief executive of the Deposit Protection Board. "The rehearsal makes sure we have a group of contracted providers, such as accountants, lawyers, cheque printers and PR firms, that are prepared for the worst. This will allow us to give cheque payments to the depositors within 14 days of a bank collapse."
Hong Kong Stockbrokers Association chairman Kenny Lee Yiu-sun said such rehearsals could be expanded to the securities market.
"It is worth it for the SFC and the related regulators to have similar rehearsals to inform the public about the impact of the collapse of a giant player like Lehman," he said.
When Lehman collapsed on September 15 last year, the SFC banned the exchange clearing house from taking the cash and stock of Lehman to settle the trades it made on the previous trading days. The clearing house was thus forced to trade in the market to settle the transactions.
Since the market fell 1,052 points that day, the trades were executed at prices lower than had been agreed upon. The result was a loss of HK$160 million, forcing the exchange to make a provision.
Legislator Chim Pui-chung said the restrictions on the Lehman settlements were a mistake. In previous cases, the clearing houses took stock and cash from the collapsed firms to make settlement, which was international practice in the Lehman case.
"Luckily, Lehman did not have a large volume of unsettled trades in Hong Kong," said Mr Chim. "The clearing house would go bankrupt if the SFC imposed curbs on collapsed brokers with unsettled trades valued at HK$20 billion or HK$30 billion."
Mr Chim urged the SFC to confirm it would not repeat the practice.
However, the SFC argued that the powers of the commission to issue a restriction notice are set out clearly in the law, although it agreed to learn from the Lehman experience. "Based on the experience with Lehman, we have been working closely with the Hong Kong exchange to establish internal guidance as to how future restriction notices will be dealt with," the commission spokesman said.
The collapse of a giant player like Lehman is rare. Nevertheless, it exposed a range of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of preparation in the event of the failure of a large firm. The question is whether the government is prepared to fix the problems before another giant goes down.
In the last part of a series, Enoch Yiu examines proposals on how to deal with future financial failures. The Lehman Brothers minibond crisis showed just how ill-prepared Hong Kong is for the collapse of a new breed of hybrid investment products.
Bank deposits are insured up to HK$100,000, which may soon be raised to HK$500,000. Consumers can recoup up to HK$150,000 in the case of a failed broker, although the investments themselves are not covered. And the insurance industry is considering its own compensation fund in the case of failures.
But crossover products have left consumers without protection. Ten months after Lehman collapsed, leaving behind HK$20 billion in now virtually worthless minibonds, customers are still awaiting a resolution.
Regulators are trying to negotiate compensation. The government is mulling the creation of an ombudsman. Meanwhile, banks are rehearsing ways to handle any collapse, and other industries are looking on with interest.
Many Lehman minibond investors, frustrated at the lack of compensation, criticise the lengthy negotiations with the minibond sellers and the lack of clear guidelines from the regulators about handling their complaints.
They are even confused about where they should take their case - the Hong Kong Monetary Authority, which regulates banks, or the Securities and Futures Commission, which regulates the securities market.
"I did not know where to file my complaint, so I ended up contacting the Democratic Party to help me out," said investor May Chan.
The quick answer: Investors who bought minibonds from banks should go to the HKMA; those that bought them from brokers need to go to the SFC. But the whole process has left investors confused and angry.
In its negotiations with financial institutions, the SFC has so far only been able to prod full compensation for investors out of Sun Hung Kai Financial (HK$85 million) and KGI (HK$1.6 million). The SFC wanted the same compensation from banks but failed. Banks are negotiating with customers on a case-by-case basis.
Bank of China (Hong Kong) reportedly suggested compensation at 60 per cent of the minibond investment. But SFC chief executive Martin Wheatley told legislators last week that it was unacceptable, because banks should pay the higher value of the principal investment.
Permanent Secretary for Financial Services and the Treasury (Financial Services) Au King-chi said the government would consult soon about whether Hong Kong needed to set up a new agency, a financial services ombudsman, to handle complaints and negotiations between banks and customers in disputes like that over the Lehman minibonds.
"The SFC has asked for the power to compel compensation, while the HKMA has not," said Ms Au.
The government will consider the experiences of financial services ombudsmen in Britain, Singapore, Australia and Canada.
But legislator Kam Nai-wai believes an ombudsman would have little effect. "What we need is a real super-regulator that has the power to add tough regulations on banks and brokers that sell investment products to investors. We do not need another complaint channel," he said.
There is also the question of what mechanism should exist to deal with the collapse of a large investment bank or broker. Banks have already held rehearsals. In 2006, Hong Kong introduced its deposit protection scheme - initially set at HK$100,000, with a proposed rise to HK$500,000. A year later, it conducted its first annual rehearsal to deal with failed banks. Another rehearsal was conducted at the end of last year.
"Such an exercise cost several million dollars and a whole week, but it is all worth it," said Raymond Li Ling-cheung, the chief executive of the Deposit Protection Board. "The rehearsal makes sure we have a group of contracted providers, such as accountants, lawyers, cheque printers and PR firms, that are prepared for the worst. This will allow us to give cheque payments to the depositors within 14 days of a bank collapse."
Hong Kong Stockbrokers Association chairman Kenny Lee Yiu-sun said such rehearsals could be expanded to the securities market.
"It is worth it for the SFC and the related regulators to have similar rehearsals to inform the public about the impact of the collapse of a giant player like Lehman," he said.
When Lehman collapsed on September 15 last year, the SFC banned the exchange clearing house from taking the cash and stock of Lehman to settle the trades it made on the previous trading days. The clearing house was thus forced to trade in the market to settle the transactions.
Since the market fell 1,052 points that day, the trades were executed at prices lower than had been agreed upon. The result was a loss of HK$160 million, forcing the exchange to make a provision.
Legislator Chim Pui-chung said the restrictions on the Lehman settlements were a mistake. In previous cases, the clearing houses took stock and cash from the collapsed firms to make settlement, which was international practice in the Lehman case.
"Luckily, Lehman did not have a large volume of unsettled trades in Hong Kong," said Mr Chim. "The clearing house would go bankrupt if the SFC imposed curbs on collapsed brokers with unsettled trades valued at HK$20 billion or HK$30 billion."
Mr Chim urged the SFC to confirm it would not repeat the practice.
However, the SFC argued that the powers of the commission to issue a restriction notice are set out clearly in the law, although it agreed to learn from the Lehman experience. "Based on the experience with Lehman, we have been working closely with the Hong Kong exchange to establish internal guidance as to how future restriction notices will be dealt with," the commission spokesman said.
The collapse of a giant player like Lehman is rare. Nevertheless, it exposed a range of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of preparation in the event of the failure of a large firm. The question is whether the government is prepared to fix the problems before another giant goes down.
SCMP:Tsang's disapproval rating at record high
Chief Executive Donald Tsang Yam-kuen's disapproval rating has reached a record high after the July 1 protest, a poll shows.
Forty-five per cent of 1,006 people interviewed on the phone last week said they lacked confidence in him, the highest proportion to hold that view since he became the chief executive in 2005.
The figure was also 6 percentage points higher than that recorded in the previous survey late last month, the University of Hong Kong's public opinion programme found.
At the same time, the proportion of people who approved of Mr Tsang's performance dropped from 45 to 40 per cent.
His support rating also fell by 1.6 points to 53.8 points.
"Both in terms of the support rating and the approval rate, the popularity of Donald Tsang has dropped again after a rebound two weeks ago, probably due to the effect of the July 1 rally," Robert Chung Ting-yiu, director of the programme, said.
The latest poll was conducted after thousands of people marched on July 1 to air a range of demands, including calls for Mr Tsang's resignation and universal suffrage.
Some protested against the outsourcing of civil servants' work, while a group of investors who lost money on minibonds, a high-risk derivative investment, demanded compensation for their losses.
A spokesman for the Office of the Chief Executive said Mr Tsang respected the findings of the poll.
Forty-five per cent of 1,006 people interviewed on the phone last week said they lacked confidence in him, the highest proportion to hold that view since he became the chief executive in 2005.
The figure was also 6 percentage points higher than that recorded in the previous survey late last month, the University of Hong Kong's public opinion programme found.
At the same time, the proportion of people who approved of Mr Tsang's performance dropped from 45 to 40 per cent.
His support rating also fell by 1.6 points to 53.8 points.
"Both in terms of the support rating and the approval rate, the popularity of Donald Tsang has dropped again after a rebound two weeks ago, probably due to the effect of the July 1 rally," Robert Chung Ting-yiu, director of the programme, said.
The latest poll was conducted after thousands of people marched on July 1 to air a range of demands, including calls for Mr Tsang's resignation and universal suffrage.
Some protested against the outsourcing of civil servants' work, while a group of investors who lost money on minibonds, a high-risk derivative investment, demanded compensation for their losses.
A spokesman for the Office of the Chief Executive said Mr Tsang respected the findings of the poll.
Earthquake and tsunami
I received an e-mail on 14 July containing this message:
Quake and Tsunami Predicted on July 22 2009 Hello there. I just wanted to let you know that please stay away from the beaches all around in the month of July. There is a prediction that there will be another tsunami or earthquake hitting on 22 July 2009. It is also when there will be sun eclipse. Predicted that it is going to be really bad and countries like Malaysia (Sabah & Sarawak), Singapore , Maldives , Australia , Mauritius , Sri Lanka , India , Indonesia , Philippines
I just saw the news headlines on Channel News Asia (15 July):
* 7.8 earthquake off New Zealand
* Tsuname alert given out.
I don't know whether there will be another earthquake on 22 July. We have to wait and see.
6 day detox programme
I have started a 6 day detox programme, which is working well. My experience so far (after completing 3 days) is shown here.
True cost of life assurance
Many people know that life assurance is useful to provide for the financial security of their family. But they are not aware that the protection can be obtained at a low cost using term insurance or accident insurance.
They are recommended to buy a whole life, endowment, critical illness or a specially designed plan (marketing under branded names) that have high hidden cost and gives a poor return on their savings.
This FAQ explains the true cost of life assurance. It will help you to make a better choice in buying your life assurance in the future. It does not help the policyholders who already bought the life assurance and the past and has already paid the high upfront cost.
Read this FAQ and pass it to the younger people to be educated, before they buy the wrong life assurance policy.
Financial consumers need new watchdog: Obama admin
By Kevin Drawbaugh and David Lawder
WASHINGTON (Reuters) - The U.S. government's fragmented system for protecting financial consumers is "designed to fail" and must be replaced by a single, powerful new agency, a senior U.S. Treasury official said on Tuesday.
As the Obama administration seeks support for a sweeping package of financial regulation reform proposals, Treasury Assistant Secretary Michael Barr urged lawmakers at a hearing to create a new Consumer Financial Protection Agency.
"The present system of consumer protection regulation is not designed to be independent or accountable, effective, or balanced. It is designed to fail," Barr told the Senate Banking Committee. "It is simply incapable of earning and keeping the trust of responsible consumers and providers ..."
"We have to have a fresh start with a new agency whose sole mission is standing up for the American people."
His call for change met general support from Democrats.
"While we can tailor this a little bit better, the reality is we need this," said Democratic Senator Robert Menendez.
Some Republicans resisted the proposal, following lines of attack already set by lobbyists for the financial industry, which sees the agency as a threat to its profitability.
"This is a tremendous overreach ... This is way out of bounds," said Republican Senator Bob Corker at the hearing.
Senator Richard Shelby, the committee's top Republican, called the proposed new agency "a radical departure."
President Barack Obama last month unveiled a wide-ranging package of proposals to rewrite the rules for banks and capital markets in response to a severe financial crisis that has dragged down economies worldwide for more than a year.
He wants to enact new laws by the end of the year. His proposals are expected to move rapidly through the House of Representatives, where Democrats are in firm control, with the closely divided Senate likely to move more slowly.
The Consumer Financial Protection Agency (CFPA) would take over consumer protection duties on mortgages, credit cards, payday loans and other products. At present, more than 10 agencies, including the Federal Reserve, handle these issues.
"We expect the agency to have strong and stable funding through a mix of appropriations and fees. The agency would have transferred to it the staff, the resources, and the fees collected by the bank agencies," Barr said in an interview with Reuters Television.
The Financial Services Roundtable, which represents most of the nation's largest financial groups, in remarks to be delivered at a House committee hearing on Wednesday, said:
"We strongly oppose the creation of a separate, free-standing Consumer Financial Protection Agency."
Rather, the group -- whose members include Citigroup, JPMorgan Chase & Co and UBS AG -- said it supports beefing up consumer protection in existing agencies.
But Senate Banking Committee Chairman Christopher Dodd said at the hearing on Tuesday that the present oversight system broke down in the recent crisis in a "spectacular failure."
He said, "Stronger consumer protection could have stopped this crisis before it started.
"We are in a radical situation ... The classical model (of regulation) has fallen apart."
(Reporting by Kevin Drawbaugh and David Lawder; Editing by Diane Craft)
WASHINGTON (Reuters) - The U.S. government's fragmented system for protecting financial consumers is "designed to fail" and must be replaced by a single, powerful new agency, a senior U.S. Treasury official said on Tuesday.
As the Obama administration seeks support for a sweeping package of financial regulation reform proposals, Treasury Assistant Secretary Michael Barr urged lawmakers at a hearing to create a new Consumer Financial Protection Agency.
"The present system of consumer protection regulation is not designed to be independent or accountable, effective, or balanced. It is designed to fail," Barr told the Senate Banking Committee. "It is simply incapable of earning and keeping the trust of responsible consumers and providers ..."
"We have to have a fresh start with a new agency whose sole mission is standing up for the American people."
His call for change met general support from Democrats.
"While we can tailor this a little bit better, the reality is we need this," said Democratic Senator Robert Menendez.
Some Republicans resisted the proposal, following lines of attack already set by lobbyists for the financial industry, which sees the agency as a threat to its profitability.
"This is a tremendous overreach ... This is way out of bounds," said Republican Senator Bob Corker at the hearing.
Senator Richard Shelby, the committee's top Republican, called the proposed new agency "a radical departure."
President Barack Obama last month unveiled a wide-ranging package of proposals to rewrite the rules for banks and capital markets in response to a severe financial crisis that has dragged down economies worldwide for more than a year.
He wants to enact new laws by the end of the year. His proposals are expected to move rapidly through the House of Representatives, where Democrats are in firm control, with the closely divided Senate likely to move more slowly.
The Consumer Financial Protection Agency (CFPA) would take over consumer protection duties on mortgages, credit cards, payday loans and other products. At present, more than 10 agencies, including the Federal Reserve, handle these issues.
"We expect the agency to have strong and stable funding through a mix of appropriations and fees. The agency would have transferred to it the staff, the resources, and the fees collected by the bank agencies," Barr said in an interview with Reuters Television.
The Financial Services Roundtable, which represents most of the nation's largest financial groups, in remarks to be delivered at a House committee hearing on Wednesday, said:
"We strongly oppose the creation of a separate, free-standing Consumer Financial Protection Agency."
Rather, the group -- whose members include Citigroup, JPMorgan Chase & Co and UBS AG -- said it supports beefing up consumer protection in existing agencies.
But Senate Banking Committee Chairman Christopher Dodd said at the hearing on Tuesday that the present oversight system broke down in the recent crisis in a "spectacular failure."
He said, "Stronger consumer protection could have stopped this crisis before it started.
"We are in a radical situation ... The classical model (of regulation) has fallen apart."
(Reporting by Kevin Drawbaugh and David Lawder; Editing by Diane Craft)
Tuesday, July 14, 2009
The New Paper:The real problem? Underwriters hiding product's risk
14 July 2009
For the first time, the Monetary Authority of Singapore has banned 10 banks and brokers from selling structured notes for six to 24 months.
The ban doesn't affect other structured products. POSB still advertises 2.78 per cent interest in the first year for its five-year structured deposit linked to four Singapore blue chip companies.
That one is safe but, as usual, it is impossible to calculate the yield you can expect after five years.
Banks won't tell what we really need to know: A history of actual versus advertised yields for structured deposits.
Banks and brokers sold us billions of dollars of structured notes. Defaults stand at $686 million. Some have become worthless, like DBS High Notes 5. Others still have value, like Minibonds.
MAS report
In the just-released 119-page MAS report, 10 banks and brokers describe how they measure customer risk attitudes. It's useful but doesn't address the real problem: Underwriters hiding the product's risk.
Structured notes promise a safe-looking yield of around 5 per cent per year. But underwriters invest your money in risky bonds that yield much more, like 15 per cent. They keep the difference of 10 per cent, which is called 'expenses'.
The problem is, they don't disclose expenses or total yield in the prospectus or anywhere else. Investors see only their 5 per cent yield, which is low enough not to trigger any alarm bells.
That is half the story. The other half is a built-in conflict: Underwriters have fixed expenses and can earn more by investing your money in high-yielding, risky bonds.
Those bonds are more likely to default but underwriters have that covered too. A typical contract is written so that investors lose everything if only 10 to 15 per cent of the bonds default.
Investors must then forfeit the remaining 85 to 90 per cent of 'good' bonds to the underwriter. An example of this is Pinnacle Notes 9 and 10.
Underwriters get an even better deal when a 'reference entity' - like Lehman Brothers - defaults. It triggers transfer of 100 per cent of investors' money to the underwriter. An example is DBS High Notes 5.
In that case, DBS said it sold its rights to the $103m of investor losses. I asked, but the bank declined to say when it sold, how much it received and whether the buyer was an affiliated company.
Next, DBS set aside $70m to refund losses here and in Hong Kong.
The 7 Jul MAS report shows DBS made refunds of $7.6m to High Notes 5 investors. That is 11 per cent of the $70m DBS allocated to reimburse Singapore and Hong Kong investors.
The low payouts here may be explained by higher payouts in Hong Kong.
Compensation by HK v S'pore banks
WE HAVE heard that 63 per cent of decided structured note cases received full or partial refunds.
That is impressive, but the number falls considerably when you look at dollars paid to all investors.
The data comes from the 7 Jul MAS report, a 26 Jun speech by Senior Minister Goh Chok Tong and losses reported for Pinnacle Notes 9 and 10.
It shows $107m out of $686m of defaulted notes - 16 per cent - was returned to investors.
Contrast that with Hong Kong banks. On 7 Jul, The Standard newspaper there reported that 16 distributors for Minibonds met with the Securities and Futures Commission on 29 Jun to indicate they would pay 60 per cent of the amount invested. A few investors - aged 65 and above - would receive 70 per cent.
To recap, our banks paid investors 16 per cent. Hong Kong banks propose paying at least 60 per cent.
For the first time, the Monetary Authority of Singapore has banned 10 banks and brokers from selling structured notes for six to 24 months.
The ban doesn't affect other structured products. POSB still advertises 2.78 per cent interest in the first year for its five-year structured deposit linked to four Singapore blue chip companies.
That one is safe but, as usual, it is impossible to calculate the yield you can expect after five years.
Banks won't tell what we really need to know: A history of actual versus advertised yields for structured deposits.
Banks and brokers sold us billions of dollars of structured notes. Defaults stand at $686 million. Some have become worthless, like DBS High Notes 5. Others still have value, like Minibonds.
MAS report
In the just-released 119-page MAS report, 10 banks and brokers describe how they measure customer risk attitudes. It's useful but doesn't address the real problem: Underwriters hiding the product's risk.
Structured notes promise a safe-looking yield of around 5 per cent per year. But underwriters invest your money in risky bonds that yield much more, like 15 per cent. They keep the difference of 10 per cent, which is called 'expenses'.
The problem is, they don't disclose expenses or total yield in the prospectus or anywhere else. Investors see only their 5 per cent yield, which is low enough not to trigger any alarm bells.
That is half the story. The other half is a built-in conflict: Underwriters have fixed expenses and can earn more by investing your money in high-yielding, risky bonds.
Those bonds are more likely to default but underwriters have that covered too. A typical contract is written so that investors lose everything if only 10 to 15 per cent of the bonds default.
Investors must then forfeit the remaining 85 to 90 per cent of 'good' bonds to the underwriter. An example of this is Pinnacle Notes 9 and 10.
Underwriters get an even better deal when a 'reference entity' - like Lehman Brothers - defaults. It triggers transfer of 100 per cent of investors' money to the underwriter. An example is DBS High Notes 5.
In that case, DBS said it sold its rights to the $103m of investor losses. I asked, but the bank declined to say when it sold, how much it received and whether the buyer was an affiliated company.
Next, DBS set aside $70m to refund losses here and in Hong Kong.
The 7 Jul MAS report shows DBS made refunds of $7.6m to High Notes 5 investors. That is 11 per cent of the $70m DBS allocated to reimburse Singapore and Hong Kong investors.
The low payouts here may be explained by higher payouts in Hong Kong.
Compensation by HK v S'pore banks
WE HAVE heard that 63 per cent of decided structured note cases received full or partial refunds.
That is impressive, but the number falls considerably when you look at dollars paid to all investors.
The data comes from the 7 Jul MAS report, a 26 Jun speech by Senior Minister Goh Chok Tong and losses reported for Pinnacle Notes 9 and 10.
It shows $107m out of $686m of defaulted notes - 16 per cent - was returned to investors.
Contrast that with Hong Kong banks. On 7 Jul, The Standard newspaper there reported that 16 distributors for Minibonds met with the Securities and Futures Commission on 29 Jun to indicate they would pay 60 per cent of the amount invested. A few investors - aged 65 and above - would receive 70 per cent.
To recap, our banks paid investors 16 per cent. Hong Kong banks propose paying at least 60 per cent.
Petition to the Prime Minister
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?
MySudoku Contest 10 July 2009
539 entries were received for this contest. Three winners will be picked by a draw from those who submitted the correct answers in accordance with these rules. The winners will be contacted by SMS.
The next MySudoku contest will be on 17 July 2009.
Additional contests that are still open:
TKL Intelligence Quiz
Name The Shape.
Improve your intelligence through practice and exercise your mind with the puzzle books here.
Watch this Youtube video on how to solve the Shape Quiz.
The next MySudoku contest will be on 17 July 2009.
Additional contests that are still open:
TKL Intelligence Quiz
Name The Shape.
Improve your intelligence through practice and exercise your mind with the puzzle books here.
Watch this Youtube video on how to solve the Shape Quiz.
Logic9 (Sudoku pocket books)
Dear Mr. Tan,
A few years ago, NTUC printed Logic9, which is the same as Sudoku. I like the size of Logic9 which is small to fit into the pocket. It is very useful when I am in a plane or train. I looked for it in a few bookstores, but it is not available. Where can I buy it?
REPLY
NTUC Income stopped selling the Logic9 (Sudoku) books two years ago. They do not have the stock any more. I have some stock of Vol 2 to 4. I have placed them for sale at my website at a 20% discount for 3 volumes). You can click on "details" to see a photo of the books.
The stock is limited and will run out soon. If you are interested, you should place your order now. It is useful as a gift.
A few years ago, NTUC printed Logic9, which is the same as Sudoku. I like the size of Logic9 which is small to fit into the pocket. It is very useful when I am in a plane or train. I looked for it in a few bookstores, but it is not available. Where can I buy it?
REPLY
NTUC Income stopped selling the Logic9 (Sudoku) books two years ago. They do not have the stock any more. I have some stock of Vol 2 to 4. I have placed them for sale at my website at a 20% discount for 3 volumes). You can click on "details" to see a photo of the books.
The stock is limited and will run out soon. If you are interested, you should place your order now. It is useful as a gift.
Monday, July 13, 2009
Maximise shareholder value
During the past 15 years, Singapore businesses have adopted the concept of maximise shareholder value. This is implemented not only in the private sector, but in the government-linked companies also. This concept has led to salaries of top executives ballooning to several million dollars a year.
There are several flaws in this concept, as stated in this article. It is this concept that has led to the widening income gap in Singapore. Shareholder value is enhanced, when wages are depressed or profits are made at the expense of fair treatment of customers.
I hope that this flawed concept is changed soon.
Tan Kin Lian
There are several flaws in this concept, as stated in this article. It is this concept that has led to the widening income gap in Singapore. Shareholder value is enhanced, when wages are depressed or profits are made at the expense of fair treatment of customers.
I hope that this flawed concept is changed soon.
Tan Kin Lian
Low interest rate
Interest rate globally is at a low level. Central banks have pumped a lot of money into the economy to stimulate its recovery. The hope is that low interest rate will encourage some people to buy to buy houses or cars, or businesses to invest and produce goods.
Low interest rate is bad for savers. They will not earn sufficient interest on their savings. To earn a higher return, they have to take the risk and invest in stocks or other assets.
Eventually, the economy will recover. At that time, the prices of equity, property and other assets will increase. Those who take the risk now will benefit from the recovery.
The alternative is to avoid risk and accept the low rate of interest, which is now less than 1% per annum. This is not sufficient to cover inflation. In my case, I prefer to remain fully invested and wait for the recovery.
Tan Kin Lian
Low interest rate is bad for savers. They will not earn sufficient interest on their savings. To earn a higher return, they have to take the risk and invest in stocks or other assets.
Eventually, the economy will recover. At that time, the prices of equity, property and other assets will increase. Those who take the risk now will benefit from the recovery.
The alternative is to avoid risk and accept the low rate of interest, which is now less than 1% per annum. This is not sufficient to cover inflation. In my case, I prefer to remain fully invested and wait for the recovery.
Tan Kin Lian
Tiered interest rate
Several banks have offered tiered interest rate on savings accounts. A different interest rate is applied to different tranches of savings. This type of complicated structures bring two issues:
a) does the bank state clearly how the interest is to be computed?
b) is the customer able to check that the correct amount of interest has been credited?
In a savings account, the balance can fluctuate every day. Does the bank apply the tiered interest calculation on the daily balance?
Will the bank be willing to show each customer how the interest credited in each month is calcuated?
I hope that bank customers are given the correct amount of interest and are not short changed, due to their inability to check on the calculation of the interest.
a) does the bank state clearly how the interest is to be computed?
b) is the customer able to check that the correct amount of interest has been credited?
In a savings account, the balance can fluctuate every day. Does the bank apply the tiered interest calculation on the daily balance?
Will the bank be willing to show each customer how the interest credited in each month is calcuated?
I hope that bank customers are given the correct amount of interest and are not short changed, due to their inability to check on the calculation of the interest.
Ask for investigation report through FIDREC
Dear Mr Tan,
I have filed my case with FIDREC and I am waiting for FI's investigation report. I will decide, after getting the report, on whether to proceed to the next step, i.e. to get FIDREC to adjudicate the case. It is important for me to get the investigation report first.
For any investor who wants to go through legal action, it is necessary to get FI's investigation report. In Chinese, we have to know the enemy to win the battle.
Currently, when we were interviewed by the FI, it is one direction. We have to answer many questions, but FI do not need to answer us anything.
REPLY
I agree with your approach. It is important for the complainant to get the report from the financial institution and decide how to present your case for mis-representation. You should submit documentary evidence or witnesses who can attest to your side of the story.
I have filed my case with FIDREC and I am waiting for FI's investigation report. I will decide, after getting the report, on whether to proceed to the next step, i.e. to get FIDREC to adjudicate the case. It is important for me to get the investigation report first.
For any investor who wants to go through legal action, it is necessary to get FI's investigation report. In Chinese, we have to know the enemy to win the battle.
Currently, when we were interviewed by the FI, it is one direction. We have to answer many questions, but FI do not need to answer us anything.
REPLY
I agree with your approach. It is important for the complainant to get the report from the financial institution and decide how to present your case for mis-representation. You should submit documentary evidence or witnesses who can attest to your side of the story.
The Emperor's Clothes
Edited from Wikimedia
"The Emperor's New Clothes" is a fairy tale by Danish poet and author Hans Christian Andersen about an emperor who unwittingly hires two swindlers to create a new suit of clothes for him.
The tale is one of Andersen's most popular. It appears often in selected collections of his work and is frequently published in illustrated storybook editions for children. The tale has seen adaptations in animated film, and television drama.
Plot
An emperor of a prosperous city who cares more about clothes than military pursuits or entertainment hires two swindlers who promise him the finest suit of clothes from the most beautiful cloth. This cloth, they tell him, is invisible to anyone who was either stupid or unfit for his position. The Emperor cannot see the (non-existent) cloth, but pretends that he can for fear of appearing stupid; his ministers do the same. When the swindlers report that the suit is finished, they dress him in mime. The Emperor then goes on a procession through the capital showing off his new "clothes". During the course of the procession, a small child cries out, "But he has nothing on!" The crowd realizes the child is telling the truth. The Emperor, however, holds his head high and continues the procession.
"The Emperor's New Clothes" is a fairy tale by Danish poet and author Hans Christian Andersen about an emperor who unwittingly hires two swindlers to create a new suit of clothes for him.
The tale is one of Andersen's most popular. It appears often in selected collections of his work and is frequently published in illustrated storybook editions for children. The tale has seen adaptations in animated film, and television drama.
Plot
An emperor of a prosperous city who cares more about clothes than military pursuits or entertainment hires two swindlers who promise him the finest suit of clothes from the most beautiful cloth. This cloth, they tell him, is invisible to anyone who was either stupid or unfit for his position. The Emperor cannot see the (non-existent) cloth, but pretends that he can for fear of appearing stupid; his ministers do the same. When the swindlers report that the suit is finished, they dress him in mime. The Emperor then goes on a procession through the capital showing off his new "clothes". During the course of the procession, a small child cries out, "But he has nothing on!" The crowd realizes the child is telling the truth. The Emperor, however, holds his head high and continues the procession.
Morale
How do you tell the Emperor that things are going wrong, or things that he does not like to hear?
Sunday, July 12, 2009
Brain Workout in The New Paper
The Brain Workout in the New Paper is taken from my book, TKL Intelligence Quiz. The puzzles in this book is based on the famous quiz created by Albert Einsten. Einsten said that 98% of the people in the world could not solve the quiz. My book teaches the reader on how to be among the 2%.
There are 72 quizzes in my book: 24 at each of three levels. The first level is based on 4 houses and is easier to solve. The next level is based on 5 houses and is the same as Einstein's quiz. The third level is based on 6 houses and is more challenging than Einstein's quiz.
After practicising a few quizzes, the reader will be able to master the technique and be able to solve the quizzes quite quickly. This quiz is also suitable for a challenge among several competitors - to see who can solve the quiz first.
www.easyapps.sg/iShop
There are 72 quizzes in my book: 24 at each of three levels. The first level is based on 4 houses and is easier to solve. The next level is based on 5 houses and is the same as Einstein's quiz. The third level is based on 6 houses and is more challenging than Einstein's quiz.
After practicising a few quizzes, the reader will be able to master the technique and be able to solve the quizzes quite quickly. This quiz is also suitable for a challenge among several competitors - to see who can solve the quiz first.
www.easyapps.sg/iShop
Serangoon North HUDC Privatisation
Dear Mr Tan,
Hope you can post this article in your blog site. Hopefully someone out there may be able to offer the residents in Serangoon North HUDC estate some ideas on how they can proceed from the present jam they are in.
Hope you can post this article in your blog site. Hopefully someone out there may be able to offer the residents in Serangoon North HUDC estate some ideas on how they can proceed from the present jam they are in.
Aik Theng Chong
Saturday, July 11, 2009
Idling ships clog up Singapore shores
Friday, July 10, 2009
Rebuttals to editorial in Straits Times
Dear Kin Lian
I was very upset with the editorial in today ST because the editorial is full of errors. I am wondering if you will be putting up a rebuttal in your blog on this article.
It is easy to rebute the factual inaccuracy of the article (rebuttals in bold italic)
> Unfortunately, Lehman brothers turns out to be a company in their basket of "reference entities" - this is not the case
> 10 FIs here weren't selling anything that was unknown to tetail investors. Hundreds of varieties were sold during boom years - this is not the case
> Many investors happily pocketed returns much higher than what could be earned in comparable time deposits - this is not the case
> A fine that is unduly large will raise alarm bells over the fairness with which Singapore's internationally oriented financial sector is run, especially given the difficulties of assign blame in this matter - in HK, financial institutions voluntarily proposed that they compensate ALL investors a minimum 60% to 70% of their invested amount.
There are many more errors that you could probably can point out than me.
S
I was very upset with the editorial in today ST because the editorial is full of errors. I am wondering if you will be putting up a rebuttal in your blog on this article.
It is easy to rebute the factual inaccuracy of the article (rebuttals in bold italic)
> Unfortunately, Lehman brothers turns out to be a company in their basket of "reference entities" - this is not the case
> 10 FIs here weren't selling anything that was unknown to tetail investors. Hundreds of varieties were sold during boom years - this is not the case
> Many investors happily pocketed returns much higher than what could be earned in comparable time deposits - this is not the case
> A fine that is unduly large will raise alarm bells over the fairness with which Singapore's internationally oriented financial sector is run, especially given the difficulties of assign blame in this matter - in HK, financial institutions voluntarily proposed that they compensate ALL investors a minimum 60% to 70% of their invested amount.
There are many more errors that you could probably can point out than me.
S
Issues not addressed by MAS investigation findings
Dear Mr. Tan,
I am disappointed that the MAS investigation findings did not address the following issues:
1) Are minibond products suitable for the retail investors?
2) Are ordinary investors with education level above primary 6 able to comprehend the complexity of the prospectus?
3) Are minibond products defective?
4) Whether minibond products are fair with respect to the return and risk?
5) Whether the newspaper advertisements misled the investors into believing that minibond is a bond from the six leading banks?
6) Whether the sales brochures misled the investors into believing that it is a bond from the six leading banks?
7) Whether the prospectus confusing and/or misleading?
8) Whether the sales brochures and prospectus omitting any important information?
9) Whether conflicts of interest arise: can Lehman alone being the arranger, issuer and swap counterparty?
Thank You,
P
I am disappointed that the MAS investigation findings did not address the following issues:
1) Are minibond products suitable for the retail investors?
2) Are ordinary investors with education level above primary 6 able to comprehend the complexity of the prospectus?
3) Are minibond products defective?
4) Whether minibond products are fair with respect to the return and risk?
5) Whether the newspaper advertisements misled the investors into believing that minibond is a bond from the six leading banks?
6) Whether the sales brochures misled the investors into believing that it is a bond from the six leading banks?
7) Whether the prospectus confusing and/or misleading?
8) Whether the sales brochures and prospectus omitting any important information?
9) Whether conflicts of interest arise: can Lehman alone being the arranger, issuer and swap counterparty?
Thank You,
P
Law Suit on DBS High Notes
SINGAPORE, July 10 (Reuters) - More than 200 customers have sued Singapore's DBS Bank, a unit of DBS Group Holdings , in a bid to recover investment losses of around S$17 million ($11.6 million) arising from the collapse of Lehman Brothers, the Straits Times reported on Friday.
Siraj Omar, a director at Premier Law, told Reuters his firm had filed a claim in a Singapore court on behalf of 204 investors but declined to discuss the case. The investors had purchased a callable basket of credit-linked notes, called High Notes 5, from DBS.
A DBS spokeswoman confirmed receipt of the claim, saying the suit was without merit and that DBS planned to defend the lawsuit.
Siraj Omar, a director at Premier Law, told Reuters his firm had filed a claim in a Singapore court on behalf of 204 investors but declined to discuss the case. The investors had purchased a callable basket of credit-linked notes, called High Notes 5, from DBS.
A DBS spokeswoman confirmed receipt of the claim, saying the suit was without merit and that DBS planned to defend the lawsuit.
Coverage of Lehman cases in Hong Kong
Hi Mr. Tan,
Why is there no coverage of what is happening with the Lehman cases in Hong Kong in our newspapers? Surely, this is relevant to the investors in Singapore, to know what is happening to similar cases in HK. The main source of this information is your blog - thank G!
REPLY
I want to thank a volunteer who seaches the online version of the Hong Kong newspapers every day and sends the articles to me. Without his help (and he did it without my asking), I would not be able to put up these news clippings. My job is to check that they are relevant to the readers.
I wish that our daily newspapers would be active in covering the developments in Hong Kong. This is what a free and independent media should do. I hope that they will be more active in this coverage in the future.
Why is there no coverage of what is happening with the Lehman cases in Hong Kong in our newspapers? Surely, this is relevant to the investors in Singapore, to know what is happening to similar cases in HK. The main source of this information is your blog - thank G!
REPLY
I want to thank a volunteer who seaches the online version of the Hong Kong newspapers every day and sends the articles to me. Without his help (and he did it without my asking), I would not be able to put up these news clippings. My job is to check that they are relevant to the readers.
I wish that our daily newspapers would be active in covering the developments in Hong Kong. This is what a free and independent media should do. I hope that they will be more active in this coverage in the future.
MySudoku Contest in MyPaper
A fair solution to the toxic product crisis
Several letters were printed in the Straits Times during the past two days. The writers indicated that the punishment meted out to the financial institutions for mis-selling the credit linked notes was inadequate. There is no point in banning them from the sale of structured notes, when no customer will be buying them anyway over the next two years.
It is quite unjust that the retail customers, who have lost large sums of money due to the wrongdoings of the financial institutions, were left to seek compensation on their own. Most of them do not have the financial means or the knowhow to take legal action. Their chance of winning is at best uncertain, considering the ability of the financial institutions to engage the best lawyers in town, and the perception that the authority is siding these institutions.
In most countries, it is the duty of the authority to implement the law and ensure that the ordinary people are treated fairly. If there are wrongdoings, especially by the stronger people, the authority should step in to put matters right and look after the interest of the weak.
I hope that the Monetary Authority of Singapore will use its influence to get the financial institutions to offer to share the loss equally with the retail investors. A possible apporach is for the institution to take over the credit notes and pay the retail investors 50% of the invested sum now (less any payment that they have received earlier) and 50% of the proceeds of the notes at the time of maturity or earlier redemption or sale of these notes.
This step will be seen by many people to be fair to all parties. I believe that it will be accepted by the invstors in Singapore, although it may appear to be less generous that the compensation of 60% or 70% that is being considered in Hong Kong.
Tan Kin Lian.
Here are the URL to the ST letters:
http://www.straitstimes.com/ST%2BForum/Story/STIStory_400745.html
http://www.straitstimes.com/ST%2BForum/Story/STIStory_401138.html
http://www.straitstimes.com/ST%2BForum/Story/STIStory_401136.html
It is quite unjust that the retail customers, who have lost large sums of money due to the wrongdoings of the financial institutions, were left to seek compensation on their own. Most of them do not have the financial means or the knowhow to take legal action. Their chance of winning is at best uncertain, considering the ability of the financial institutions to engage the best lawyers in town, and the perception that the authority is siding these institutions.
In most countries, it is the duty of the authority to implement the law and ensure that the ordinary people are treated fairly. If there are wrongdoings, especially by the stronger people, the authority should step in to put matters right and look after the interest of the weak.
I hope that the Monetary Authority of Singapore will use its influence to get the financial institutions to offer to share the loss equally with the retail investors. A possible apporach is for the institution to take over the credit notes and pay the retail investors 50% of the invested sum now (less any payment that they have received earlier) and 50% of the proceeds of the notes at the time of maturity or earlier redemption or sale of these notes.
This step will be seen by many people to be fair to all parties. I believe that it will be accepted by the invstors in Singapore, although it may appear to be less generous that the compensation of 60% or 70% that is being considered in Hong Kong.
Tan Kin Lian.
Here are the URL to the ST letters:
http://www.straitstimes.com/ST%2BForum/Story/STIStory_400745.html
http://www.straitstimes.com/ST%2BForum/Story/STIStory_401138.html
http://www.straitstimes.com/ST%2BForum/Story/STIStory_401136.html
Thursday, July 09, 2009
Part Time Work Portal
I am relaunching this portal to help people to find part time work and employers to look for these workers. This is relaunched as a free service to serve the community. There is no charge to register in this portal or to search for workers.
I have asked the job seekers to provide their residential postal sector, type of work and the hourly rate. I encourage employers to search for part time workers who live close to the place of work. This will save travelling time and cost, and keep the cost low for employers.
This portal is useful for people who are now not employed and for students during the vacation.
Please help to promote this portal.
I have asked the job seekers to provide their residential postal sector, type of work and the hourly rate. I encourage employers to search for part time workers who live close to the place of work. This will save travelling time and cost, and keep the cost low for employers.
This portal is useful for people who are now not employed and for students during the vacation.
Please help to promote this portal.
Name the Shape Contest
Take part in this Contest. Participation is Free. Win an autographed copy of the Shape Quiz Book.
TKL Intelligence Quiz Contest
Here is a chance to win an autographed copy of my TKL Intelligence Quiz book. Participation is free. Contest.
The Standard:Ip supports banks' offer in minibond settlement
9 July 2009
Eight independent lawmakers, led by Regina Ip Lau Suk-yee, yesterday met representatives of the Hong Kong Association of Banks in an attempt to resolve the Lehman minibonds saga.
The meeting was mainly focused on the settlement offer by 16 distributor banks that was revealed by The Standard last week, which has won the support of many lawmakers, sources said.
The meeting between the HKAB and the lawmakers went smoothly and the banks were close to concluding an offer, said Ip, who is also the founder of the Savantas Policy Institute, a think-tank.
Ip said the eight lawmakers in her delegation were speaking on behalf of 3,000 Lehman minibond investors in Hong Kong and they hope to resolve the issue of compensation as soon as possible.
" The investors have been seeking help from us, and I have received 1,000 cases," she said.
Other lawmakers in Ip's delegation included Lam Tai-fai, Jeffrey Lam Kin- fung, Samson Tam Wai-ho, Leung Ka- lau, Paul Chan Mo-po, Chan Kin-por and Philip Wong Yu-hong, sources said.
The lawmakers cited the report issued by the Monetary Authority of Singapore on Tuesday, which said up to 75 percent of the investors in the city state may be able get some of their money back as they had filed complaints. "They said the MAS report showed only a 32.2 percent repay ratio, which is much lower than the current proposal [from 16 Hong Kong distributor banks] which calls for paying back up to 70 percent," a banking source said.
Lawmakers were said to support the banks' proposal as it was "more reasonable" and a better offer when compared with the MAS deal, according to sources familiar with the situation. Last week, representatives from the banks approached the Securities and Futures Commission, presenting a formal proposal to settle the issue concerning compensation for investors who had bought minibonds linked to the collapsed US financial firm Lehman Brothers.
The proposal said banks would offer an average of 60 percent of principal invested or 70 percent to those investors aged over 65. They also agreed to top up the difference if collateral is sold at higher prices in the future.
Meanwhile, Democratic Party legislator Kam Nai-wai suggested Hong Kong follow the Singapore model.
Kam yesterday said he would meet the financial secretary to discuss the matter.
"According to the Singapore model, up to 95 percent of investors could get their money," Kam said, offering data different from that quoted by the HKAB.
Eight independent lawmakers, led by Regina Ip Lau Suk-yee, yesterday met representatives of the Hong Kong Association of Banks in an attempt to resolve the Lehman minibonds saga.
The meeting was mainly focused on the settlement offer by 16 distributor banks that was revealed by The Standard last week, which has won the support of many lawmakers, sources said.
The meeting between the HKAB and the lawmakers went smoothly and the banks were close to concluding an offer, said Ip, who is also the founder of the Savantas Policy Institute, a think-tank.
Ip said the eight lawmakers in her delegation were speaking on behalf of 3,000 Lehman minibond investors in Hong Kong and they hope to resolve the issue of compensation as soon as possible.
" The investors have been seeking help from us, and I have received 1,000 cases," she said.
Other lawmakers in Ip's delegation included Lam Tai-fai, Jeffrey Lam Kin- fung, Samson Tam Wai-ho, Leung Ka- lau, Paul Chan Mo-po, Chan Kin-por and Philip Wong Yu-hong, sources said.
The lawmakers cited the report issued by the Monetary Authority of Singapore on Tuesday, which said up to 75 percent of the investors in the city state may be able get some of their money back as they had filed complaints. "They said the MAS report showed only a 32.2 percent repay ratio, which is much lower than the current proposal [from 16 Hong Kong distributor banks] which calls for paying back up to 70 percent," a banking source said.
Lawmakers were said to support the banks' proposal as it was "more reasonable" and a better offer when compared with the MAS deal, according to sources familiar with the situation. Last week, representatives from the banks approached the Securities and Futures Commission, presenting a formal proposal to settle the issue concerning compensation for investors who had bought minibonds linked to the collapsed US financial firm Lehman Brothers.
The proposal said banks would offer an average of 60 percent of principal invested or 70 percent to those investors aged over 65. They also agreed to top up the difference if collateral is sold at higher prices in the future.
Meanwhile, Democratic Party legislator Kam Nai-wai suggested Hong Kong follow the Singapore model.
Kam yesterday said he would meet the financial secretary to discuss the matter.
"According to the Singapore model, up to 95 percent of investors could get their money," Kam said, offering data different from that quoted by the HKAB.
Relevance of Animal Farm
Read this article.
Although this book was written as a satire to the Russian Revolution, some bloggers have started to compare it with what is happening in Singapore today.
I cannot help but think of Boxer as reflecting the workers of Singapore – hard working, dedicated and loyal, but were let down when they grow old. After a lifetime of work, they could not afford to retire and were asked to continue working. They have no security, no pension, no savings for old age (many lost through the credit linked notes) and cannot afford the expensive health care.
I like to mention the wise old donkey Benjamin in the story. He could read as well as any pig, but preferred to have a low profile. Benjamin had known about the pigs' wrongdoing the entire time, but he said nothing to the other animals. He represented the cynics in society or the intellectuals who had the wisdom to stay clear of the purges, but take no action themselves.
Are we having our own Animal Farm in Singapore? Are there too many Benjamins in our midst? What are your views?
Tan Kin Lian
Tyranny and liberty
"When the people fear their government, there is tyranny; when the government fears the people, there is liberty." - Thomas Jefferson
Wednesday, July 08, 2009
Cheyenne does Shape Quiz (2)
SCMP:SFC does not need to complete all minibond inquiries, chief say
8 July 2009
The Securities and Futures Commission did not need to conclude all the investigations into the 20,000 complaints by those who invested in Lehman Brothers minibonds to reach a deal with affected banks, its chief executive, Martin Wheatley, told lawmakers yesterday.
"We are working at the institutional level and looking at whether adequate systems and controls are in place to ensure they comply with the code of conduct. We don't need a conclusion on all the thousands of cases to reach a conclusion," he said.
"What our investigation is trying to do is to reach a conclusion for all of the banks' clients in one go."
Outgoing Hong Kong Monetary Authority chief Joseph Yam Chi-kwong has told lawmakers he hopes 70 per cent of the complaints can be dealt with by March.
The authority is investigating complaints about the way banks sold credit-linked derivatives, including minibonds, issued or guaranteed by Lehman, which collapsed during the credit crunch last year. The authority can refer cases to the commission if further action is warranted.
Minibonds are not corporate bonds, but high-risk, credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
Testifying before the Legislative Council subcommittee probing the Lehman debacle for the fourth time, Mr Wheatley said investigations had dragged on for too long. He hoped banks would agree to settlement terms similar to those offered by Sun Hung Kai Investment Services last week.
The brokerage firm and KGI Asia settled with 329 customers by fully compensating them for their principal investments. The two firms are now entitled to a distribution from the underlying collateral of the minibonds, which is expected to offset a significant part of the buy-back costs.
"It is our hope that we can enter into such agreements with other banks that would achieve a much speedier outcome than the outcomes that we've talked about," Mr Wheatley said.
He said the commission had been in talks with affected banks about a possible deal.
Media reports have disclosed that 16 banks were offering to settle with minibond investors for about 60 per cent of their principal investment.
Investors aged 65 or above would receive about 70 per cent. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
"We're involved in settlement discussions, which are supposed to be confidential, with a number of banks," Mr Wheatley said. "Specific details {hellip} have been leaked."
The Securities and Futures Commission did not need to conclude all the investigations into the 20,000 complaints by those who invested in Lehman Brothers minibonds to reach a deal with affected banks, its chief executive, Martin Wheatley, told lawmakers yesterday.
"We are working at the institutional level and looking at whether adequate systems and controls are in place to ensure they comply with the code of conduct. We don't need a conclusion on all the thousands of cases to reach a conclusion," he said.
"What our investigation is trying to do is to reach a conclusion for all of the banks' clients in one go."
Outgoing Hong Kong Monetary Authority chief Joseph Yam Chi-kwong has told lawmakers he hopes 70 per cent of the complaints can be dealt with by March.
The authority is investigating complaints about the way banks sold credit-linked derivatives, including minibonds, issued or guaranteed by Lehman, which collapsed during the credit crunch last year. The authority can refer cases to the commission if further action is warranted.
Minibonds are not corporate bonds, but high-risk, credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
Testifying before the Legislative Council subcommittee probing the Lehman debacle for the fourth time, Mr Wheatley said investigations had dragged on for too long. He hoped banks would agree to settlement terms similar to those offered by Sun Hung Kai Investment Services last week.
The brokerage firm and KGI Asia settled with 329 customers by fully compensating them for their principal investments. The two firms are now entitled to a distribution from the underlying collateral of the minibonds, which is expected to offset a significant part of the buy-back costs.
"It is our hope that we can enter into such agreements with other banks that would achieve a much speedier outcome than the outcomes that we've talked about," Mr Wheatley said.
He said the commission had been in talks with affected banks about a possible deal.
Media reports have disclosed that 16 banks were offering to settle with minibond investors for about 60 per cent of their principal investment.
Investors aged 65 or above would receive about 70 per cent. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
"We're involved in settlement discussions, which are supposed to be confidential, with a number of banks," Mr Wheatley said. "Specific details {hellip} have been leaked."
SCMP:Chief keeps quiet over calls for his resignation
8 July 2009
He lambasted pan-democrats for disrupting his speech and denied he was a "fugitive" from environmental protection. But during a rowdy Legislative Council question time, the chief executive left one issue unanswered: calls for his resignation.
In the heat of the battle, Donald Tsang Yam-kuen was also accused of turning a blind eye to the plight of people who lost money on Lehman Brothers-linked minibonds. They, and several other groups, formed a banner-waving mob blocking almost all entrances to the Legco building.
"Tsang Yam-kuen, step down!" shouted the protesters, among them minibonds victims seeking government help, green groups and pan-democrats demanding a speedy introduction of universal suffrage.
But when the convoy of chauffeur-driven vehicles arrived at the Legco building, Mr Tsang stepped out of his car and determinedly walked towards the entrance, ignoring the petitions thrust at him.
Adopting the same attitude, Mr Tsang tried to tackle the political controversy over the July 1 march during his speech to open question time.
But among his conclusions on the "two categories" of July 1 demands, he left out the two strongest calls demanded by marchers: his resignation and government assistance to minibonds victims.
He was interrupted three times by legislators from the League of Social Democrats, who demanded to know why he had ignored the plight of minibonds victims, including one who recently killed herself.
"You are really shameless for ignoring them," shouted League legislator Leung Kwok-hung, before he was removed. "A Lehman Brothers' victim has killed herself - her [ghost] is waiting for you outside."
Democratic Party lawmaker James To Kun-sun and unionist Lee Cheuk-yan accused Mr Tsang of playing up youth drug abuse to divert attention from universal suffrage and governance problems.
"The chief executive did not calm people's anger on July 1. He had no response to the people's demands, including universal suffrage and the minibonds saga," Mr Lee said.
There was an uproar when Mr Tsang cut short Legco president Tsang Yok-sing's announcement of the end of the meeting to air grievances "suppressed inside me for a long time".
The chief executive then read a prepared script lambasting lawmakers for interrupting him earlier, thus dishonouring the Hong Kong spirit of inclusiveness. When he was done, Democrat Lee Wing-tat protested, saying the Legco president was biased because he allowed the chief executive to speak but stopped others when they tried to question him.
Meanwhile Chief Secretary Henry Tang Ying-yen found an easier way to avoid protesters. "Of course I am not scared," he said, when caught using the rear entrance. "I always like using the elevator at the back."
He lambasted pan-democrats for disrupting his speech and denied he was a "fugitive" from environmental protection. But during a rowdy Legislative Council question time, the chief executive left one issue unanswered: calls for his resignation.
In the heat of the battle, Donald Tsang Yam-kuen was also accused of turning a blind eye to the plight of people who lost money on Lehman Brothers-linked minibonds. They, and several other groups, formed a banner-waving mob blocking almost all entrances to the Legco building.
"Tsang Yam-kuen, step down!" shouted the protesters, among them minibonds victims seeking government help, green groups and pan-democrats demanding a speedy introduction of universal suffrage.
But when the convoy of chauffeur-driven vehicles arrived at the Legco building, Mr Tsang stepped out of his car and determinedly walked towards the entrance, ignoring the petitions thrust at him.
Adopting the same attitude, Mr Tsang tried to tackle the political controversy over the July 1 march during his speech to open question time.
But among his conclusions on the "two categories" of July 1 demands, he left out the two strongest calls demanded by marchers: his resignation and government assistance to minibonds victims.
He was interrupted three times by legislators from the League of Social Democrats, who demanded to know why he had ignored the plight of minibonds victims, including one who recently killed herself.
"You are really shameless for ignoring them," shouted League legislator Leung Kwok-hung, before he was removed. "A Lehman Brothers' victim has killed herself - her [ghost] is waiting for you outside."
Democratic Party lawmaker James To Kun-sun and unionist Lee Cheuk-yan accused Mr Tsang of playing up youth drug abuse to divert attention from universal suffrage and governance problems.
"The chief executive did not calm people's anger on July 1. He had no response to the people's demands, including universal suffrage and the minibonds saga," Mr Lee said.
There was an uproar when Mr Tsang cut short Legco president Tsang Yok-sing's announcement of the end of the meeting to air grievances "suppressed inside me for a long time".
The chief executive then read a prepared script lambasting lawmakers for interrupting him earlier, thus dishonouring the Hong Kong spirit of inclusiveness. When he was done, Democrat Lee Wing-tat protested, saying the Legco president was biased because he allowed the chief executive to speak but stopped others when they tried to question him.
Meanwhile Chief Secretary Henry Tang Ying-yen found an easier way to avoid protesters. "Of course I am not scared," he said, when caught using the rear entrance. "I always like using the elevator at the back."
A Doctor by Choice, a Businessman by Necessity
Read this article. In a commercialised world, many doctors have to carry out unnecessary tests to earn income to meet their operating expenses and produce a profit. The unnecessary tests are wasteful and add to the cost of the health care, which has to be borne by the patients or tax payers. This is sad.
Ban on selling structured notes
A journalist told me that the ban imposed by MAS is from selling structured notes. The ban does not apply to other types of structured products. Frankly, I do not understand the distinction. Can anyone enlighten me? What kind of structured products are not covered by the ban?
Let your views be heard
Someone commented that there is no point in putting the suggestions in my blog, as the Government will not be reading them or consider them for implementation.
My purpose is to educate the people who visit and read my blog. I hope that more people will come forward to express their genuine views, either anonymously (if they prefer privacy) or, better still, with their actual names.
I also hope that the authority will hear the genuine grievances, and come forward to find a solution.
My purpose is to educate the people who visit and read my blog. I hope that more people will come forward to express their genuine views, either anonymously (if they prefer privacy) or, better still, with their actual names.
I also hope that the authority will hear the genuine grievances, and come forward to find a solution.
Gathering at Speaker's Corner, 22 Aug at 5 pm
Someone asked me, "What is the purpose of the gathering at Speaker's Corner in August? What is the strategy to get compensation for the investors?"
The purpose is to allow the investors to attend and meet other investors. Many of them have been rejected. They want to express their unhappiness. This is the least that the investors can do, compared to the rallies and demonstrations that have been held in Hong Kong.
Many investors have concluded that they have to take a class action to seek compensation. There are many obstacles to organise this class action. I shall try to explore some avenues.
The purpose is to allow the investors to attend and meet other investors. Many of them have been rejected. They want to express their unhappiness. This is the least that the investors can do, compared to the rallies and demonstrations that have been held in Hong Kong.
Many investors have concluded that they have to take a class action to seek compensation. There are many obstacles to organise this class action. I shall try to explore some avenues.
Section 27 of Financial Adviser's Act
I post below, the wordings of section 27 of the Financial Advisers Act. I believe that MAS should consider if the licensee (i.e. distributor) has breached this section and ask them to compensate the investor for the loss or damage as required under sub-section (3). But I am not sure if I have read this section correctly, in respect of the mis-representations to the investor of the credit linked notes. What are your views?
Recommendations by licensees
27. —(1) No licensee shall make a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation if the licensee does not have a reasonable basis for making the recommendation to the person.
(2) For the purposes of subsection (1), a licensee does not have a reasonable basis for making a recommendation to a person unless —
(a) he has, for the purposes of ascertaining that the recommendation is appropriate, having regard to the information possessed by him concerning the investment objectives, financial situation and particular needs of the person, given such consideration to, and conducted such investigation of, the subject-matter of the recommendation as is reasonable in all the circumstances; and
(b) the recommendation is based on the consideration and investigation referred to in paragraph (a).
(3) Where —
(a) a licensee, in making a recommendation to a person, contravenes subsection (1);
(b) the person, in reliance on the recommendation, does a particular act, or refrains from doing a particular act;
(c) it is reasonable, having regard to the recommendation and all other relevant circumstances, for the person to do that act, or to refrain from doing that act, as the case may be, in reliance on the recommendation; and
(d) the person suffers loss or damage as a result of doing that act, or refraining from doing that act, as the case may be,
then, without prejudice to any other remedy available to that person, the licensee is liable to pay damages to that person in respect of that loss or damage.
(4) In this section, a reference to the making of a recommendation is a reference to the making of a recommendation expressly or by implication.
(5) This section shall not apply to any licensee or class of licensees in such circumstances or under such conditions as may be prescribed.
Recommendations by licensees
27. —(1) No licensee shall make a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation if the licensee does not have a reasonable basis for making the recommendation to the person.
(2) For the purposes of subsection (1), a licensee does not have a reasonable basis for making a recommendation to a person unless —
(a) he has, for the purposes of ascertaining that the recommendation is appropriate, having regard to the information possessed by him concerning the investment objectives, financial situation and particular needs of the person, given such consideration to, and conducted such investigation of, the subject-matter of the recommendation as is reasonable in all the circumstances; and
(b) the recommendation is based on the consideration and investigation referred to in paragraph (a).
(3) Where —
(a) a licensee, in making a recommendation to a person, contravenes subsection (1);
(b) the person, in reliance on the recommendation, does a particular act, or refrains from doing a particular act;
(c) it is reasonable, having regard to the recommendation and all other relevant circumstances, for the person to do that act, or to refrain from doing that act, as the case may be, in reliance on the recommendation; and
(d) the person suffers loss or damage as a result of doing that act, or refraining from doing that act, as the case may be,
then, without prejudice to any other remedy available to that person, the licensee is liable to pay damages to that person in respect of that loss or damage.
(4) In this section, a reference to the making of a recommendation is a reference to the making of a recommendation expressly or by implication.
(5) This section shall not apply to any licensee or class of licensees in such circumstances or under such conditions as may be prescribed.
A fair compensation
Since the start of the Minibond crisis, I have suggested that a fair settlement is for the distributor and the investor to share the loss equally. I believe that both parties should share the blame equally for this unfortunate event.
The difficulty is that some of the notes have residual values that may change during the period prior to maturity. They may be worth more than 50% at the time of settlement or at maturity. Other notes may be worth less. How are these different notes to be dealt with?
I have since found a possible solution. The distributor should buy back the note at 50% of the invested sum now (less any interest that have been paid), take over the notes and refund back 50% of the future proceeds. The distributor is in a better position to decide on future actions, e.g. to hold or dispose of the notes prior to maturity.
I hope that some of the distributors will consider this proposal, in the interest of fair treatment of their customers.
Tan Kin Lian
The difficulty is that some of the notes have residual values that may change during the period prior to maturity. They may be worth more than 50% at the time of settlement or at maturity. Other notes may be worth less. How are these different notes to be dealt with?
I have since found a possible solution. The distributor should buy back the note at 50% of the invested sum now (less any interest that have been paid), take over the notes and refund back 50% of the future proceeds. The distributor is in a better position to decide on future actions, e.g. to hold or dispose of the notes prior to maturity.
I hope that some of the distributors will consider this proposal, in the interest of fair treatment of their customers.
Tan Kin Lian
Follow up action on MAS investigation report
The report released by MAS has been disappointing. The financial institutions that were found to be breached the regulation have been banned from selling structured products for 6 to 24 months. This will not affect them financially, as the sale of structured products have virtually disappeared during the past months, and is unlikely to revive over the next two years.
More importantly, the mis-guided investors, who have lost a large sum of savings in these products and were looking for some compensation for their loss, had their hopes dashed. They posted their views strongly in this blog.
There were reports that investors in Hong Kong are likely to get compensation of 60% to 70%. Someone worked out that the compensation paid to Singapore investors to be less than 20% (but this is not verified due to lack of complete information).
During the past two weeks, I have been talking to lawyers and the insurance broker to see if the "after the event" insurance can be obtained for investors who wish to take legal action against the distributor on the legal grounds of mis-representation. They are several obstacles to be overcomed, but I am working on them.
If the obstacles can be overcomed, investors (who are not involved in any existing class action) can consider a new class action to be arranged. The larger investors can consider taking individual legal action. I like to ask you to complete this survey, to see if there is sufficient interest.
A team of volunteers is helping me to plan a gathering of investors at Speaker's Corner in Hong Lim Park on Saturday 22 August 2009 at 5 p.m. Keep the date free. If you wish to help in the organisation, you can join this Google Group.
On a separate matter, I like to ask investors to write your story for publication in a book. Share your experience with the future generation. Write your story to cover how you were misled into investing in the toxic product and the months of agony that you went through in trying to get compensation. You can send them to me at kinlian@gmail.com.
Tan Kin Lian
More importantly, the mis-guided investors, who have lost a large sum of savings in these products and were looking for some compensation for their loss, had their hopes dashed. They posted their views strongly in this blog.
There were reports that investors in Hong Kong are likely to get compensation of 60% to 70%. Someone worked out that the compensation paid to Singapore investors to be less than 20% (but this is not verified due to lack of complete information).
During the past two weeks, I have been talking to lawyers and the insurance broker to see if the "after the event" insurance can be obtained for investors who wish to take legal action against the distributor on the legal grounds of mis-representation. They are several obstacles to be overcomed, but I am working on them.
If the obstacles can be overcomed, investors (who are not involved in any existing class action) can consider a new class action to be arranged. The larger investors can consider taking individual legal action. I like to ask you to complete this survey, to see if there is sufficient interest.
A team of volunteers is helping me to plan a gathering of investors at Speaker's Corner in Hong Lim Park on Saturday 22 August 2009 at 5 p.m. Keep the date free. If you wish to help in the organisation, you can join this Google Group.
On a separate matter, I like to ask investors to write your story for publication in a book. Share your experience with the future generation. Write your story to cover how you were misled into investing in the toxic product and the months of agony that you went through in trying to get compensation. You can send them to me at kinlian@gmail.com.
Tan Kin Lian
Tuesday, July 07, 2009
The Standard:Illegal Lehman protest targets Tsang home
6 July 2009
Dozens of angry Lehman Brothers minibond investors staged a noisy protest outside Government House yesterday, calling on Chief Executive Donald Tsang Yam-kuen to accept responsibility for their losses and step down.
Holding banners and shouting slogans, the protesters broke through police barriers on Upper Albert Road but returned to the pavement following police persuasion.
More than 50 people took part in the unauthorized demonstration, police said.
The protesters maintained Tsang has failed to supervise the banks and is not doing enough to help them.
Allied Victims of Lehman Products chairman Peter Chan Kwong-yue had initially suggested the protesters would refuse to leave until Tsang talked to them.
Chan, who organized the demonstration, had also expected a turnout of 200 to 300, but traffic diversions and the rain took their toll.
The group will now be applying for permission from the police to stage a protest outside the Legislative Council tomorrow when Tsang arrives for a question and answer session, Chan said. He expects between 400 and 500 people to attend.
Nobody from the government came forward to accept a letter from the group yesterday. And banks involved have not replied to investors even though the group has reached out to them, Chan said.
Upper Albert Road was reopened by early evening yesterday, with all protesters dispersed by 6pm.
A police spokesman said the force had not been informed in advance of the protest so the group violated the Public Order Ordinance. While there were no arrests, an investigation is under way.
Sixteen distributor banks for Lehman Brothers minibonds last Monday met the Securities and Futures Commission to indicate they would pay most investors 60 percent of the principal invested, while investors aged 65 or above would receive 70 percent of their investment. An official proposal was sent to the regulator on Thursday.
SFC chief executive Martin Wheatley said on Friday that the suggestion of paying investors only 60 percent of principal on average was not fair.
A 52-year-old woman linked to Lehman Brothers products reportedly jumped to her death from a Kowloon Bay apartment building on Friday.
Dozens of angry Lehman Brothers minibond investors staged a noisy protest outside Government House yesterday, calling on Chief Executive Donald Tsang Yam-kuen to accept responsibility for their losses and step down.
Holding banners and shouting slogans, the protesters broke through police barriers on Upper Albert Road but returned to the pavement following police persuasion.
More than 50 people took part in the unauthorized demonstration, police said.
The protesters maintained Tsang has failed to supervise the banks and is not doing enough to help them.
Allied Victims of Lehman Products chairman Peter Chan Kwong-yue had initially suggested the protesters would refuse to leave until Tsang talked to them.
Chan, who organized the demonstration, had also expected a turnout of 200 to 300, but traffic diversions and the rain took their toll.
The group will now be applying for permission from the police to stage a protest outside the Legislative Council tomorrow when Tsang arrives for a question and answer session, Chan said. He expects between 400 and 500 people to attend.
Nobody from the government came forward to accept a letter from the group yesterday. And banks involved have not replied to investors even though the group has reached out to them, Chan said.
Upper Albert Road was reopened by early evening yesterday, with all protesters dispersed by 6pm.
A police spokesman said the force had not been informed in advance of the protest so the group violated the Public Order Ordinance. While there were no arrests, an investigation is under way.
Sixteen distributor banks for Lehman Brothers minibonds last Monday met the Securities and Futures Commission to indicate they would pay most investors 60 percent of the principal invested, while investors aged 65 or above would receive 70 percent of their investment. An official proposal was sent to the regulator on Thursday.
SFC chief executive Martin Wheatley said on Friday that the suggestion of paying investors only 60 percent of principal on average was not fair.
A 52-year-old woman linked to Lehman Brothers products reportedly jumped to her death from a Kowloon Bay apartment building on Friday.
Singapore bars 10 firms from selling structured notes
By Lee Siew Hoon, Channel NewsAsia | Posted: 07 July 2009 1728 hrs
SINGAPORE: The Monetary Authority of Singapore (MAS) has, for the first time, imposed bans on the sale of structured notes by 10 financial institutions (FIs) which had distributed toxic structured notes linked to the collapsed US financial institution Lehman Brothers.
The bans took effect on July 1 and will remain in place until MAS is satisfied there are adequate measures to address the findings of its investigation into the sale of the failed structured products last year.
The 10 FIs are ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Philip Securities and UOB Kay Hian.
MAS revealed this as it released the findings of its investigations into the sale of the failed structured products last year.
The regulator found that the 10 FIs had policies, procedures and controls in place for the sale and marketing of the structured notes, but the extent of due diligence and level of internal controls differed among them.
As a result, MAS said there were various forms of non-compliance with its notices and guidelines on the sale and marketing of these investment products.
MAS said some of the specific failings included insufficient steps taken by some FIs to ensure that all their financial advisory representatives were properly trained before marketing and selling these products.
The regulator also noted that some FIs had assigned risk ratings to the products that were inconsistent with risk warnings stated in the prospectus and pricing statement.
According to MAS, there were also weaknesses in how some FIs ensured that their sales representatives were properly equipped with accurate and complete information about the structured notes.
As a preventive measure, the regulator said FIs must rectify all weaknesses identified in the investigations, appoint an external person identified by MAS to review action plans and report on implementation, and appoint senior management staff to oversee compliance with MAS' direction.
MAS said that until it is satisfied with the measures put in place, the FIs will not be able to distribute structured notes.
MAS also gave details about how the FIs have compensated investors who bought structured notes.
Hong Leong Finance paid S$57.6 million to 2,048 investors who bought the structured notes that it distributed. This is the highest amount of compensation paid out to retail investors.
Hong Leong Finance is also barred from selling structured products for two years.
Maybank offered S$25.3 million to 1,100 investors, while ABN Amro paid 262 investors S$14.1 million.
DBS Bank compensated 197 investors S$7.6 million.
The three banks will be banned from selling structured products for six months.
According to MAS, the total settlements for decided cases amounted to S$105 million.
The six brokerage firms, which also sold the structured notes, paid a total of
S$2.74 million to 297 investors.
UOB Kay Hian and DMG & Partners will get a six-month ban, while the others will be barred from selling structured notes for a year each.
http://www.channelnewsasia.com/stories/singaporelocalnews/view/440970/1/.html
SINGAPORE: The Monetary Authority of Singapore (MAS) has, for the first time, imposed bans on the sale of structured notes by 10 financial institutions (FIs) which had distributed toxic structured notes linked to the collapsed US financial institution Lehman Brothers.
The bans took effect on July 1 and will remain in place until MAS is satisfied there are adequate measures to address the findings of its investigation into the sale of the failed structured products last year.
The 10 FIs are ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Philip Securities and UOB Kay Hian.
MAS revealed this as it released the findings of its investigations into the sale of the failed structured products last year.
The regulator found that the 10 FIs had policies, procedures and controls in place for the sale and marketing of the structured notes, but the extent of due diligence and level of internal controls differed among them.
As a result, MAS said there were various forms of non-compliance with its notices and guidelines on the sale and marketing of these investment products.
MAS said some of the specific failings included insufficient steps taken by some FIs to ensure that all their financial advisory representatives were properly trained before marketing and selling these products.
The regulator also noted that some FIs had assigned risk ratings to the products that were inconsistent with risk warnings stated in the prospectus and pricing statement.
According to MAS, there were also weaknesses in how some FIs ensured that their sales representatives were properly equipped with accurate and complete information about the structured notes.
As a preventive measure, the regulator said FIs must rectify all weaknesses identified in the investigations, appoint an external person identified by MAS to review action plans and report on implementation, and appoint senior management staff to oversee compliance with MAS' direction.
MAS said that until it is satisfied with the measures put in place, the FIs will not be able to distribute structured notes.
MAS also gave details about how the FIs have compensated investors who bought structured notes.
Hong Leong Finance paid S$57.6 million to 2,048 investors who bought the structured notes that it distributed. This is the highest amount of compensation paid out to retail investors.
Hong Leong Finance is also barred from selling structured products for two years.
Maybank offered S$25.3 million to 1,100 investors, while ABN Amro paid 262 investors S$14.1 million.
DBS Bank compensated 197 investors S$7.6 million.
The three banks will be banned from selling structured products for six months.
According to MAS, the total settlements for decided cases amounted to S$105 million.
The six brokerage firms, which also sold the structured notes, paid a total of
S$2.74 million to 297 investors.
UOB Kay Hian and DMG & Partners will get a six-month ban, while the others will be barred from selling structured notes for a year each.
http://www.channelnewsasia.com/stories/singaporelocalnews/view/440970/1/.html
MAS Investigation Findings
MAS Releases Investigation Findings on the Sale and Marketing of Structured Notes Linked to Lehman Brothers
100 fun and information personality quizzes
Hi Tan,
We just posted an article, “Know Thyself: 100 Fun and Informative Personality Quizzes”. I thought I'd bring it to your attention in case you think your readers would find it interesting.
Suzane Smith
We just posted an article, “Know Thyself: 100 Fun and Informative Personality Quizzes”. I thought I'd bring it to your attention in case you think your readers would find it interesting.
Suzane Smith
Simplify Internet Banking
Editor
Forum Page
Straits Times
I use internet banking to transfer money to the other people through their bank account. I find this service to be convenient, compared to sending a cheque to them.
However, I find that the actual implementation of this service by my bank to be a hassle in the following aspects:
1. The bank requires the customer to create a record for each new payee and to authenticate it through a PIN sent through the mobile phone.
2. The bank requires the customer to enter the IB Secure PIN for every payment
These layers of security measures are duplicative, as the customer already has to enter user ID, PIN and an IB secure PIN to gain access to the internet banking facility.
The real risk to the customer is by entering the wrong account code of the payee or the wrong amount. The bank is not helping the customer to mitigate this risk.
By giving hassle and distracting the customer, these duplicative tasks actually increases the risk to the customer of making mistakes in entering the wrong bank account or amount. The inconveniences are aggravated when the computer system or internet is slow.
I believe that these security features may have been mandated by the regulator. I hope that the banks and the regulator should re-look at these requirements and simplify the process for the customer, while maintaining an adequate level of security. This will allow the customer to focus on ensuring that the entries are correct.
Tan Kin Lian
Forum Page
Straits Times
I use internet banking to transfer money to the other people through their bank account. I find this service to be convenient, compared to sending a cheque to them.
However, I find that the actual implementation of this service by my bank to be a hassle in the following aspects:
1. The bank requires the customer to create a record for each new payee and to authenticate it through a PIN sent through the mobile phone.
2. The bank requires the customer to enter the IB Secure PIN for every payment
These layers of security measures are duplicative, as the customer already has to enter user ID, PIN and an IB secure PIN to gain access to the internet banking facility.
The real risk to the customer is by entering the wrong account code of the payee or the wrong amount. The bank is not helping the customer to mitigate this risk.
By giving hassle and distracting the customer, these duplicative tasks actually increases the risk to the customer of making mistakes in entering the wrong bank account or amount. The inconveniences are aggravated when the computer system or internet is slow.
I believe that these security features may have been mandated by the regulator. I hope that the banks and the regulator should re-look at these requirements and simplify the process for the customer, while maintaining an adequate level of security. This will allow the customer to focus on ensuring that the entries are correct.
Tan Kin Lian
Prevent Mis-selling of Financial Products
I wrote an article to suggest the following measures to prevent mis-selling of financial products in the future, namely:
a. Enforce the law
b. Allow contingenncy fee system
c. Set up a consumer protection agency.
Read this article.
Funds Transfer
Service Quality Manager
DBS Bank
I find the funds transfer facility provided by DBS Bank through internet banking and ATM to be very useful. I wish to pass this suggestion for your bank to improve this service.
1. Type of account
When I make a funds transfer by internet banking or ATM to a DBS or POSB account, I am asked to specify the type of account, e.g. current, saving, or other type. Usually, the payee does not tell me the type of account. They only indicate DBS or POSB
Can you change the system to avoid specifying the type of account. I believe that the account number should be sufficient for DBS to identify the actual account.
2. Reference Number
When another person transfers money to me through ATM, the transferor is not able to enter a Reference in your ATM machine. I do not have any idea about the identity of the person making the payment to me through ATM.
Can you change your ATM system to allow a Reference Number to be entered. I am aware that this has to be restricted to a Numeric number, but this is better than no reference at all.
Thank you.
Tan Kin Lian
DBS Bank
I find the funds transfer facility provided by DBS Bank through internet banking and ATM to be very useful. I wish to pass this suggestion for your bank to improve this service.
1. Type of account
When I make a funds transfer by internet banking or ATM to a DBS or POSB account, I am asked to specify the type of account, e.g. current, saving, or other type. Usually, the payee does not tell me the type of account. They only indicate DBS or POSB
Can you change the system to avoid specifying the type of account. I believe that the account number should be sufficient for DBS to identify the actual account.
2. Reference Number
When another person transfers money to me through ATM, the transferor is not able to enter a Reference in your ATM machine. I do not have any idea about the identity of the person making the payment to me through ATM.
Can you change your ATM system to allow a Reference Number to be entered. I am aware that this has to be restricted to a Numeric number, but this is better than no reference at all.
Thank you.
Tan Kin Lian
Diverse Views
I wish to post this reply to the Note of Enouragement by Cashew Nut.
1. I state my views and give my reasons.
Some people who disagree with me, use this approach:
I hope that more people can come forward to express their views honestly and positively. If one has to be anonmymous or use a pen name, it is more important that one should show respect and fairness to other people.
Tan Kin Lian
I welcome diverse views. I hold different views from other people. I observe the following principles in expressing my views:
1. I state my views and give my reasons.
2. I do not pass judgement on other people's views (i.e who am I to judge?)
3. I do not attack another person.
Some people who disagree with me, use this approach:
1. They pass judgement on my views
2. They give an extreme interpretation of my views (i.e. put words in my mouth) and attack it
3. They attack me personally on other matters
4. They carry out these actions, while remaining anonymous.
I hope that more people can come forward to express their views honestly and positively. If one has to be anonmymous or use a pen name, it is more important that one should show respect and fairness to other people.
Tan Kin Lian
A poor return on savings in life insurance
When you pay premium for a whole life or endowment policy, a portion (say $X) goes to provide the insurance cover and another portion (say $y) goes towards savings to pay your the maturity benefit or cash value in the future.
The insurance company aims to earn a return of say 5% per annum on the savings po
The insurance company aims to earn a return of say 5% per annum on the savings po