Saturday, July 11, 2009

Idling ships clog up Singapore shores

The global economy is still bad and will take some time to recover. Read this report.
I hope that the Government will consider new ways to create jobs for the unemployed and school leavers. The old ways will not work. My suggestions are stated here.

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.


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,

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.

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!

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

I have partnered with MyPaper to start MySudoku contest. It will appear on Friday from 4 weeks, starting today. The rules are listed here. Several entries have already been submitted by SMS within 30 minutes this morning.

The prize is TKL Sudoku Vol 1. It can be purchased here.

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:

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.

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.

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)

Cheyenne (6 years) now complete another 3 shapes, which are more difficult than the earlier batch. She is observant and flexible in mind. I gave her the nickname of "artist", which makes her very happy and proud. Watch this video on Youtube.

You can order the Shape Quiz here. Delivery from 16 July.

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."

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."

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.

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.

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.

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

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

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.

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.

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

Simplify Internet Banking

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

Diverse Views

I wish to post this reply to the Note of Enouragement by Cashew Nut.

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 portion. However, they take away more than half of the gain to pay commission to the agent, overhead expenses and profit for shareholders, giving a net return of less than 2.5% to the policyholder.

This net return is not guaranteed, as it takes the form of a bonus that can be adjusted by the insurance company.

When the investment return is bad (as has happened every few years), the insurance company cuts the bonus and gives you a lower return. If the investment return is good, the insurance company may not increase the bonus, as it prefers to keep the excess gain as "orphan money" in the insurance fund. The policyholder is likely to lose out in the long run and get a return lower than projected.

After deducting the cost of insurance (i.e. $X) the net return may be less than 1% per annum. This is a poor return for a long term savings plan.

This very low return is possible only if the policy is maintained for more than 15 years. If it is terminated earlier, the cash value is likely to be less than the total premiums paid, giving a negative return to the policyholder. Many policyholders lose more than half of their savings on early termination.

To give a fair return to the policyholder, an insurance company should follow this approach:
a) reduce its expenses, especially commission to agents
b) distribute most of its investment gain to policyholders

Unfortunately, to my knowledge, none of the life insurance company in Singapore follow this approach.

Hence, it is best to avoid all types of life insurance policies that have high expenses. Buy term insurance for the life insurance. Invest your savings in government bonds or an exchange traded fund.

Tan Kin Lian

A note of encouragement

MR Tan Kin Lian

May I offer a note of encouragement to your good work.

You should not loose heart when the response to your suggestions may not be as good as you expected. People take time to respond. It takes time to manifest from inward to outward. Even "educated" people like me takes a long time to unwind the process from inside to outside.

One of the scary things we see in myself and others is the apathy of the heart and lethargy of the body to talk about half-justice and half-truth. I think to make people able to think is more important than winning the debate. Once the people is able to think, then we shall leave it to the people to decide. For example, I am a father too.

My job to to impact good value and character (to the best of our ability), teach them to think independently and pray that God will lead them in their pilgrimage of life. I cannot impose once they come of age.

I have the interest of looking at the recent China history. The Chinese people during late Qing has gone through much soul searching. Even great men like "Zheng Guo Fan" and "Li Hong Zhang", they are searching and trying very hard to institute change from within the institution. Zheng Guo Fan did not suffered humiliation as a result and was hailed as a great leader and teacher. Li Hong Zhang is being portrait as a "traitor" although he did a fair amount of good things for China. History can be enlighening and cruel. It may not apply directly to Singapore, to respect history is the beginning of humanness and humanity.

Thanks a lot and God bless.


No-fault motor insurance

Hi Mr. Tan,
What are you views on the no-fault motor insurance, that is proposed by the Consumer Association?

I sent the following views to the Straits Time. The journalist mentioned it in his report.

There are two types of third party claims and they require to be dealt with differently.

a) Injury claims
For injury claims, it is useful to have a "no fault system" to compensate the injured party, similar to worker's compensation. Here is the experience of such a system used in Sweden. It allows for the compensations to be paid more promptly and fairly, and reduces the litigation cost. See this article in my website:

b) Damage claims
For damage claims, a better solution is for the regulation to require a motorist to lodge a third party claim directly with the insurance company, prior to arranging the repair of the vehicle. The past practice was that the third party will arrange the repair the vehicle with his workshop (who can inflate the claim) and then get a lawyer to lodge the third party claim against the insruance company (hence, adding up the litigation cost as well). (Note: I am not sure if the Motor Claim Framework introduced last year has already addressed this matter).

If the third party damage claim can be put on a proper framework, there is no need to change to law to introduce a "no fault" system for damage claims.

Monday, July 06, 2009

Are we over-reacting to Influence A (H1N1)

Read this article by Dr. Ong Hean Teik. It is purported to be publised in Malaysiakini. He advised Malaysians to take a different approach from Singapore, and to follow the approach taken in the USA.

There was a mention of Dr. Ong in my blog late last year.

The hidden ugly side of Singapore

Does this article give a fair description of the life of the poor in Singapore, or is it an exaggeration? Give your opinion here.

Consumer Finance Protection Agency

I suggest that a consumer finance protection agency should be introduced in Singapore, similar to the approach being considered now in America under the Obama Administration.

This agency should have the duty to examine financial products and ensure that they are suitable for sale to the general public. This is similar to the role of the drug authority in approving drugs for sale to the public.

It is not possible for ordinary consumers to assess the safety and fairness of the financial products on their own, based on the information given to them and their lack of financial expertise. This role has to be done by an agency that has access to financial experts. In making the assessment, the financial experts can ask relevant information from the product issuer, including information that is not disclosed in the published materials given to the consumers.

It may be difficult for the Government to take the big step of introducing an agency that has the power to approve or reject any specific financial product. I suggest that this agency can provide a white-list of the suitable products that meet its criteria of disclosure, fairness and general suitability.

This approach allows the ordinary people to check that a particular financial product has been on the white-list. Risky products can be on the white-list, so long as it is adequately disclosed and fairly priced.

The agency can declare products as “not meeting its criteria” without having the power to reject these products.

Tan Kin Lian

SCMP:Lehman investments recouped

3 July 2009

A total of 329 investors who bought soured Lehman Brothers-linked minibonds from Sun Hung Kai Investment Services and KGI Asia have received their principal amounts back. Under a deal struck with the Securities and Futures Commission, the two firms voluntarily agreed to buy back the minibonds for the principal amount.

Sunday, July 05, 2009

FISCA Research: Interest Rates on Savings Accounts and Fixed Deposits

Here are the interest rates on savings accounts and fixed deposits. Courtesy of FISCA Research.

Cheyenne does the Shape Quiz (T Puzzle)

My niece Cheyenne, 6 years old, tried the Shape Quiz (T Puzzle). She has an artistic inclincation and is able to figure out how to form the shapes by looking at the picture. She did the first 3 shapes out of 100 shapes. She will try the other shapes, one at a time. Watch her on Youtube.

More about the Shape Quiz here.

Allow lawyers to act on contingency fee

Many investors of the credit linked notes (i.e. Minibonds, High Notes, Pinnacle Notes, Jubilee Notes) had, as a last resort, sought to take a class action against the issuers and/or distributors of these financial products. However, they are daunted by the huge legal cost of a class action.

Many lawyers are not willing to take up the class action as they have existing relationships with the financial institutions and they do not wish to jeopardise their future dealings.

A few lawyers who are willing to act for the investors required a large sum of money to be collected to pay for their case preparation and for their fees and expenses to represent the investors in court. Most of these lawyers are not even prepared to write down their legal arguments and give any assessment of the chance of winning the case, prior to their formal appointment.

Many investors were reluctant to join the class action as they were not sufficiently assured about the credibility of the lawyers or the strength of their case. Some said, “We have been cheated by the banks. We do not now wish to be cheated by the lawyers. We do not want to pay large legal fees, when the chance of winning is unclear or quite remote.”

It is useful for a contingency fee system to be introduced in Singapore for such cases. The lawyers are in the best position to assess the strength of the case, and to take the commercial risk of the litigation. They cannot expect the ordinary folks to make this assessment, especially as the decision has to be taken by many investors with different financial circumstances and understanding of the law.

There are some possible abuses of a contingency fee system, but these abuses can be mitigated. This system provides the positive benefit of allowing ordinary people to seek redress against abuses by large companies.

Tan Kin Lian

Automated car

The automated car will soon be a reality. Watch a video here.

Gathering in Speaker's Corner in August (4)

29 people have replied to the survey mentioned in this blog. Each person indicated that they will ask a small number of people to attend. Only 1 person is willing to speak. Four are willing to share their story (with particulars removed to protect their confidentiality) for another speaker to use.

I need more speakers. If you wish to share your story, I can get someone to speak on your behalf. If you like the gathering to be organised, please give your reply here.

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