Saturday, August 22, 2009
Signatures as at 15 August: 734
This is the countdown to the Gathering on 22 August.
I hope that all those who signed the Petition will attend the Gathering, and encourage other people to attend as well.
Date of Gathering: 22 August 2009
Place: Speaker's Corner, Hong Lim Park
2. Speech by Tan Kin Lian
3. Hold placards with messages
4. Sign Petition (for those who did not sign online)
5. Talk to other investors at the Gathering
Three in eight buyers of Lehman Brothers minibonds have accepted an offer by 16 banks to buy them back in the two weeks since the offer opened, the Hong Kong Monetary Authority said yesterday. Peter Chan Kwong-yue, chairman of a group of aggrieved investors, is not surprised.
It is 11 months since the US investment bank collapsed amid the global credit crisis and many of the investors wanted a resolution, Mr Chan said. "It makes sense that the Hong Kong Monetary Authority wants to put pressure on the remaining investors to quickly take up the offer as well."
A spokesman for the authority said investors needed to "consider carefully the terms of the offer and his or her personal circumstances" in deciding whether or not to accept the offer.
The 9,219 investors who have agreed to sell their minibonds to the banks from which they bought them will get back 60 to 70 per cent of their initial investment depending on their age, and may get more depending on the residual value of the assets underlying the minibonds.
Despite their name, minibonds are not corporate bonds but complex, credit-linked derivatives whose value depends on the performance of their underlying assets.
Investors claim banks marketed them as proxy investments in well-known companies and failed to explain the investment risk.
"The HKMA is just using the fact that so many people accepted the offer to get the rest of us to accept and swiftly close the whole issue. It's outrageous," he said.
More than 20,000 investors complained about the vendor banks and brokerages to the Monetary Authority and the Securities and Futures Commission, which have begun taking action. Of 21,635 complaints the authority has received, it has dismissed 1,851, is seeking more information on 11,853 and is currently investigating 6,346.
The SFC has won a court order for Lehman Brothers Asia to hand over 17 internal documents as part of its investigations. Lehman Brothers Asia is in liquidation.
The commission issued a notice to the investment bank on October 31 requiring the surrender of the documents. But the bank refused, claiming the documents involved confidential information about dealings between lawyers and clients.
HONG KONG, Aug. 21 -- Hong Kong's securities regulator said Friday it won a court ruling that forces Lehman Brothers Asia Ltd., a subsidiary in liquidation of the now-defunct U.S. financial firm, to hand over minibond-related documents that it had deemed ''too privileged'' for disclosure.
Some 30,000 local investors claim they were scammed into buying the Lehman Brothers financial product, believing it had a low-risk nature and some invested their life savings.
The Securities and Futures Commission has been investigating the matter and as part of the investigation it has sought documents from Lehman's liquidator since last year that it said are related to the assessment of the minibonds.
The High Court handed down a ruling Wednesday ordering Lehman to hand over the documents in question because they ''were not subject to valid claims of privilege,'' according to a statement issued by the commission.
''It is unfortunate that the SFC would not have obtained any of these documents without having to take these proceedings against Lehman Brothers,'' said Mark Steward, the commission's executive director of enforcement.
A spokesman for the commission declined to say if it has received the documents from Lehman's liquidator yet.
Along with another regulator, the Hong Kong Exchanges and Clearing Ltd., the commission has been criticized by the minibond investors for acting too slowly in the investigation.
Sixteen banks responsible for selling the minibonds agreed last month to a settlement arrangement that will buy back at least 60 percent of the product's worth from eligible investors.
The outstanding value of the minibonds was estimated at about HK$12.6 billion ($1.61 billion).
U.S. securities firm Lehman Brothers Holdings Inc. filed for bankruptcy protection last September.
Friday, August 21, 2009
Thursday, August 20, 2009
I REFER to last Thursday's reply by the Monetary Authority of Singapore (MAS), 'Interests of policyholders protected: MAS', in which MAS stated that my letter ('Transparency in insurance: Policyholders underpaid', Aug 6) suggested that insurers have built up 'orphaned money' by under-declaring bonuses to participating policyholders.
I never suggested that. In fact, I said orphaned money comes from a different source: policyholders who leave the fund early, before their policy matures.
Life insurers acknowledge that early surrenders receive less than their full asset share. The underpayments accumulate and form a slush fund commonly known as 'orphaned money'.
MAS claims I believe life insurers under-declare bonuses in order to build up orphaned money, but this would be difficult and I doubt it happens.
Bonuses are cut only in downturns, when the policyholders' fund has suffered losses. They would need to be cut in good times for the bonuses to add to orphaned money. This has probably never occurred.
Whether orphaned money exists depends on just one thing: Do life insurers pay less than the proportionate ownership - called asset share - to policyholders who leave the fund before their policy matures? To give a frame of reference, it would be like a unit trust paying less than the net asset value when investors sell.
If MAS or the life insurers say, 'We pay early surrenders their full asset share and always have', then that is the end of it. I have made an error, orphaned money does not now exist, it never has and I apologise.
The MAS reply, however, talks about the 90:10 insurance rule and the risk-based capital regime. These do not address the question of whether the full asset share is paid to policyholders when they exit the fund. That is the only way to know if orphaned money exists.
It would be easy for MAS or life insurers to disclose if they pay the full asset share. They are the only ones who can answer the question as they are the only ones with the data.
If orphaned money exists, then we can move on to the second step of determining how much it is and where it is held since - at present - no Singapore life insurer carries an account labelled, 'orphaned money'.
Published in Straits Times Forum Page
IN LAST Thursday's reply, 'Interests of policyholders protected', the Monetary Authority of Singapore (MAS) stated that insurers in Singapore are required to record the total amount of assets held in the participating fund as backing liabilities to participating policyholders. It also said the issue of 'orphaned money' does not arise.
I am unable to follow its reasoning. Take, for example, a participating fund with assets of $15 billion and total individual liabilities of participating policies of $13 billion. This leaves orphaned money amounting to $2 billion.
Although this orphaned money is supposed to belong to the policyholders, it is not distributed to any individual policyholder who leaves the fund on termination of his policy.
This is not fair to policyholders who have unwittingly contributed to the orphaned money by receiving lower bonuses than they are entitled to. This has contributed to the poor return received by policyholders on the savings in their life insurance policies made over a lifetime.
The orphaned money is usually used by the insurance company to pay the high marketing expenses to acquire new policyholders and introduce new products. This benefits shareholders.
The recent practice of many insurance companies in reducing their bonus rates will aggravate this problem.
I have terminated most of my participating policies as I felt uneasy with the practice that is now adopted by the insurance company.
Several countries have addressed this problem by mandating that the 'asset share' should be computed for each individual policy. This is the amount that is attributable to each individual policy based on the premiums paid, the investment income earned on these premiums, less the charges for insurance protection and expenses.
There is also a requirement that the full asset share should be given to the policyholder on termination of the policy, after it has been in force for a certain period.
It is timely for Singapore to explore the use of this concept of asset share, to ensure that the interest of the policyholders is truly protected and that they receive a fair return for a lifetime of savings. It will also prevent the accumulation of a large orphaned fund, at the expense of the participating policyholders.
Tan Kin Lian
I had insured three 5-year policies taken with X since 2004. They reduced the bonus in April 2009 and reduced the maturity proceeds for my three policies by a substantial sum of $ 12,751 (projected yield at maturity reduced from 2.81% reduced to 1.59%). The maturity returns was cut by almost 45% over the 5-year period.
My appeal case was reviewed twice by X but they were unable to offer the higher maturity values. X stated that the bonus revision is within the policy contract and only the non-guaranteed portion is adjusted.
The poor returns affect my retirement saving. I would like to seek your advice - should I put forward my case to FIDReC for a third partly iassessment in order to get a fairy satisfactory returns.
FIDREC is likely to side with X, so there is no point in asking them to adjudicate.
NEW YORK (Reuters) - U.S. consumers will see on Thursday the first signs of the biggest overhaul of the credit card industry in at least two decades, as companies will be forced to provide customers with more time to pay their bills and be required to give more warning of contractual changes.
From August 20, credit card issuers will have to give clients at least 21 calendar days to pay monthly bills and will have to warn consumers 45 days in advance of major changes in conditions, under provisions of a law signed in May by President Barack Obama.
Now, credit card issuers have to mail bills at least 14 days in advance and provide a 15-day notice of changes in terms.
Consumers will also be able to reject the changes set by credit cards, and arrange a plan to cancel the debt and close the credit card account.
"It evens the amount of power between consumers and credit card companies, but it doesn't prevent credit card companies from charging really significant interest rates if they can find a reason to do it," said Jamie Court, president of consumer advocate group Consumer Watchdog.
Some of the biggest changes to the credit card industry look to limit the ability of companies to impose fees, raise interest rates or sell credit card to students, but those will not go into effect until February.
"Those are the ones the card issuers are trying to grapple with to see how to keep the business profitable," said Jason Arnold, an analyst at RBC Capital Markets.
Credit card firms enjoyed hefty profits earlier in the decade, as cheap money ignited a lending boom. American Express Co, usually considered a credit card company for wealthy consumers, became the fastest-growing firm by expanding among less affluent clients.
Other companies grew aggressively by offering no fees and adjusting interest rates according to customers' performance.
However, the housing slump and the financial crisis sent default rates to record highs in the last year. Since then, credit card companies have been closing accounts and trimming credit lines to cushion losses.
Public anger against credit card companies grew as the same banks that were penalizing customers for late payments started receiving billions of dollars of taxpayer money in federal bailouts.
"If Uncle Sam is giving free money to banks who have already received at least tens of billions of dollars from the federal government as bailouts, then the American taxpayers should know that there is a national cap on how much they can be charged," Court said.
"It is definitely a step in the right direction, but only because we were so far gone in the other direction."
The companies have anticipated that the restrictions of the new law will force them to slash credit lines and raise interest rates, or set annual fees.
Moshe Orenbuch, an analyst at Credit Suisse, estimated available credit lines could be cut by about 20 percent, or $1.2 trillion, as banks adjust to comply with the new credit card law.
American Express, Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp, and Discover Financial Services make up around 80 percent of the credit card industry.
(Reporting by Juan Lagorio, editing by Gerald E. McCormick)
Wednesday, August 19, 2009
Less than 10% of respondents (male citizens who have completed national service) are happy with the current arrangement. 54% said that they should be paid an adequate, regular salary. 37% prefer other ways to protect the nation (e.g. full time soldiers).
In the event of a war, 57% would not fight and give their life for Singapore. Some of their reasons are stated in the report. This is a worrisome finding and indicate that the morale problem needs to be arrested urgently..
There is a strong view (80%) that permanent residents should have the same NS obligations as citizens. 65% felt that females should also perform NS, but most prefer a non-combat role.
I plan to introduce a website that gives information to the consumers about the prices of private property and condominiums. Buyers can search the website to see what is being transacted for similar properties around the same area. They can also see the amenities and other useful information.
Consumers should carry out their research and understand the market, before committing to a purchase of $1 million or more, that will tie them down over a lifetime.
Tuesday, August 18, 2009
By Jonathan Stempel
NEW YORK (Reuters) - Charles Schwab Corp was sued by New York Attorney General Andrew Cuomo, who accused the discount brokerage of fraudulently misleading investors about the safety of auction-rate securities.
The civil lawsuit filed Monday in New York State Supreme Court in Manhattan was expected, after Cuomo's office announced its intent to sue Schwab on July 20.
It represents an escalation of Cuomo's efforts to punish brokerages and force them to repurchase the debt at face value from investors who were misled into believing the securities were as solid as cash.
Much of the debt became illiquid in February 2008 when dealers stopped supporting the $330 billion market. Cuomo has already gotten more than a dozen other banks and brokerages to buy back more than $61 billion of the debt.
"This may be a strategic move to get Schwab to agree to a more pro-investor settlement," said James Cox, a law professor at Duke University in Durham, North Carolina. "Schwab has built a foundation as the broker for the middle-class and would not want its reputation harmed by letting the lawsuit fester."
Thousands of customers of San Francisco-based Schwab held about $787.9 million of auction-rate securities as of February 13, 2008, Cuomo's office estimated.
Schwab said the lawsuit lacks merit.
"The New York Attorney General's lawsuit casts blame for a bad situation in the wrong direction," spokeswoman Sarah Bulgatz said. She said Cuomo should instead punish underwriters that deceived brokers on the safety of auction-rate debt.
"GREAT" ALTERNATIVE TO CASH, BROKER SAYS
According to the complaint, which cited recordings of brokers' conversations with clients, one broker labeled auction-rate securities "great alternatives to cash, frankly."
Another called an investor who was planning to buy a home and had been keeping cash in a money market fund. Expressing a "humble opinion," the broker told the investor that auction-rate debt would be a "very safe" place for that money.
"Schwab owed its customers a duty to properly understand and make accurate representations," Cuomo said. "Anyone in the industry who misrepresented the risks of investing in auction-rate securities will be held accountable."
Two brokerages that, like San Francisco-based Schwab, only sold the securities, Fidelity Investments and TD Ameritrade Holding Corp, have settled with Cuomo's office.
Underwriters that settled with Cuomo include Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc, JPMorgan Chase & Co and Royal Bank of Canada, among others.
Cuomo charged Schwab with four counts of fraud, including action under the state's Martin Act, which gives Cuomo wide powers to fight financial fraud.
He wants Schwab to buy back auction-rate debt from clients at face value and pay penalties, among other remedies.
"The Martin Act is an extraordinarily broadly written statute," Cox said. "It essentially gives Cuomo carte blanche."
According to the complaint, Schwab sold customers "a product it did not fully understand and could not properly explain," despite "advertisements promising expertise."
The company also knew, or was reckless or negligent in not knowing, of the market's problems in the summer of 2007, when auctions began to fail, the complaint said.
In a July 24 letter to Cuomo, released Monday, Schwab said it did not actively market or induce the sale of auction-rate debt, and never made any commitment to support that market.
Cuomo's demand that Schwab "act as an insurer against an unprecedented market collapse that it did not cause and could not predict is legally unsound," wrote Faith Gay, a partner at the law firm Quinn Emanuel Urquhart Oliver & Hedges LLP.
In afternoon trading, Schwab shares were down 82 cents, or 4.5 percent, at $17.44 on the Nasdaq.
The case is Cuomo v. Charles Schwab & Co, Supreme Court of the State of New York, County of New York.
(Reporting by Jonathan Stempel; Editing by Phil Berlowitz and Gerald E. McCormick)
Monday, August 17, 2009
Sunday, August 16, 2009
a) Sceptics. These are people who sneered at the effort and declared that there would be no support for the Petition and that the Government would not listen anyway.
b) Enemies. These are people who attacked me through anonymous comments in my blogs and elsewhere. They dislike me for various reasons or may be acting on the instructions of the financial institution or the authority.
c) Fear-mongers. These are people who created unfounded fear and warned me to be careful, giving their advice on how to avoid getting into trouble with the Government.
d) Lack of support from the media. Although I approached about 10 journalists three times, none of them covered the Petition. There was total silence. My emails remain unanswered.
My task was made more difficult by the unwillingness of the investors to step forward to speak. They did not want to be seen as trouble makers or be known that they had lost a lot of money. The installation of the cameras at Hong Lim was another deterrent. A Tan, who is helping me in FISCA, keeps complaining that if the investors are not willing to step forward, why should Tan Kin Lian take the brunt of the personal attacks and sacrifice? He compared the docile attitude of the Singapore investors, with the bravery of the Hong Kong investors.
I considered asking some opposition politicians to speak, but decided against it. I did not want to politicise this issue and make it more difficult for the investors to get the hearing of the Prime Minister.
But Providence is on my side. Two significant events occurred after the launch of the Petition. First, there was the Hong Kong settlement, which was surprising fair and favourable to the investors. It set a benchmark for Singapore to be compared. Second, Great Eastern Life decided to give full compensation to the policyholders who were mis-guided into investing in the Great Link Choice, which is similar to the structured notes.
To my surprise, the Petition collected more than the initial target of 300 signatures. With more signatures on 22 August, I hope that it will surpass the new target of 1,000 signatures.
To the credit of the Government, I did not receive any direct threat or harrassment for my efforts.
We are now counting down to the Gathering on 22 August, which is only 6 days away. I am encouraged by several investors, who thanked me for my efforts, even though they knew that it will be an uphill task. They felt that it was necessary to organise the Petition and Gathering to register the anger of the people who were treated unjustly and were let down by the leaders.
But, who knows? Providence may be on our side one more time. I am always hopeful and positive.
Tan Kin Lian
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08/16 - 08/23
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- Transparency in insurance
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- New books are now available
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