Tan Kin Lian's Blog: ST Forum: Should MAS act?

Saturday, April 24, 2010

ST Forum: Should MAS act?

MANY claims have been made by aggrieved investors in Singapore and other countries of malpractices in the creation and sale of collateralised debt obligations (CDOs) by investment banks.

It was also reported that the United States authorities may investigate other banks that pushed similar CDO products. This is expected, given the copious structures of CDO products prevalent then.

On April 16, Goldman Sachs was charged by the US Securities and Exchange Commission (SEC) with fraud in the structuring and marketing of a debt product tied to sub-prime mortgages.

The SEC alleged that Goldman structured and marketed a synthetic CDO that hinged on the performance of sub-prime residential mortgage-backed securities, and which cost investors more than US$1 billion (S$1.4 billion).

This latest revelation sheds a new light on the debacle and has created widespread public outcry in the US.
But in Singapore, there has been silence from the authorities, although the stakes in Singapore alone are huge, exceeding $100 million of investors' money.

This turn of events prompts at least two questions.

First, should the Monetary Authority of Singapore not open its own investigation into troubled CDOs sold here? In the meantime, should the Government at least stop channelling public deals and business to investment banks that concocted the products, as it suspended local distributors from derivatives sales, until they agree to open their books for scrutiny?

Second, how will the Financial Industry Disputes Resolution Centre (Fidrec) take this into consideration in cases under its judgment in which investors claim mis-selling and malpractice by local distributor-agents and the originator-banks they represent?

How should Fidrec factor this circumstantial evidence into its final decisions pending the outcome of the charges in the US and potential investigations here? Should decisions be deferred or at least be conditional?
Investors, I am sure, look to a constructive and supportive response from the two authorities. For many, this could be the answer to their prayers on what remains a personal dilemma.

Quek Soo Beng

15 comments:

Minibond said...: I fully agree with the writer the authority should be doing something like what USA SEC is doing & be responsible to their citizen since they are the financial wizard (with eyes wide open) that approve these types of products to be sold to the less savvy retail investor.; April 24, 2010 10:51 PM
Anonymous said...: If Quek Soo Beng feels hopeful by writing that letter, he, like many others, may be in for a disappointment.

In Singapore to avoid being in the state of those unfortunate investors, one has to take care of oneself by avoiding those products in the first place. And it is not a difficult thing to do.; April 24, 2010 11:09 PM
Anonymous said...: i am sure the investors would have avoided those products had they been told the truth. What do the old folks know about risk? If they were told that product could give high return and "pow cheak" it would be stupid not to go in especially the products were sold by the BIG BANKS, right?.Big banks 'pow' safe and 'pow' honest.Banks cannot fail...
Secondly, if the RMs and the salespeople had done a fact find and need analysis it also would not have happened. The problem was the salespeople had no intention of helping the investors but closing a sales and the commission from the sale was the sole aim.
Would you avoid an insurance product like wholelife if it pitched to you that the return is better than the bank or FDs? Would you jump in and pour all your money into it? This is misleading , right? That is why MAS has banned any comparison with the bank interest rate.But have the insurance agents heeded? No, you still hear them using it to mislead consumers.Have the insurance companies enforced it too? No also.....MAS must send 'police' around to check on them and at roadshows. if the insurance agents are found to have committed it the CEO must answer it.; April 25, 2010 12:18 AM
Anonymous said...: mimibond, taking the bank to court is a very complex task. I dont think our MAS has that kind of capabilities within the organisation unless they take the initiative of hiring the lawyers from outside the MAS.; April 25, 2010 5:52 AM
Anonymous said...: I think Quek Soo Beng and his friends should try to do something to solve the problem.

And then share with all of us as to responsive the 'authorities" have been to his pleas for help.; April 25, 2010 8:31 AM
Anonymous said...: How to avoid?
They are "billed" as "AA" rated and by "BIG" names???; April 25, 2010 8:47 AM
Anonymous said...: I suspect DXX was holding substantial amount of bonds from the eight banks. Seeing that some of the bonds were going to fail, they quickly package a insurance package via their off shore subsidiary to sell this insurance to unsuspecting treasXXX customers, their RMs told their customers these are bonds from the eight reputable banks and they were as solid as FD and eight bonds were better than one bond.

The only problem for customers is to prove that the above is true. I hope MAS can help.; April 25, 2010 9:32 AM
Diwali said...: Anon on April 24, 2010 11:09 PM and again on April 25, 2010 8:31 AM

Mr Quek Soo Beng and fellow victims may NOT necessarily
"be in for a disappointment".

UK's FSA hv already started formal investigation of Goldman Sachs.
ABN Amro which lost money in the GS deal, was acquired in 2007 by the Royal Bank of Scotland, which is now controlled by the British government after a series of bailouts.
If UK wins compensation...

To Mr Quek Soo Beng and fellow victims:
Just sit and do nothing. UK's action has opened a new front. Let the big boys slug it out. Let the pressure build. Good luck..; April 25, 2010 10:09 AM
Anonymous said...: Personally, I hope MAS does nothing. I want them to reveal their caring side to Singaporeans.; April 25, 2010 10:29 AM
Anonymous said...: Anon April 25 5.52am- If MAS, central bank, in Singapore does not understand complex product like Minibond, how the man on the street will understand? I guess MAS is too keen to promote Singapore as a financial centre and overlook the suitability to retail investors. Now they disclaim responsiblities. See for yourself what other countries have done for their citizens in this fiasco!; April 25, 2010 3:40 PM
Anonymous said...: MAS and Govt is the same. When confident and easy to copy, they copy.

When difficult to copy, they just keep quiet e.g.

i) Ministers' salary
ii) Goldman Sach investigation
iii) HK SEC investigation into MB
iv) No investigation into Town council losing $16-$18 millions in MB.; April 25, 2010 6:04 PM
Anonymous said...: It is apparebt now GCT and heng Swee Kiat know nothing about CDOs and credit default swaps, and pretend they know, and now when things go wrong they hide behind, and talk of other things to hide their ignorance. And in the process still command high pay and perks. Meritocracy, my foot.; April 26, 2010 10:13 AM
Anonymous said...: This is not unusual..but they do consult and follow and they take a long time to understand and they say they are taking measured steps. Don't know say don't know and don't come and bull, MAS.; April 27, 2010 7:26 PM
Anonymous said...: MAS should not act both as regulating & marketing. This function should be separated to avoid conflict of interest. The same problem is also happen in SGX that is part of the reason why so many S chip share fails.; May 01, 2010 7:48 AM
Anonymous said...: No words from MAS so far! Government always believes in Right to Reply without editing. What happen now!; May 01, 2010 2:13 PM