Speaker Corner, 13 Dec 2008 Speech by TKL

Speech by Tan Kin Lian

1. Queens Counsel opinion
I have briefed a senior lawyer in Singapore about the credit linked notes. He will be giving a brief to a Queens Counsel in London. We will wait for the QC opinion, expected in January.

2. Briefing of investors – Lawyer
One lawyer has received more than 250 warrants to act. He will be giving a briefing to the investors in January 2009. He hopes to be able to get additional investors to join the class action on the credit linked notes (except the High Notes).

3. Investors of High Notes
These investors have held several meetings. This group is well organised and will be taking separate action. They have a separate website.

4. Investors of Minibonds
These investors are also setting up a separate website and collecting data on their investors. They also plan to have a briefing of their investors in January 2009.

5. Legal action
By end of January 2009, it will be clearer to the investors on the legal action that can be taken. In the meantime, investors can read my blog for updates.
www.tankinlian.blogspot.com

6. Legal action in USA
Several investors have read news report about taking class action in the USA against the financial institutions, similar to what is being done in Hong Kong. I have consulted a Singapore lawyer on this matter. Their advice is that this approach is not applicable to us. We are monitoring the situation.

7. Dual currency investments
Be careful about dual currency investments. Some investors have lost a lot of money on this product. The bad feature is that your gain is capped and your loss is unlimited. If you are leveraged, you can loss your entire capital. I will give some examples.

8. Consumer association for financial services.
Some people have asked me to set up a consumer association for financial services. I have formed a pro-tem committee to look into this matter. The aims are to educate consumers and help them to obtain financial products that give good value to consumers. More details can be found in my blog, www.tankinlian.blogspot.com. A separate website will be set up soon.

9. Guide on making a complaint
I have distributed a leaflet giving information on the contact persons and websites that guide you to make a complaint on the credit linked notes.

Tan Kin Lian

Rejection of travel insurance claim

Dear Mr. Tan,

I wish to seek your opinion and advice on a recent travel claim.

I bought a Travel insurance coverage for myself and my wife for travel to Spain/Portugal. During the trip, we received an urgent call from the travel agency that my wife's brother had a critical stroke and in coma at a hospital. The tour group were 3 days into a tour of 15 days.

My wife and I took a taxi from hotel to the airport and a shuttle flight to catch the SIA flight back to Singapore. We rushed to the hospital and managed to bid farewell to my wife's brother who passed away on the same day.

I submitted a claim for the taxi fare to the airport, shuttle fare and pro-rated reimbursement of 12 days.

I received a letter from the insurance company stating that:
"a - taxi and shuttlefares as expenses incurred after the trip curtailment is not payable under the policy cover
b - trip curtailment expenses for me as the deceased is not considered as a family member under the policy definition."

I would appreciate you frank opinion on 'a' and 'b' before I pursue the matter further.

LNW

REPLY
In my frank opinion, the insurance company should pay your claim, which is quite reasonable and is connected to a covered event. I am sad that they have rejected the claim, which is not fair to the policyholder.

You can file a complaint with Fidrec, www.fidrec.com.sg

Petition Form for Elected Presidency

Note: If you do not wish to disclose your full NRIC, you can provide only the first 3 digits, ie XXX.

If you wish to help to collect 100,000 signatures, please print this form and get 20 signatures.

www.tankinlian.com/forms/epsingapore1.pdf

Please scan the completed form (with 20 signatures) and send to the e-mail address shown, i.e. epsingapore1@gmail.com.

New online form (optional particulars)
http://www.PetitionOnline.com/TKLFP03/petition.html

Mail to completed form to:
5 Ang Mo Kio Industrial Park 2A, #06-12, S(567760).

Volunteers to help in getting signatures:
http://www.petitiononline.com/VTHTKL1/petition.html

HK: Minibond losers back on the street

Peter So, Dec 13, 2008

Close to 1,000 investors who have lost billions on Lehman Brothers' linked derivatives took to the street again to express grievances against the government and regulators - hours after a widowed investor was rescued from a suicide attempt. ...

http://www.scmp.com/portal/site/SCMP/menuitem.2c913216495213d5df646910cba0a0a0/?vgnextoid=63f95c0aa1c2e110VgnVCM100000360a0a0aRCRD&vgnextfmt=teaser&ss=hong+kong&s=news

HK investors protest over mis-selling of Lehman-linked products

December 12, 2008

HONG KONG - MORE than 200 Hong Kong investors marched on 20 local banks on Friday to demand a full refund of the money they lost after putting it into financial products backed by failed US giant Lehman Brothers.

The protesters, who said they were mis-sold the products by the banks, complained of being frustrated that little action had been taken by the banks and financial regulators to settle their cases.

A large team of police officers escorted the protesters as they marched along Des Voeux Road, one of the busiest roads in the city’s central business hub, stopping at almost every one of the banks.

‘You do not have any more credibility. Had it not been your inaction, we would not have taken to the street so many times,’ Phillip Khan, spokesman for the Alliance of Lehman Brothers Victims, which organised the march, told the bank staff through his loudspeaker.

One of the protesters, Yau Pui-fat, said DBS Bank had not contacted him since September when a staff member told him his investment in Lehman Brothers’ structured notes may have become worthless.

‘I am hoping they will return me the money. But they do not even bother to call,’ the 65-year-old told AFP.

Each of the banks they had visited was guarded by staff and security guards at the entrance.
More than 40,000 Hong Kong investors - including many retirees - had put a total of HK$15.7 billion Hong Kong (S$2.99 billion) of their savings into mini-bonds and other complex products backed by Lehman Brothers, which filed for bankruptcy in September under mountains of debts. — AFP

http://www.sgpolitics.net/?p=1544

Speaker's Corner, 13 Dec 08, 5-7 pm

Venue: Speaker's Corner, Hong Lim Park
Date: Saturday, 13 Dec, 2008
Time: 5 pm

I will cover the following topics:
1. Queens Counsel opinion
2. Briefing of investors – Lawyer
3. Investors of High Notes
4. Investors of Minibonds
5. Legal action
6. Legal action in USA
7. Dual currency investments
8. Consumer association for financial services.

Tan Kin Lian

SCMP:Troubled minibond investor attempts suicide

http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=9R9J8ES96EV6&linkid=5f5d823e-98bb-45d9-9a5b-a431066bef9d&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d

13 Dec 2008Clifford Lo A widow who invested more than HK$5 million in Lehman-related investment products was rescued from a smoke-filled car in which she had cut a wrist and ignited charcoal, police said.

She had left a note on the windscreen of the vehicle, in a Ngau Tau Kok car park, saying: "Murder for money."

Last night, the woman, 45, was recovering at United Christian Hospital, where she was listed as stable.

Her apparent attempted suicide was discovered at 11.37pm on Thursday when an attendant at the car park, in Chun Wah Road, saw the vehicle and called police.

She was found unconscious, bleeding from her right wrist, according to police. Charcoal burning on a tray was also found.

The housewife reportedly said in a seven-page letter that the money had been left to her by her husband, who had died in 2005, and it had originally been invested in a Bank of China fixed deposit to support her and her son. But she said she had been persuaded to invest in Lehman Brothers-backed investment products. A letter dated November 28 from the Bank of China, indicating that the sale of investment products to her had not been deemed to involve anything inappropriate and that the bank would not buy back her investment product, was also found.
Saying in her letter that "she feels desperate" and "I am now extremely terrified", the woman signed off with "I have given up".

She also said in the letter that she had been suffering from depression and needed to take sleeping pills every night since her husband passed away, and the Lehman Brothers failure had made her life even more painful.

http://www.scmp.com/portal/site/SCMP/menuitem.2c913216495213d5df646910cba0a0a0/?vgnextoid=b4c91e1e18a2e110VgnVCM100000360a0a0aRCRD&vgnextfmt=teaser&ss=hong+kong&s=news
http://www.mpinews.com/htm/INews/20081212/gb51053i.htm

Financial Talk and Counselling - Sat 13 Dec 2-5 p.m. URA Center

Organised by The Society of Financial Services Professionals

As the effects of the recent economic crisis begin to seep in, one of the biggest question looms over our heads: what are the social and economic rights of ours that should be protected? Healthcare, too, is a fundamental part of these rights that we deserve.

A qualified group of consultants will give a forum that will promote awareness on our social and economic rights. Join Tan Kin Lian, Leong Sze Hian and others* for this session on how your dollar is related to your rights. Following the talk is a financial consulting session for all participants hosted by the Society for Financial Services Professionals.

Venue: URA Auditorium
Date: 13th December
Time: 2 - 5pm

http://u60sg.org/2008/11/08/financial-counselling/

Citigroup and UBS Agree to Buy Back Risky Securities

The regulator in USA look after the interest of consumers. I hope that the regulator in Singapore can follow the same example. Tan Kin Lian

http://www.nytimes.com/2008/12/12/business/12auctions.html?ref=business

December 12, 2008
By THE ASSOCIATED PRESS
WASHINGTON (AP) — Two banking giants, Citigroup and UBS, agreed on Thursday to buy back nearly $30 billion in risky auction-rate securities that regulators said the banks had marketed to customers as safe.

The Securities and Exchange Commission formally approved the settlements with the two banks after preliminary deals that were reached in August.

Securities regulators in Texas and New York also announced details of final agreements with the banks.

Tens of thousands of the banks’ customers bought the auction-rate securities before the $330 billion market for them froze in mid-February, the S.E.C. said in announcing the final accords.

The new settlements were the largest return of customer money in the agency’s history and all the investors will be made whole, the chairman of the S.E.C., Christopher Cox, said in a statement.

Citigroup and UBS of Switzerland neither admitted nor denied wrongdoing under the settlements.

Citigroup agreed to buy back about $7 billion in the securities from affected customers, while UBS’s repurchase totaled $22.7 billion.

The settlements require federal court approval. The banks agreed to refrain from future violations of securities laws.

Who should be retrenched first?

Discussion in The Online Citizen
http://theonlinecitizen.com/2008/12/who-to-retrench-first-pm-vs-labour-chief/#comment-39428

Here are my views about who should be retrenched first - locals or foreign workers?

My answer is: retrenchment should be avoided. If demand drops by 20%, all workers should work 4 days (instead of 5 days) and take a 20% wage cut. The workers who are able to find alternative work elsewhere can resign. This allows the other workers to work more than 4 days and get additional income for the additional work.

How can the worker cope with a 20% cut in wages? They can draw down on past savings. I suggest a new scheme - to allow them to get a relief loan (for the drop in earnings) at a a modest rate (say 2.5% p.a.) for a period of 12 or 24 months. Such a scheme should be set up by the Governmetn as part of a social safety net. This is important in Singapore, in lieu of unemployment insurance.

We should treat our foriegn workers fairly. Many of them take big loans to come to work in Singpaore. We cannot send them back prematurely on an economic downturn.

In the future, we should plan the use of foreign workers carefully. It is better to have long term migrants into Singapore, if we need to increase our manpower and size of the economy.

Tan Kin Lian

Poll: How should a company cope with falling demand in a recession?
Number of replies: 95

Retrench local workers: 5%
Retrench foreign workers: 40%
Reduce the days worked and wages proportionately: 54%

A broad based approach towards re-training

Some people argued that re-training should be matched against job opportunity. I am in favour of a more broad-based approach.

In a recession, companies are cutting down jobs. There are few job opportunities to match the re-training.

I suggest that the retrenched workers should be allowed to attend training courses that will upgrade their educational level, such as language, mathematics, customer service and IT skills. These skills will be useful in most jobs.

Many of the older workers have low education. It will be a good time to let them catch up on these shortcomings. They can receive a training attendance allowance. It will also create jobs for other people to be instructors.

In many advanced countries, the retrenched workers receive an unemployment benefit without having to attend training. If we do not wish to give this benefit so easily, we can require them to attend re-training, but a more flexible, broad based approach can be adopted. Let them be trained on the skills that are most useful, and not necessarily be tied to a specific job opporunity.

Poll: What type of training courses should a retrench worker attend, to receive a training allowance
Number of replies: 106
A training course tied to a specific job: 17%
Any useful training, including upgrading of education and general skills: 63%
They should receive an unemploymenet benefit that is not tied to training: 16%
No training allowance or unemployment benefit: 2%

Hong Kong banks repay 30 million HK dollars in mini-bond scandal

HONG KONG (AFP) — Hong Kong banks have paid back 30 million Hong Kong dollars (3.9 million US) to investors who said they were missold financial products backed by failed US giant Lehman Brothers, a lawmaker said Wednesday.

About 60 people have so far received compensation from the banks, Democratic Party legislator and lawyer Albert Ho said, in the scandal that has led to protests across the Asian financial hub.
But Ho lamented that the settled cases represented fewer than one percent of the 7,000 cases the party has been handling.

"After more than two months' effort, we have successfully pressured the banks to settle about 60 cases through mediation, allowing the victims to get back the money they earned with their blood and sweat," Ho told AFP.

He added that the investors had managed to get a full refund in some of the cases, but refused to give a breakdown.

"However, this number is very small. Many times, we had to threaten them with lawyers' letters before the banks agreed to settle," he said.

More than 40,000 Hong Kong investors -- including many retirees -- had put a total of 15.7 billion Hong Kong dollars of their savings into mini-bonds and other complex products backed by the investment bank.

Former Wall Street icon Lehman Brothers collapsed in September under mountains of debt, making many of the investments completely worthless.

Ho said other cases may have to use the courts to find a settlement. He added a group of US lawyers will fly to Hong Kong later this month to discuss a proposal for a cross-country lawsuit against the US institutions involved in the handling of the Lehman-backed products.

Meanwhile, two Singaporean residents have become the first to launch a lawsuit in Hong Kong's High Court over the mini-bonds saga, The Standard newspaper reported Wednesday.

In a writ filed on Tuesday, Stephen Tou and Wong Fung-chun sought 9.83 million Hong Kong dollars in compensation from DBS Bank (Hong Kong).

They said they had put almost all their life savings into Lehman-backed structured notes after staff at the bank told them the investment was safe

http://www.google.com/hostednews/afp/article/ALeqM5hZPW-eovXWUnTM9-gEdt5Ex1vsIw

Why we need a minimum wage policy in Singapore

http://theonlinecitizen.com/2008/12/sporeans-and-foreigners-both-paying-the-price/#comments

Free competition in the labour market, without safeguards, will continue to push down wages. With outsourcing of many types of work, the wages of the contract workers have now fallen below the subsidence level. Many family now needs two or three jobs to earn enough to survive.

Many countries solve this problem by introducing a “minimum wage”. I suggest that the minimum wage in Singapore should be SGD 10 an hour. If this wage is applied to cleaners, shop attendants and other low income jobs, there will be sufficient Singaporeans who are keen to accept these jobs - rather than remain unemployed.

We should continue to control the number of foreign workers who are allowed to take these jobs. The employer should be required to provide acceptable standard of accommodation and medical benefits to these worker. This will increase the cost of these foreign workers, and reduce the attraction of their “lower cost”, as compared to local workers. The foreign worker’s levy can continue to be levied.

If we need foreign workers to increase the pool of manpower, let us welcome them as long term immigrants. If they bring their family here, they will have to face the same high cost of living and cannot depress the wages fo local workers. This will be the subject of a separate discussion.

A minimum wage policy may mean that the customers have to pay more for these services. But, the increase may not be as large as feared. The wages of the workers is only one component of total cost. The other components are rental, profit and management salaries. I expect that, in a competitive market, these other components will fall to more reasonable levels, before the charges to the customers are raised.

Some people argued that higher wages will fo force businesses to locate to other countires. This argument does not hold water for the domestic service sector, which will be an important source of employment for the local people.

Anyway, we do not need many businesses in Singapore to create employment for foriegn and local workers who earn below the minimum wage. The large number of foriegn workers working in Singpaore at the depressed wages will create social problems that are not fully realised at this time.

I like to ask for support for a minimum wage policy in Singapore. This is social justice and fairness. It is for the long term good of our society.

Tan Kin Lian

Minimum wage should be $8 per hour
Someone told me that $10 an hour may be too high. He suggested that a minimum wage of $8 per hour may be more acceptable for a start. This gives $1,280 a month for 8 hours X $8 X 20 days = $1280. I agree.

Results of Poll
Poll, "Should a minimum wage policy be implemented in Singapore?"
Number of replies: 173
Yes: 75%
No: 18%
Not sure: 7%

Cheating - as defined in Penal Code of Singapore

Cheating – Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he or she would not do or omit if he or she were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat". For example, A cheats if he intentionally deceives Z into a belief that A means to repay any money that Z may lend to him when A does not intend to repay it, and thereby dishonestly induces Z to lend him money. Cheating is punished with imprisonment of up to one year, or a fine, or both.

Read my article about cheating in The Online Citizen:
http://theonlinecitizen.com/2008/12/stop-cheating/#comment-39083

HK: Lehman losers eye US class action move - press

Representatives of two United States law firms are expected to arrive in Hong Kong soon to establish links with local investors of the failed Lehman-related products in a bid to launch a no-win-no-pay class action in a US court.

Democratic Party lawmaker Albert Ho said yesterday the class action, if launched, would not affect local attempts at mediation, arbitration and buybacks in court cases.

"There is no collective litigation in Hong Kong," Ho said. "Besides, investors will only have to pay the lawyers should they be compensated [because of the no- win-no-pay approach, which is outlawed in Hong Kong]."

He said another major difference was that the US class action would be against the trustees while the Hong Kong cases are against retail banks.

HK: DBS sued over investment losses

10 Dec 2008

A retired couple are suing DBS Bank alleging misrepresentation resulting in the loss of US$1.26 million in their Lehman Brothers-related investments. In a writ filed on Monday in the High Court, Stephen Tou Kwok-woon and his wife, Wong Fung-chun, allege that a bank executive failed to properly advise them about the risks involved in their 2006 and 2007 investments.

SCMP:60 investors get HK$30m from banks on minibonds

http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=I7NBGPBK4P25&linkid=97fb02bf-a16e-487f-9fba-1d13bf14caec&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d

10 Dec 2008
Joyce Man

More than 60 investors in Lehman derivatives have received HK$30 million in compensation with help from the Democratic Party.

The settlements, involving 14 banks, came as a Legislative Council subcommittee that was formed to look into the saga said it would invoke its powers to call witnesses.

“ The range of compensation is very wide,” party member and district councillor Andrew Fung Waikwong said yesterday. “Some of them received full refunds and some even with the interest accrued.”

The party would not disclose the average percentage of the principals the investors received, but chairman Albert Ho Chun-yan said it was high.

Bank of China ( Hong Kong) reached 11 agreements, the largest number. DBS and Nanyang Commercial Bank followed with 10 and nine, respectively.

The other banks were Shanghai Commercial, Dah Sing, Citic Ka Wah, Wing Hang, Wing Lung, Bank of Communications, Citibank, Chong Hing, Fubon, Standard Chartered and Chiyu.

The city’s investors lost billions of dollars on minibonds guaranteed by Lehman Brothers when the US investment bank went bankrupt in September. Minibonds consist of high-risk, credit-linked derivatives marketed as a proxy investment in well-known companies.

Party member and legislator Kam Nai-wai expressed dissatisfaction that the resolved cases represented fewer than 1per cent of the total 7,000 requests – with losses totalling HK$ 4 billion – it received for help. “
Resolutions are going at a snail’s pace and the Monetary Authority is also moving at a snail’s pace,” he said.

Most of the investors were elderly, less educated, had little investment experience and had invested considerable amounts of their savings.

“The banks have told me they will also consider a compassionate factor,” Mr Kam said, citing single parents or people who needed to pay for their children’s education or family medical bills.

Mr Ho said he had no doubt the cases were resolved because the banks knew they had broken sales guidelines.

“All had regulation violations,” he said, adding that in some cases, bank representatives who were not licensed to sell the derivatives explained the investments to clients, and a licensed salesman simply signed the sales documents.

The Legco panel involved decided yesterday to call all its witnesses, as allowed by the law.

It may either compel them to give testimony or invite them on a voluntary basis.

But a legal adviser present said that if a witness declined to provide certain evidence at a subcommittee meeting open to the public, only the panel’s chairman and deputy chairman would have access to the material to decide whether the panel could examine it.
Reply Forward

Mistrust of financial products

Hi Kin Lian,

Read your blog. I have thought about many of the issues in your blog for a long time and having worked as in the banking industry for 20 years, I have been long concerned about the products the banks are pushing out. As I shared, some of the products are so sophisticated and 'well-structured' that even financial professionals have difficulty telling the risks they are taking.

Here ia an example of an option product I came across 8 years ago, which on surface yields a whopping 18% interest. However, this 18% is merely the premium for writing a put option on HSBC shares that my CFO bought from his private banker. If the strike price was reached, his shares would be 'switched out'. Actually, this is when the option would be exercised. I saw the danger of such a product and even plotted a graph to show him that his upside was capped and his losses were unlimited. That kept him sweating for a few months until this option expired. Luckily for him, he got to 'milk' the 18%. I thought the financial institution was the greatest gainer and reaped him off completely!!

Reply: There are many products like this. It is quite common. The financial institution sells an option and takes the exess profit, leaving the investor to take an unlimited loss.

I have for a long time mistrusted banks and regulators to look after my welfare. Never invested in any of those structured deposits or even buy shares. I get saddened whenever I see folks who get trapped into this. Every time my mum brings home a brochure, I told her to dump it. To me, the financial system will fail one day. What are we to do? We certainly cannot put our money under our pillows and in biscuit tins. Surely, there must be more sober and honest institutions in the making that will look after the needs of ordinary people. Do you have any idea what this institution should be like? Can we implement that legally from our own capacity?

Reply: I hope that someone can set up a new institution, similar to the Central Provident Fund, that invest money honestly in the interest of the investors. It is just a low cost mutual fund, similar to an indexed fund.

P

Petition to Town Council - arranged by Gilbert Goh

Hi Friends

There are widespread unhappiness on the way our town councils have invested into toxic instruments. This is not helped by some wayward reporting by our authorities.

I have just posted an online petition for more transparency with regard to our town councils' investment.

http://www.petitiononline.com/tc0502/petition.html

Please support this petition for more transparency with town councils' investment so that we can participate fully together in our nation building.

Please also help to spread this online petition movement if you feel inclined to.

Regds
Gilbert Goh

Election into public office

I have received 716 signatures asking me to stand for election for public office.

The distribution of the replies are:
> Prefer TKL for elected president 26%
> Prefer TKL for member of parliament 14%
> Prefer TKL for both or either 60%

Several people have asked for a new petition form that allows them to leave out some of the particulars. Here is the new form:
http://www.petitiononline.com/TKLFP02/petition.html

Survey results - consumer association for financial services

Results of survey: 154 people replied.

What is a good name for the consumer association for financial services?
FISCA - financial service consumer assocation 66 (42%)
CORE - consumer research and education 39 (25%)
SACRE - Singapore association for consumer research and educaiton 12 (7%)
No need for this association 37 (24%)

Financial Services Consumer Association - Survey

If you wish to serve in the pro-tem committee to set up this association, or to help as a volunteer in some capacity at a future date, or give some suggestions on the work of the association, you can participate in this survey:

http://www.surveymonkey.com/s.aspx?sm=mFi1bCabtn2VHpVrBPRuUA_3d_3d

Giving a fair deal to policyholders

We have to be honest in our dealings with other people. Honesty is to be transparent and fair. We have to give the relevant information to the other party, so that they can make an informed judgement.

Let us look at the opposite value, which is dishonesty or cheating. Cheating is defined as taking advantage of another person, for one’s personal benefit, at the expense of the other person.

Let us look at the example of the sale of life insurance. The policy has a high upfront charge to pay commission to the agent. The commission earned is excessive, compared to the value of the service. The policyyholder pays an average of $2,000 on a typical policy of $100 a month. This high charge is hidden from the policyholder.

It takes about 15 years for the policy to earn sufficient investment income to cover the upfront charge. If the policy is kept longer, it may show a positive return on the premium. The policyholder does not realise that the high charges take away 40% or more of the total investment income. It leaves a poor return to the policyholder, that is insufficient to cover inflation.

The policyhohlder could have inviested in other "fairer" products that have lower charges and give a better return to the customer.

The insurance agent is able to sell the life insurance contract at the high charges, because they are trained to over-sell the value of the insurance contact. It tells the customer about the importance of protecting the family from the financial loss due to the death of the breadwinner.

A more honest way is to advise the policyholder to buy term insurance, where the cost is much lower and affordable.

To prevent the excessive abuse of customers, it is important for a life insurance company to act honestly and to reduce the excessive charges. When I managed an insurance company, I observe this principle and reduce the expenses to give better value to the customers. After my departure, this organisation has increased its expenses tremendously.

In many countries, the authority sets limits to these charges, to prevent abuse of the public. In Singapore, there are no limits, so long as the commission is disclosed. Unfortunately, this approach does not work, as the public is not informed about it.

Salaries of CEOs of Motor Companies

Sent to me by AT

According to Equilar Inc., an executive compensation research and data provider, the annual compensation of the following CEOs (in USD) were:

President of Toyota: $1 million
CEO of General Motor (Wagoner: $15.7 million
CEO of Ford Motor (Mulally): $22.8 million,

What’s missing is a formula for determining what is a fair salary. I suggest using 365 times 12 hours per day = hours that an executive works as the basis for an hourly rate to be paid. This gives executives the premise that they work 12 hour days, 365 days per year. hat works out to 4,380 per year. Then determine what a “reasonable” pay per hour is.

The claim that outsize income packages are necessary to retain talent is unproven be the GM fiasco. Mr. Waggoners pay package of around $15,000,000 works out to be $3, 425 PER HOUR. And what did the company get for this - leadership into insolvency?

Using the above formula, Toyota’s president earned under $230/hour and look at the great job he’s done. Did Mr. Waggoner do 20 times as well as Toyota? I leave that to the reader.

Association to educate consumers on financial service

Several people have asked me to form an association to educate consumers and help them to identify and buy financial and insurance products that are of good value. This will reduce their exposure to bad products such as the credit linked notes and high cost life insurance products.

Is there a need for such an association? What name is suitable for this association? Please take part in the poll on the right panel.

SCMP:Gripes about banks double, but over what?

http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=MMFLFJ67IQQ4&linkid=69b75443-86a5-4375-81d5-442df893c00f&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d

7 Dec 2008
Nick Gentle

In the first 10 months of this year, complaints about banks reached more than double the figure for the whole of 2007 – and that is excluding the 10,000 complaints about their sale of minibonds that lost their value when Lehman Brothers collapsed.

While the Hong Kong Monetary Authority agreed to release the figures – 1,050 up to October 31 against 469 last year – it would not say which banks were the subjects of the complaints, nor what complaints were about.

The HKMA claims it is bound by the Banking Ordinance to keep that information secret.

However, commentators question whether withholding such information is in the public interest. David Webb, a campaigner for better corporate governance, said consumers were entitled to know whether financialservices providers were being complained about regularly.

“ Information is the lifeblood of free markets, and enabling investors and depositors to make informed choices is a good thing,” Mr Webb said. “ I think the HKMA should be much more transparent about its complaints and enforcement activities.

“I see no reason why the HKMA should not publish complaint statistics on a per-institution basis.”

To make sure larger institutions are not unfairly over-represented, the authority could state the figures as a percentage of a bank’s unique account holders.

Mr Webb noted that the Securities and Futures Commission, which regulates stockbrokers and listed companies, regularly published reports on enforcement action it has taken and complaints it has received.

“The HKMA’s traditional reason for not publicising disciplinary action has been that it might undermine confidence in the banks concerned. My response would be: ‘So what? It should’.”

An HKMA spokesman said the authority investigated all complaints to decide whether and how they could be taken further.

“Upon receipt of a written complaint, we will examine it and the written response from the bank concerned,” the spokesman said. “Our focus is on whether the bank’s complainthandling procedures are working properly.

“Should there be concerns about the bank’s handling of the complaint, we will refer the complaint to the bank for reinvestigation and a further reply to the complainant.”

If complaints related to breaches of the Banking Code of Practice, the HKMA would work with banks to address any issues, the spokesman said.
“ The HKMA has a supervisory interest in cases where a bank may have acted in a way that is improper or imprudent,” he said. “The HKMA will pursue these issues … and where necessary, require remedial action to be taken by the bank.”

But Civic Party lawmaker Ronny Tong Ka-wah, who has tabled a Legislative Council resolution asking the government to review the regulatory regime, said keeping issues between the regulator and the bank might not be in the public interest.

“ At the very least we should be able to see a breakdown of the nature of the complaints,” he said. “Otherwise, how are consumers going to know what they should be looking for and can expect in terms of service?”

Dealing with an adviser - what to look out for

The adviser is required to disclose to you about the charges, when you buy a life insurance policy. Read the answer to Q8 in this FAQ. Read the rest of this FAQ:

http://www.moneysense.gov.sg/publications/guides_publications/Consumer_Portal_FAAGuide.html

Q8: What information is a FA representative required to disclose to me when recommending an investment product?

A: When recommending a unit trust or life insurance policy, a FA representative is required to disclose to you the key features of the product including the following:

1. Nature and aim of the product Whether the product is a life insurance policy or a unit trust, and whether it is meant for protection, savings or investment.
2. Benefits of the productInformation on the amount and timing for payment of benefits and whether the benefits are guaranteed or non-guaranteed.
3. Risks of the productDetails of the risk factors that may result in the benefits payable being less than the illustrated values (for a life insurance policy), and the risks stated in the prospectus or profile statement (for a unit trust).
4. Details of the product providerThe business address and permitted activities of the product provider, and the relationship between the product provider and the FA.
5. Fees and charges to be borne by youDetails of the amount and nature of fees and charges to be paid by you, and the frequency of payment.

The Online Citizen celebrates its second anniversary

The Online Citizen celebrates its second anniversary. Visit this website for the speeches on "Social Justice and Fairness". It also contains an update of the class action for the minibonds and credit linked notes.

http://theonlinecitizen.com/2008/12/toc-celebrates-its-2nd-year-anniversary/
http://theonlinecitizen.com/2008/12/toc-raised-social-issues-for-people-at-2nd-anniversary/

Six months ago, TOC has an average of 3,000 visitors a day. Today, it has an average of 15,000 visitors a day - a five fold increase. TOC is the work of about 60 volunteers - young and not so young. I write a article weekly for TOC.

Congratulations to TOC. It is becoming an important source of alternative news and views about Singapore.

http://theonlinecitizen.com/

Adviser is required to disclose and explain the charge

Dear Mr. Tan

I wanted to terminate my ID2 and was told that I have to pay a charge of 15% of the premium for 5 years, making a total of 75%. I was not aware of this charge, which was not disclosed to me by the adviser. Is it true that I have to pay this charge? Is it a fair charge?

REPLY
During my time, I recall that the charge for ID2 is 15% for 3 years only. The total of 45% was much lower than an average of 150% charged in the market. I was not aware that the charge has been increased to 15% for 5 years. You can check with the adviser.

If you have not been informed by the adviser about the charge at the time that you bought the policy, you can lodge a complaint with MAS. The adviser is required to disclose and explain the charge to you, as set out in A5 of Q8 in this attached document from MAS:

http://www.moneysense.gov.sg/publications/guides_publications/Consumer_Portal_FAAGuide.html

Offer of 30% compensation

Two investors met me at Speaker's Corner yesterday. They received offer from their distributor (stockbroker) of 30% compensation and are given a deadline to accept it. They asked for my advice.

My view is that a fair compensation is 50%. If the distributor offers 50%, you should accept it.

For the 30% offer, I suggest that you let it lapse and wait for a better offer. If you wait until February, the prospect of the class action may be clearer. At that time, your option will be clearer.

However, if you are willing to take 30% and call it quits, you should decide on your own. It is better than nothing.

The CDO time-bomb

The CDO timebomb – how it works and why it could sink or save the world economy
Wednesday, 19 November 2008
Alan Kohler

http://www.smartcompany.com.au/Free-Articles/The-Briefing/20081119-The-CDO-timebomb--how-it-works-and-why-it-could-sink-or-save-the-world-economy-Kohler.html

Extracts:
.... the bankers who created the synthetic CDOs knew exactly what they were doing. These were not simply investment products created out of thin air and designed to give their sales people something from which to earn fees – although they were that too.

They were specifically designed to protect the banks against default by the most leveraged companies in the world. And of course the banks knew better than anyone else who they were.

As one part of the bank was furiously selling loans to these companies, another part was furiously selling insurance contracts against them defaulting, to unsuspecting investors who were actually a bit like “Lloyds names” – the 1500 or so individuals who back the London reinsurance giant.

Except in this case very few of the “names” knew what they were buying. And nobody has any idea how many were sold, or with what total face value.

Spare a though for the foreign workers in Singapore

Read this story:
http://www.yawningbread.org/arch_2008/yax-962.htm

Two sources of loss on your investment

Hi Mr. Tan,

I was surfing the internet and came across your website. Recently, I feel very depressed becuase I realised I was conned by my own advisor who is also a friend of mine. I trusted her too much. I bought a few policies with her. Due to the bad market situation, I lost $X (my hard-earned money) for investing in unit trusts.

I would like to check with you on what I should do. The following is what i bought from her in 2006/2007:

(details deleted)

For the whole life policy, I have to pay 18 months of premiums to pay for her service. I really didn't know that till I clicked on the Askdrmoney link on your website.

For the pure unit trust with no insurance. I put in $1800 to try to average out the prices of my unit prices due to recession. I'm paying 3% for the comission. Now my unit trusts dropped from $Y to $Z. I feel stupid for paying 3% commission. So I terminated the monthly contribution of $1,800. Have i done the right thing?

After reading your website, i realised my agent really earning a lot. She can go for holiday every year. e.g. she just came back from California. As for me, I saved every single cent of my money...

I feel so frustrated that I really feel like terminating every single policy that i bought fr her. Should I do that?

D

REPLY

The loss that you have incurred come from the following sources:

a) Paper loss on your investments, due to the fall in the market
b) Loss due to the expenses charges deducted from your life insurance policies.

For (a), you will recover the paper loss when the market recovers in a few years' time. As a long term investor, you can wait for a better time to realise your investment.

For (b), you have already incurred the expense charges in the past. You should consider if the future expense charges compared to the alternative types of investments. If most of the charges have already been deducted, it is better to keep the investments and look towards the future. If there are still heavy charges to be deducted from the future, you can terminate the policies.

You should make your decision after getting the relevant facts.

If you need independent financial advice and is willing to pay a modest fee, you can consult the following:
http://tankinlian.blogspot.com/2008/12/financial-advice-for-fee.html

HK: Minibond investors to sue HSBC

http://www.thestandard.com.hk/breaking_news_detail.asp?id=10620

Lehman Brothers minibond investors plan to sue the minibond trustee, US-incorporated HSBC (0005), after Hong Kong banks postponed buying back the structured products.

Peter Chan Kwong-yue, chairman of investors action group Allied Victims of Lehman Products, said the action group has been approached by US legal firm offering to represent minibond investors in Hong Kong filing the lawsuit.

Meanwhile, the Hong Kong Monetary Authority has received 19,196 complaints concerning minibonds as at Thurday. HKMA today referred 21 complaints of alleged misconduct tied to Lehman Brothers financial products to the Securities and Futures Commission for possible action.

SCMP:Class- action lawsuit over minibonds to start soon

http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=TPKF3AERZ3I8&linkid=0b57f4e1-cc3d-4a34-9d09-8612bf7d989c&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d

6 Dec 2008
Dennis Eng and Albert Wong

A US class-action lawsuit by local investors in soured minibonds is expected to start by the end of next month, paving the way for a protracted legal battle that could drag on for two years, a spokesman for the investors said.

“We really don’t want to do this but we have no other option. We’re not going to give up,” Peter Chan Kwong-yue, chairman of investor action group Alliance of Lehman Brothers Victims, said. Investors bought minibonds, issued or guaranteed by Lehman Brothers, from one or more of 16 local banks.

The move is seen as a last-ditch effort by angry investors to recover almost HK$13 billion from the bankrupt Wall Street giant after a proposed buy-back of the minibonds suffered a setback. Secretary for Financial

Services and the Treasury Chan Ka-keung said a legal challenge by lawyers representing Lehman’s liquidators would inevitably delay the buy-back timetable.

Details of the buy-back were supposed to be announced last week. “I think what the liquidators were doing was to ask the trustee to stop any actions regarding the collaterals,” he said, referring to the minibonds’ underlying assets.

Minibonds consist of high-risk, credit-linked derivatives that are marketed as a proxy investment in well-known companies.

“This, of course, will throw some challenges into the process of the buy-back, and the banks have to address these before they can proceed.”

Hong Kong Association of Banks chairman He Guangbei said the priority now was to try to clarify the legality of the buy-back and resolve the legal challenge. The buy-back was conceived under British law but the trustee, HSBC Bank USA, was incorporated under United States law, complicating the matter.

“There is a conflict in legal opinion from the US and UK,” Mr He said. “ According to UK law, there’s certainly a priority in terms of payments but there is this challenge from the US bankruptcy law. Which one is going to stand is very hard to say.”

The government said it had considered the legal risks when it proposed the buy-back to banks in October. It said the taskforce formed by the banks on the issue had clearly stated it was seeking legal advice and “we hope [it] will continue to follow up with the trustees of the Lehman minibonds in taking necessary actions to get back the market value of the minibonds”.

The class-action lawsuit will automatically cover the roughly 33,000 Lehman minibond investors in Hong Kong although they can opt out. US lawyers contacted Peter Chan as well as the Democratic Party about the possibility of a US class-action lawsuit. An agreement is still pending.

Peter Chan declined to identify the US lawyers but said they were involved in helping investors affected by the collapse of energy trader Enron in late 2001. Law firm Coughlin Stoia Geller Rudman & Robbins helped Enron investors settle for US$ 7.2 billion and negotiated a record US$688 million in fees.

The prospect of a drawn-out lawsuit is increasingly likely after banking sector legislator David Li Kwokpo, the chairman of Bank of East Asia, said lawyers advised against the buyback.

But Democratic Party legislator James To Kun-sun said he hoped the government would not give up on the buy-back proposal.

Since October 17, the Hong Kong Monetary Authority has referred 207 Lehman-related cases to the Securities and Futures Commission.

MAS seeks advice from senior counsel

By: FRANCIS CHAN, Straits Times

THE Monetary Authority of Singapore (MAS) has enlisted senior counsel Davinder Singh to advise it on the latest legal issues faced by the ill-fated Minibonds structured notes.

The central bank said last night that it had called on Mr Singh, the chief executive of Drew & Napier, "to advise MAS on the implications of the legal issues raised by the lawyers acting in the Chapter 11 proceedings for Lehman Brothers".

This follows Tuesday's warning by the Minibonds trustee – HSBC Institutional Trust Services Singapore – that the unwinding of the notes may be challenged by lawyers involved in bankruptcy proceedings over Lehman in the United States.

Minibonds series 1 and 5 to 10 of the notes have defaulted and will be unwound by three appointed receivers of the defaulted notes from PricewaterhouseCoopers (PwC) Singapore.

On Tuesday, the receivers said investors might have to wait at least two years or more for any resolution, given the legal complexities introduced by the notice from Lehman's lawyers.

MAS last month also called on Deloitte & Touche Corporate Finance to advise the central bank on the

Minibonds fiasco. Deloitte & Touche's services have also now been extended.

While the MAS has Mr Singh and the resources of Deloitte & Touche, the receivers from PwC are separately being advised by their own legal counsel.

Last night, the MAS also reiterated the trustee and receivers' warning that it may not be possible for any resolution to be reached within a short span of time.

"Nevertheless, MAS expects the trustee and receivers to pursue all appropriate avenues to protect noteholders' interests," it added.

About 8,000 retail investors sank $375 million in Minibonds – only to see Lehman collapse on Sept 15.

Three other independent parties have been roped in by the MAS to ensure that the plight of these investors is not ignored amid potential cross-border legal battles.

On Oct 2, Mr Gerard Ee, Mr Hwang Soo Jin and Mr Law Song Keng were appointed by distributors of structured products such as Minibonds, Merrill Lynch Jubilee Series 3LinkEarner Notes and DBS High Notes 5 to oversee their complaints handling processes.

All three said they were working closely with the financial institutions to ensure fair and prompt resolution of complaints by investors.

REPLY
I hope that MAS will also ask Mr. Davinder Singh to see if there were any wrong doing committed by Lehman Brothers in the creation of these products. Did they breach the requirements of the Securities & Futures Act to provide relevant information on the product for the investors to make a proper assessment, or were any material information omitted?

Auction Rate Securities

Extract from New York Times:
http://www.nytimes.com/2008/11/30/business/30gret.html?_r=1&pagewanted=print

Auction-rate securities are preferred shares or debt instruments with rates that reset regularly, usually every week, in auctions overseen by the brokerage firms that originally sold them. They have long-term maturities or, in the case of the preferred shares, no maturity dates at all. The securities are issued by municipalities, student-loan companies, closed-end funds and tax-exempt institutions like hospitals and museums.

Brokers that peddled these securities told buyers that they were cash equivalents, easy to get out of and relatively safe. But the promises of liquidity turned false last February when buyers for the securities disappeared and the auctions began failing. The $300 billion market for auction-rates ground to a halt, entrapping thousands of investors both large and small, sophisticated and novice.

Officials in Massachusetts, New York and other states came to the rescue earlier this year, striking settlements with some of the bigger brokerage firms in the arena.

But while some of the larger firms agreed to redeem the securities, not everyone is covered by those agreements. A group of people, size unknown, has fallen through the cracks in the settlements, and for several quirky reasons. They remain frozen in the securities and understandably upset.

China stimulates its economy

China's inland provinces need infrastructure, and Beijing has announced a stimulus package of four trillion yuan (S$889 billion) by 2010. China is extending its railway network, rebuilding earthquake-damaged areas in Sichuan, increasing export tax rebates, lending more to small and medium-sized enterprises and spending more on social welfare systems.

To revive the housing market, it is reducing taxes on housing transactions and unwinding property- tightening measures introduced earlier to counter speculation. For first-time home buyers, the minimum down payment has been reduced from 30 per cent to 20 per cent, and banks are allowed to offer interest rates as low as 70 per cent of the standard lending rates for such mortgages. The demand for residential housing remains strong, and China's construction companies are capable of meeting it.

Personal consumption in China should be encouraged; it is only 35 per cent of gross domestic product (GDP), compared with America's 70 per cent. Beijing is introducing rural land reforms, increasing government funding for low-price housing and basic medical services, and reducing interest rates in order to boost domestic consumption. China is determined to grow by at least 8 per cent, to create enough jobs to sidestep large-scale unemployment and social unrest.

Class action - update as at 4 Dec 2008

I wish to give an update to the notebolders (i.e. the investors of the credit linked notes).

1. About 200 notebolders have appointed a specific lawyer to act in the class action. I am meeting this lawyer to discuss his approach and the possibility of involving an experienced senior lawyer to fight the case in the high court.

2. A separate group of noteholders have approached several lawyers. They advised that a "test case" be used to take a case in high court. This group is likely to recommend a lawyer and to present the proposal to the noteholders in January 2009.

3. I have approached two senior lawyers to study the possible defects in the prospectus and pricing statement and to obtain an opinion from a Queens Counsel from the UK. A recommendation is likely to be made in January.

http://tankinlian.blogspot.com/2008/12/legal-action-against-issuers-and.html

I hope that the investors will wait until February to decide on the strategy for the class action. It may be possible for two or three class actions to be pursued separately for the differtent types of notes.

SCMP:Illiterate minibond investor files writ

http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=GBJR3WVK97T5&linkid=c62f11e3-4682-4992-b33c-9bc37feea64e&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d

4 Dec 2008
Yvonne Tsui, Eva Wu and Dennis Eng

A fisherman is suing the Bank of China for the return of HK$800,000 he invested with Lehman Brothers, alleging he was deceived because he is illiterate.

Lai Kam-fook, who filed a writ in the District Court on Tuesday, is taking legal action after he was told in September that his money was affected by the collapse of the American bank.

The writ alleges he and his wife were advised by a staff member at the bank’s Aberdeen branch in August 2004 to make a risk-free, five-year deposit with a higher interest rate. It says he had deposited HK$800,000.

It alleges Mr Lai had never received or read any documentation from the bank.

“Because the staff member, surnamed Leung, told me it was a fiveyear deposit, I believed her. I did not read anything. It is useless to have read anything because I am illiterate anyway,” Mr Lai stated in the writ.

“To conclude, the total sum I had invested is HK$800,000. My allegation is: the bank cheated me because I am illiterate.”

However, HSBC Hong Kong received a cease-and-desist order last week from Weil, Gotshal & Manges, Lehman’s bankruptcy counsel. This notice means the minibonds cannot be liquidated, which would be necessary to go ahead with a buy-back. Democrat Kam Nai-wai, however, said the best option remained the banks buying back the bonds.

As an alternative, six lawmakers suggested that a redemption fund of HK$20 billion, including HK$10 billion from the government, be established.

However, the Secretary for Financial Services and the Treasury, Chan Ka-keung, said public funds should not be used to compensate investors’ losses.

Minibonds are not corporate bonds, but consist of high-risk, credit-linked derivatives that were marketed as proxy investments in well-known companies.

Persist in our efforts

The officials in MAS spent the past month to find a new swap counterparty to replace Lehman Brothers. They are not able to find a new arrangement, in spite of the highly qualified, well paid people and regulatory power available in their hands.

I work with a handful of volunteers to help the noteholders (i.e. the "investors" who bought the credit linked notes) to get a fair compensation. These volunteers have to work on their full time job, and find some free time to devote to this task. Our request for information and meetings from the financial insitutions and with the regulator are usually ignored.

In spite of the great obstacles, we will persist in our fight for justice and fairness. I hope that, one day, our efforts will be rewarded.

http://forums.delphiforums.com/n/mb/message.asp?webtag=3in1kopitiam&msg=2907.1

Hong Kong: Can the SFC avoid a knee-jerk response?

http://www.asianinvestor.net/article.aspx?CIaNID=90380

By Jame DiBiasio 4 December 2008

CEO Martin Wheatley explains the Hong Kong securities regulator’s strategy for dealing with the Lehman Minibond fallout.

Martin Wheatley, CEO of the Hong Kong Securities and Futures Commission, says the SFC and other securities regulators around the world are trying to understand how so many retail investors became exposed to complex financial products, to the extent that blow-ups of Icelandic banks could cause serious losses to moms and pops in Hong Kong.

He spoke yesterday at a conference organised by AsianInvestor on the future of fund management, on a panel session regarding regulation that also included a fund management regulatory lobbyist and a tax specialist. James Walker, a partner at Clifford Chance, moderated the discussion.

Wheatley says investors around the world have lost money on complex structured products backed by Lehman Brothers (of which the Minibonds are a branded product line) or through other credit-derivative exposures. Since the investment bank went under in September, the entire spectrum of financial products has been tarnished.

This has led the SFC to realise the extent to which investors have been sold such complex instruments; and the extent to which selling agents didn’t understand the risks in these products. Things like counterparty and credit risks must be explained, he concludes.

Right now the SFC is investigating the process that has taken the industry to this point, to understand whether issuers and distributors are guilty of mis-selling, and whether they are competent at understanding and explaining the risks of such products.

Second, the SFC is trying to determine what the financial-products regime must look like. This includes macro structural issues, such as which government agencies are responsible for approving and overseeing such products or sales; as well as micro ideas such as a cooling-off period for prospective buyers, or the process used by sales channels to appraise product suitability.

The SFC is consulting with other securities regulators to develop a response to issues such as short selling, regulating credit-default swaps and oversight of unregulated entities. But market players recognise the difficulty in getting a standard response.

Catherine Simmons, vice-president for regulatory and government relations at State Street Bank and Trust, says local political agendas will shape each market’s response.

Asian governments lack a centralised policy coordination platform, let alone a single monetary policy structure, unlike Europe. Its financial systems vary. So while they all face the issue of fallout from investor exposure to complex credit products, their responses are not uniform.

For example, many regional governments have guaranteed bank deposits, but these measures vary by time horizon, and what assets are covered – those of foreign depositors or just locals; individuals or corporations; local currency or foreign exchange; and whether such protection incurs a fee.

“Businesses must continue to monitor regulatory change – and to engage with regulators,” Simmons says.

Accounting issues are also in flux, particularly as more investors and fund managers question the wisdom of marking assets to market. But Florence Yip, partner for tax services at PricewaterhouseCooper, says the Lehman bankruptcy will accelerate global moves to accept International Financial Reporting Standards. This will impact tax laws, which in turn will affect revenues on investments and fund products.

“Fund management companies need to understand the impact of uncertainty in tax rules on their businesses,” she says.

The SFC will submit its ideas to the Hong Kong government by the end of the year, and the financial secretary’s office is expected to recommend specific actions by mid-2009. “I hope by that time the finance industry has returned to something close to normal,” Wheatley says.

Wheatley’s overriding philosophy is to avoid knee-jerk reactions, mainly by focusing on the necessary information to be disclosed to investors, rather than micromanaging questions of product suitability. “Markets hate sudden change,” he says, citing moves by other governments to ban short selling. “We’ve tried to stay on an even keel.”

He says the focus of the SFC’s investigation will be on disclosure of structured products, particularly when they offer capital protection. Product structure determines under which regulator it is manufactured and sold, and the SFC is aware of the problems of this uneven playing field. It is also aware that current standards of disclosure have created documentation so dense that clients don’t bother to read it, and are overly reliant on tips from distributors.

SCMP:Lehman investors turn to US government

http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=Q4YPBJJ055D7&linkid=dedc89da-260c-411d-85be-9ca8bc4b31e3&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d

3 December 2008
Paggie Leung

About 50 investors who bought Lehman Brothers-related products through Citibank marched to the American consulate yesterday to request an investigation into alleged mis-selling by the American bank.

The investors, who lost money after Lehman collapsed, petitioned the consulate, asking the American government to investigate Citibank's sales procedures.

"The US government recently injected so much money into Citi and has become the bank's key shareholder. Therefore, it should look into the matter," said Hui Shun-ngai, a representative of the group. The American government last week guaranteed US$306 billion of Citigroup's troubled assets and extended it US$20 billion in cash.

"The US government must also inquire into Citibank's authorised representatives responsible for the incident, including the tolerance of Citibank's mis-selling practices and lack of governance resulting in financial losses to Citibank's victims," the petition said.

Mr Hui said each protester had bought at least HK$500,000 in Lehman Brothers credit-linked derivatives from Citibank and they had not been informed of the high risk.

Meanwhile, 10 more investors filed lawsuits with the Small Claims Tribunal against six banks yesterday: Bank of China, Bank of Communications, Bank of East Asia, DBS, Wing Hang and Nanyang Commercial Bank. Their cases will be heard on January 29.

Financial Advice for a Fee

The following financial adviser firm is willing to give advice for a fee, based on an hourly rate of $100 or $150 per hour. They will also give an estimate in advance for a particular type of advice.
An outline of their approach is stated here:
http://www.tankinlian.com/forms/providend.pdf

I have listed Providend as they agreed to offer their service at a modest rate, and also to provide an estimate in advance. I do not have any financial interest in Providend.

There are a few financial advisory firms willing to offer their service for a fee, but their charges are rather high. If they are willing to operate on my preferred fee structure, I shall list them as well.

Read this:
http://tankinlian.blogspot.com/2008/11/end-of-free-financial-advice.html

Minibond investor keen to take class action

Dear Mr. Tan,
Our hopes are dashed by the most recent announcement on the minibond issue. I guess most of the investors are devastated now.

Unfortunately, there is no way out now except for the class action. I believe that is the most effective and most direct way in approaching this issue. We consumers need to know the truth, whatever the outcome is. Please lead us into this!

RZ

REPLY
Please read my blog about the progress of the class action. It will take some time to get organised. I expect to give a recommendation towards end January on the course of action to take.

http://tankinlian.blogspot.com/2008/12/legal-action-against-issuers-and.html

Speaker's Corner 6 December, 5 - 7 pm

Speakers' Corner: 6 December, 5-7 pm.

Social Justice and Fairness
First World Country in the 21st Century
How are our poor faring?

Speeches:
Tan Kin Lian
1. Our society should be more egalitarian
2, Elected leaders should represent the people
Leong Sze Hian:
1. HDB – how the poor are faring and affected by HDB policies
Ravi Philemon
1. Distributive justice; especially about how our education system does not equip people to be self-reliant, but to be workers.
Others:
1. Tan Kin Lian – Update on investors' situation (if any)
2. Andrew Loh – Update on town councils' replies to residents' query

Mr. Brown show on TC investments

http://www.mrbrownshow.com/2008/12/01/the-mrbrown-show-town-council-investment-bank-of-singapore/

Washing dirty linen in public

"The convention which framed the Constitution of the United States was composed of fifty-five members. A majority were lawyers not one farmer, mechanic or laborer. Forty owned Revolutionary Scrip. Fourteen were land speculators. Twenty-four were money-lenders. Eleven were merchants. Fifteen were slave-holders. They made a Constitution to protect the rights of property and not the rights of man": Senator Richard Pettigrew - Triumphant Plutocracy (1922)

Contributed by Ho Cheow Seng

Why we need to educate the people

"Enlighten the people generally, and tyranny and oppressions of body and mind will vanish like the evil spirits at the dawn of day." -- Thomas Jefferson, letter to Pierre S. du Pont de Nemours, 24 April 1816

Contributed by Ho Cheow Seng

David Marshall in 1994

Dear Mr. Tan,
Please post this story. Thanks.
tkh

DAVID MARSHALL SAID IN 1994
I've got nothing against money. I'd like to have money myself! I'd like to have a house and a garden and dogs and a car and a chauffeur but, look, I've got a flat. I've got a swimming pool attached to the flat. I've not even got a car but I use taxis. I have a dignified way of life without being wealthy.

I don't see the necessity of owning a Mercedes-Benz and a swimming pool and a couple of mistresses. I think we've got our values all wrong.

You know $96,000 a month for a Prime Minister and $60,000 a month for a minister. What the hell do you do with all that money? You can't eat it! What do you do with it? Your children don't need all that money.

My children have had the best of education. In fact, I'm very proud of them. One of them is a senior registrar to two major hospitals in Oxford. Another of them is a consultant in European law to the Securities and Investment Board in the United Kingdom. They've had their education. There are no complaints.

I never earned $60,000 a month or $90,000 a month. When I was Chief Minister, I earned $8,000 a month. Look, what is happening today is we are encouraged to and are becoming worshippers of the Golden Calf.

We have lost sight of the joy and excitement of public service, helping our fellow men. The joy and excitement of seeking and understanding of the joy of the miracle of the living the duty and the grandeur. We have lost taste for heroic action in the service of our people.

We have become good bourgeois seeking comfort, security. It's like seeking a crystal coffin and being fed by intravenous injections through pipes in the crystal coffin; crystal coffins stuck with certificates of your pragmatic abilities.

Suffering from depression and mental illness

Mr. Tan.

First of all, I would like to thank you for helping all the helpless victims to voice up. Till now, no MPs have really initiated to try to help. I believe majority of the MPs also knew that this is a clear cut misled case but dare not bring up in the Parliament because they afraid that their rice bowl may get broken.

“Yes” man is “Safe” man. Do we want to have such leaders? I was at the Speakers corner yesterday. I spoke to some of the victims who had seen their MPs. They told me that they were again lectured by their MPs “you went in with your eyes open”.

My dear MPs and Minister, you are leaders with high profile. Please go through the brochure and prospectus and honestly tell the public whether you understand such complicated product with hidden toxic ingredients for every item. Oh! Sorry, maybe, you don’t have to read it since you are rich enough to get your lawyer to go through for you.

Please also do a survey. Get the graduates who have never invested to look at the brochure and prospectus whether they understand every single item. I suggest that our government should also get the RC members to go through and get them to feedback whether if they understand.

All the while, I have full faith in our Singapore government. Just like the China milk products case where it contains melamine that killed many lives, immediate action was taken. However, for such case, our government may think that immediate action is not required because it will not cause live and death and can take their time to resolve the issue. They have oversight the consequences and seriousness.

Many Singaporeans were already suffering from depression and mental illnesses due to sleepless night as all their life (coffin) saving is already gone. Mind them, waiting to die is worse then immediate death.

Even the financial experts already said the products are too complicated and it should not be sold. The toxins are all hidden in the ingredients. I believe MAS should also agree with it now. To my conclusion, I believe MAS is also under pressure and have not guts to admit their overlooking and allowing of such complicated toxic product to be sold in by the FIs in Singapore.

T

Investors compensated in Belgium?

Hi Kin Lian,

I'm a former lawyer from Singapore now residing in Brussels. I have closely followed the activities with regards to the Lehman Brothers saga in Singapore. I have attached an article from a news site in Belgium with regards to this matter to demonstrate how this matter is being handled over here. Keep up the good work.

Video link:
http://www.deredactie.be/cm/de.redactie.english/mediatheek_en/1.425647

Sat 29/11/08
Angry clients of Citibank and Deutsche Bank demonstrated in Brussels this afternoon. They first marched to the headquarters of Deutsche Bank in Brussels, and then to Citibank. The demonstrators are demanding compensation for the money they lost due to the bankruptcy of the American Lehman Brothers.

According to the Citibank and Deutsche Bank clients they had not been aware that there was a risk for their money as well when Lehman Brothers went bust. Apparently Citibank and Deutsche bank sold investments to their clients that were managed by Lehman Brothers. The clients say they were not informed of the risk. When the American bank went bankrupt, Belgian clients also lost their money. They want Deutsche Bank and Citibank to reimburse their loss in full. The pressure on Deutsche Bank and Citibank is rising especially because a number of other banks who had sold their clients Lehman Brothers investments such as Fortis, Ethias and Swiss Life have guaranteed the capital of their clients. In the meantime Deutsche Bank has said that there will be compensation for clients whose portfolios were composed largely of investments with Lehman Brothers.

A delegation of the demonstrators was received by Economy Minister Vincent Van Quickenborne. His inspection team also suspects deceit. Minister Van Quixkznborne: "Misleading advertising violates legislation on trade practices. The question is whether the people, when they bought these products, if they were properly informed about the possible risks.

There was talk of capital guarantee- 100% and it then it turned out that
1) it was a product that was not from the same bank they bought it from; and
2) afterwards it also turned out to be a bank that was vulnerable to problems."

Seek help from embassies

Dear Mr. Tan KL,

You have been advising the victims to seek the help of their respective MPs, but this is more suitable for citizens only. I doubt these MPs would bother about PRs/non-citizens when they are so indifferent towards their own citizens. Perhaps the non-citizens could try to seek the help from their respective embassy.

I'm really disappointed with the way X bank is handling the claims, very unfair, indifferent and high handed.

Things would be very different if it happens in M'sia. The press and the MPs, particularly the opposition will be assisting the helpless victims. The Malaysians just like the HK, Thais and Indonesia or even Filipino will fight for their rights and will not allow banks to cheat them of even RM$1 k not to mention S$100k!

Two months have passed and the banks and MAS are still so indifferent and ignore the plight and traumatic experience of the victims who have lost their hard-earned savings. It is sad that there is no compassion shown and instead abuses have been hurled at the helpless victims.

Notwithstanding the indifference shown by the relevant parties concerned and despite criticism and sarcastic remarks, you have out of compassion come out to do the right thing in helping the helpless victims, a true hero indeed.

I notice that some of the victims have lost faith, stamina after the heartless standard rejection letters. Please tell them not to give up and be more resilient and fight for your rights until they do the right thing i.e. compensate the victims their hard-earned savings of which they have been cheated!

tkh

Consumer speak against Opt Out Sales Tactics

Dear Mr. Tan,

I like to tell you about my personal experience concerning the practice of opt-out Sales Tactics.

Recently, I upgraded my mobile hand-phone with a leading local telecommunication provider.
I have been a loyal customer of this provider for more than 12 years and have been upgrading my phones at each regular cycle of 2 years.

This time round, I noticed that since the upgrading I have been receiving a barrage of SMS such as Gaming results, CNA news flash , ringtones etc.

After this recent financial fiasco, of which I am a victim of the MiniBond mis-selling, I am more wiser and call up the Service Provider hotline representative.

I was told these SMS messages form part of the upgrading contractual package and will be charged at $xxx after the 30th day from purchased date, unless I opt-out during this period.

Further, I was told by this representative that the Provider shop sales person has made this fact known to me during the sales. It was not made known to me ! Of course like the MInibond, I was made to sign some documents, which was quit routine like the previous upgrading I had.

I like to draw some parallel in this episode to the MiniBond selling procedure. Sales people did not disclosed all hidden costs and risks to their customer but only emphasis the unique selling point.

Mr Tan, I Fully support your efforts in educating the public and getting the authorities to review and investigate into the current selling procedures of these Institutions. These Institutions have become more profit focus and lose touch with their loyal customers (we placed too much trust in them) over the years.

In the name of efficiency, Institutions seems to heading this path of “Express Sales “ with fine prints embedded in the contract. Some Day our Life may also be opt-out !

Martho2008

REPLY
I suggest that you bring this matter to the Consumer Association of Singapore , www.case.org.sg. They will be able to act on this matter more effecitively than me.

Thoughts for the Day - Ho Cheow Seng

The form of law which I propose would be as follows: In a state which is desirous of being saved from the greatest of all plagues -- not faction, but rather distraction -- there should exist among the citizens neither extreme poverty nor, again, excessive wealth, for both are productive of great evil . . . Now the legislator should determine what is to be the limit of poverty or of wealth.": Plato (427-347 B.C.):

By 'distraction' Plato means that the 'citizens' are seduced by matters of no real importance so as to lose focus on issues that are crucial to their real well-being.

Appeal to the President of Singapore

Dear Mr. Tan,

The government is also not supportive to the investors, even sacrifice the Town Councils $16 millions. Shall we appeal to The President of Singapore?

We conduct another petition which include the age of the investors, the amount invested and also the % of the investment compare to all their saving. To include the age is to let every Singaporeans and especially the government knows that those who are above age of 45 may not have another 20 or 30 years to accumulate the same amount of saving again. The % is to show every Singaporeans and especially the government that how important these amount of money is to us.

The few ten thousands that we have invested, though this maybe some people 1 or 2 months salary or the few hundred thousands that we have invested, though this maybe just a peanut to some people, BUT they are all accumulated by us, cents by cents, over many years of hard work and sweats.

The situation now is seems to be only the top down instruction from MAS/Govt will make FIs to compensate. These CDOs related credit –linked investments amounted to billions, it is definitely very difficult for the FIs to settle the compensation by themselves. (There may be more products bust.)

The MAS should hold some responsibility (approving these products) and thus the government should step in.

LK

REPLY
I wish to invite volunteers to step forward and lead this project. I need volunteers who are convinced that this is worth the effort.

I will not be able to handle this additional project, as I already have too many things to do.

Legal action against the Issuers and Distributors

If the noteholders take legal action against the issuers and/or distributors of the credit linked notes and win the case, it is possible to get the contracts rescinded and the noteholders will receive a full refund of the invested money.

I heve spoken to several lawyers. They advised that the noteholders have a good case against the issuers and/or distributors on the following grounds:

1) There are possible misrepresentations, omissions and inconsistencies in the prospectus and pricing documents. Under the principle of "contract of adhesion", these inconsistencies will be interpreted against the financial institutions as they provided the legal wordings to the contracts.
2) The documents require more than 1 day to read and understand, even for an educated and financially savvy person. How is it possible for the securities to be sold over the counter to an ordinary layman withon one hour?

3) The actual risks of these securities clearly do not fit the risk profile of the people that are marketed to. This is sufficient grounds for the contracts to be rescinded.

I will be talking to two or three senior lawyers to go through the legal documents and the above arguments. If we find sufficient evidence, we can get the written opionion from a Queens Counsel or other suitable experts. This will strengthen the case and help to get the noteholders to join a class action.

I will find someone to fund the cost of the expert legal opinion, so that the noteholders do not need to wrry about this matter now. If the case proceed, those joining the class action can reimburse this cost.

I am still keen to avoid a costly legal battle and have a negotiated settlement with the financial institutions. I hope that they will come forward to offer a fair compensation to the notebolders, so that this matter does not need to be taken to the courts.

Clash of events at Speakers Corner on 29 November

Dear Mr. Tan,

Do you think that the Indian cultural event held on 29 November at Hong Lim Park was arranged to make it difficult for you to use Speaker's Corner?

REPLY

I do not think so. This type of event probably takes a few months to organise. If anyone is suspicious, perhaps you can check the facts for me.

It appears that Hong Lim Park is not used exclusively for Speaker's Corner. In the future, I will check if there are competing events on Saturdays. I am also considering to move my regular meeting at Speaker's Corner to Wednesday at 6 p.m. There is less likelihood of a clash of events during the weekdays.

Speech at Speaker's Corner on 29 Nov - video

http://theonlinecitizen.com/2008/11/%e2%80%9cthis-thing-cannot-just-die%e2%80%a6%e2%80%9d/

Speech at Speaker's Corner, 29 Nov 2008

Speaker’s Corner – 29 November 2008

Speech by Tan Kin Lian

1. Investors should see their Member of Parliament
I suggest that you should see your Member of Parliament, together with other investors living in your area. If you aleady saw your MP before, you can see the MP again. This time, ask the MP to do the "right thing" as the leader that represents you. You can ask your MP to ask MAS:

1. What is the outcome of petition #1 which ask MAS to investigate if there were any wrong doings by the financial institutions that created and marketed these credit linked notes? Did these financial institutions breach the Securities and Futures Act and the Financial Advisers Act?
2. How many investors had their cases resolved by the financial institutions? How many cases were rejected by the financial institutions or have made offers that were rejected by the investors? How many cases are still "waiting for decision"? How long does it take for the financial institutions to make their decision?

3. How many complaints have been lodged with FIDREC. How many cases have been decided by FIDREC? How many are still pending? How long does it take for FIDREC to handle these complaints?

It is the duty of the MP to ask these questions on your behalf. Your MP can also raise them in Parliament.

2. Material facts should be disclosed in Prospectus
Investors have been told that they the prospectus contained a warning ‘you could lose all or a substantial part of your investment’ in bold print, on the page 1 or 2”. But what if the prospectus did not disclose material facts?

The New Paper’s Doctor Money wrote on 4 November 2008:

“A feature common to ALL linked notes is that investors never see the charges. They include:
> costs embedded in the initial pricing;
> counter-party returns in the product’s risk/return structure;
> commissions from buying and selling the options, swaps and underlying bonds;
> market-making and surrender fees; and
> annual management fees, including trailer fees kicked back to distributors.

They are deducted directly from the yield. Investors are likely to attribute the low return to market conditions rather than unseen costs.

Most importantly, unit trusts and investment-linked products (ILPs) routinely publish their charges. Linked notes never do.”

You can ask a lawyer whether the failures to disclose the above amounts to a breach of section 243 (1)(a) of the Securities & Futures Act. This section reads, “A prospectus for an offer of securities shall contain all the information that investors and their professional advisers would reasonably require to make an informed assessment of the matters specified in subsection (3).

Doctor Money wrote, “The question of the day is: ‘Should non-disclosure of embedded charges invalidate linked-note sales contracts and require a refund from issuers and distributors?’”

3. Ask for information in writing
The investors had approached the relationship manager who sold the notes to them. The RM was not able to give them a satisfactory answer. These investors then approached me for the answer.

I am not able to give you the answer. I do not have the answers, as there are many series and each series is different from the other series.

You should send the questions in writing (by letter or e-mail) and ask the relationship manager to give you the reply in writing. If you do not get a satisfactory reply, you should lodge a written complaint with MAS. If the RM does not know, it is the RM’s duty to get from the product issuer.

As an investor, you have the right to get relevant information on the product that you were sold. You are also entitled to be informed by the trustee or arranger, whenever they are significant changes that affect your product.

Act to safeguard your interest. Do not accept slipshod answers. Lodge your complaint.

4. Experience with FIDREC
If you have gone through FIDREC, please send the outcome to me, so that your experience can be shared with other investors.

Although you are covered under a confidentiality agreement, it should be all right to give general information – did you accept the adjudication, how many interviews did you attend, how long did it take you to present your case, how long does FIDREC take to give an answer.

This information will be helpful to other investors who are waiting for FIDREC adjudication.

I have asked the media to find out from FIDREC and give an update of the number of cases cleared through FIDREC and the summary of the outcome. I believe that this information is necessary for the public to know.

So far, the replies given were discouraging. Many complaints have been lodged to FIDREC. It takes a long time to settle a case.

5. Mental health concerns during difficult times
I wish to read to you a letter sent by an investor, with the initial FO:

Dear Mr. Tan,
First of all, thank you for all the help and information that you provided in your blog and in Hong Lim Park.

With the recent saga over the structured products and mini-bonds, most of the affected investors are going through emotional stress as well as financial stress.

Sad to say, I am also exposed to one of the products and have to go through emotional “struggle” everyday.

On one side of my mind, I have to stay alert to handle the daily routine, the other side worrying on what will be the outcome of my hard-earned money …

I believe that all investors are affected will be going through the followings : before taking every steps, during the process and while waiting for more info, you have to go through the stressful grinding of you brain (and heart) again and again.

> Complaining to the FIs …..
> Waiting for reply ….
> Going to FiDrec ….
> Waiting for more info from the news ….
> Will I get back my hard-earned money … how much … when …

It is like, going forward, but dragging your feet in a muddy field.
It is like, when you are taking a break, you mind is still spinning.
It is like, when your child gives you a smile, you have to put in extra effort to move your facial muscles to reply his greeting.
It is like, you want to shut down the computer, but the hard disk refuses to stop and keeps spinning.
It is like, you want to sleep, but you are worried about the outcomes.
It is like, you want to sleep, but you are also worried about other investment on hand that may have “toxic ingredients” in them.

BUT don’t know how to check, don’t know whether you should believe you RMs or insurance agents (or friends that you have bought from). Not saying that they are lying but they may not have the knowledge to “detect” the “toxic ingredients”

This list will go on and on and on and on … …

My wife and I are so stressed that we have to seek medical help so that on top of our busy daily routine, we will not neglect our toddler son and of course our health.

This is in fact the main message I would like to get across to all the distressed and worried ones out there. While fighting for what we believe is right, we still have to take good care of ourselves and our loved ones.

FO

6. Class action
The various groups are still talking to several lawyers to find out about their approach towards a class action. They are still not clear about the estimated legal fees and the chance of success.

I am now talking to a few senior lawyers to see if there are any misrepresentations in the prospectus, pricing statements, sales brochures and advertisements.

If necessary, we will arrange for a Queens Council in the UK to give a written opinion. We will find out the cost and how to finance it.

7. Special meeting for next Saturday, 6 December, 5 p.m.
This will be a special day to commemorate the second anniversary of The Online Citizen. I will be speaking at this event. I shall be talking on a matter that is relevant to the investors of the credit linked notes.

If you are free, do come to this special event and give your support.

Tan Kin Lian