Saturday, October 18, 2008

Breach of the law - arguments

983 investors signed a Petition to the Government to carry out a full and independent investigation into whether there was any wrong doing involved in the creation and marketing of the credit linked securities, such as the mini bond, high notes, jubilee notes and pinnacle notes.

In an accompanying letter sent to the Monetary Authority of Singapore, I identified three laws that could have been breached:
1) Securities and Futures Act (section 199)
2) Financial Adviser’s Act (section 27)
3) Trustees Act

Let me explain these points.

Securities and Futures Act
This law requires the seller of a security to provide truthful and reliable information to the buyer. The seller cannot give false or misleading information and cannot withhold any relevant information. Any breach of this law is an offence that can lead to civil or criminal action.

I like to ask MAS to see if the actual nature and risk of the credit linked security has been properly disclosed in the advertisement, sales material or the prospectus.

Are they disclosed in a transparent and clear manner? If not, was the disclosure done in a manner that can be considered to be misleading?

Many investors said that they were misled into thinking that they had invested in the bonds issued by the six or eight reference entities and that all of these entities had to fail before they lose their entire capital

How did this mistaken belief came about?

Financial Advisers Act
This law requires the financial adviser or the representative to understand the needs, risk profile and preference of the investor and to recommend the appropriate products.

Many of the investors wanted to have a safe investment. They are risk adverse.

Did the representative carry out their responsibility properly? Why did they recommend a product that has turned out to be so risky? Did the representative understand the nature and risk of the product?

Trustee Act
This law requires people in a position of trust to look after the best interest of their client. Does this law apply to the trustee and the arranger of the securities?

Did they discharge their duty according to the law? Were the payments made out of the fund in accordance with what has been authorised in the prospectus? Were the dealings made at the correct prices and are fair to the investors? How are conflict of interest resolved?

Should the trustee have to render a full statement of account to the investors?

I hope that the Government looks into these areas, to see if there were any wrong doing that led to such large losses among the investing public.

If there were wrong doing, the Government can take the appropriate action to bring the offenders to Court and to seek suitable compensation for the losses suffered by the investors.

I hope that the Government can play an active role to minimize the losses of the investors and ensure that the underlying securities are NOT un-wound at fire sale prices.

Speech at Speaker's Corner - 11 Oct 2008

Embargoed, 6 p.m. Saturday 18 October 2008

Yesterday, on 17 October, the Monetary Authority of Singapore held a press conference on the sale of structured products to retail investors.

MAS said in its release:

7. MAS urges any affected investor who has a genuine claim that you were mis-sold the product to make sure you lodge your complaint with your FIs. MAS requires FIs to have a rigorous process to look into every complaint and resolve them fairly, giving due weight to the views of the independent parties.

8. Clearly, there is a range of investors who bought these products. Some are well-educated professionals. Others are sophisticated investors. The group we are most concerned with are the vulnerable customers. We are focussing on cases of mis-selling to vulnerable customers and on cases where the products were clearly inappropriate for them given their circumstances. We have required the FIs to give priority to these cases. They should not take an overly legalistic approach to mis-selling in dealing with these cases.

9. For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor’s profile and circumstances, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility in such cases. We welcome this commitment and expect all FIs that have sold these products to take the same approach. They must do the right thing and ensure a quick and fair resolution for these customers. We have communicated this to their CEOs.

Lodge your complain
The first priority is for each investor to lodge a formal complaint with the financial institution indicating how they had been misled into investing in the structured product. MAS has asked the financial institution to deal with the complaint expeditiously and not to take an “overly legalistic approach”. They also advised that is not necessary for the investor’s statement to be made under oath (i.e. no need for statutory declaration).

It is important for the investor to make a truthful statement to outline how they were misled into investing in the product. Many investors told me that they were misled by the advertisement, sales brochure, and/or assurances and explanation by the sales representative (given verbally or by e-mail).

Many investors were told, or had led to believe, in some of all of the following statements:

a) That the funds are invested in the bonds of the reference entitles
b) That all of the reference entitles have to fail, before we lose our entire principal
c) That their principal is protected, if we keep the investment to the maturity date

I wish to give the following guidelines to prepare your statement to support your complaint with the financial institution. You must give a truthful statement, to the best of your knowledge and memory.

Your statement should cover the following points:

1. Your name, NRIC, address, telephone
2. How did you get involved in the investment?
3. Which financial institution, branch, amount invested, date
4. What happened when you purchased the investment?
5. Were you alone or accompanied by another person? Who?
6. What did the representative (who sold the investment to you) tell you about investment?
7. Did the representative tell you about any guarantee on your investment?
8. Did they make you sign any form regarding the investment? Did you understand the content of the form? Was it given to you before or after you agreed to make the investment? Did you read the form? Did you understand the content?
9. Did you rely on the advice of the representative in making the investment? Which were the important aspects of the advice?
10. Do you have any other statements to make regarding this matter?

I will ask the contact person for each group (according to the distributor financial institution) to help the other investors, especially those that were not well educated, to prepare the statement and to help you to lodge it with the financial institution.

Vulnerable investors
MAS has asked the financial institutions to give priority to the vulnerable investors. These are the elderly, low educated and the first time investors. The financial institutions have agreed to take full responsibility for these vulnerable investors who have been mis-sold. The full responsibility includes compensation for part or the full amount that they have lost. This is a an encouraging first step.

I wish to ask the other investors, who do not fall into the “vulnerable group” to be patient and to strong. If you have been equally misled into investing in these structured products, and it seems to be clearly the case, you have a strong case to ask for compensation. But, you have to be reasonable in your expectation and may have to accept partial compensation that is lower than the “vulnerable investors”.

Let us take this at the next step. In the meantime, you should lodge your complaint.

Formal inquiries by MAS
MAS has also said that they have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the financial institutions or poor sales practices by their representatives. They will an announcement on any actions we are taking when our inquiries are completed.

If the laws have been broken or if there were failures in the internal controls and/or sales practices, there is a better chance for the investors to get a higher compensation from the culpable parties. Let us wait for the results of this investigation.

Replacement Manager
The MAS statement said that the trustee for the Lehman Minibond Programme is carefully considers all options and acts in the interests of investors. If a new swap counterparty is available, investors would have the opportunity to vote on this option. To assist investors make an informed decision, MAS will appoint an independent financial adviser. The outcome will be known by the end of next week.

If a replacement manager can be found, it will may the investors to reduce the loss as the underlying assets can be kept until a better time to realise a higher value. I am in contact with one party based in Hong Kong that has expressed interest to take over the management. They are now in touch with the trustees and the regulator.

I hope that other parties, especially the financial institutions based in Singapore, will come forward to make a bid for this contract.

Appeal to the Media
I wish to appeal to the media to convey the message to the other investors of these structured products who have not yet lodge their complaints.

Please inform them that they should lodge their complaints now, if they have been misled into investing in these products.

Tan Kin Lian

Fall outside "vulnerable investors"

MAS has asked the financial institutions to give priority to the vulnerable investors. These are the elderly, low educated and the first time investors. The financial institutions have agreed to take full responsibility for these vulnerable investors who have been mis-sold. The full responsibility includes compensation for part or the full amount that they have lost. This is a an encouraging first step.

I wish to ask the other investors, who do not fall into the “vulnerable group” to be patient and to strong. If you have been equally misled into investing in these structured products, and it seems to be clearly the case, you have a strong case to ask for compensation. But, you have to be reasonable in your expectation and may have to accept partial compensation that is lower than the “vulnerable investors”.

Let us take this at the next step. In the meantime, you should lodge your complaint.

Statutory declaration - Glenn Knight

Mr. Tan,

We have approached Glenn Knight to do statutory declaration and show him our complaint letter to Hong Leong and MAS. He was patient, listened and jotted down notes. Glenn told us that some victims from Maybank are also meeting up with him.

Glenn highlighted that for the class suit against HONG LEONG to be strong, we should gather more victims. This would be a good case to show that there was a certain pattern of behaviour by the bank to mislead the customers.

Those who have been mis-sold and heard similar things from their own RM during the sales pitch such as:-

1) This is a low-risk product.
2) The principal is protected.
3) Minibonds is a BONDS.
4) Lehman Brothers not mentioned.
5) bankruptcy of Lehman Brothers not mentioned.

If you are interested, you can book an appointment with him. To save precious time, do DO YOUR HOMEWORK! Those victims from Maybank can also contact him.

To prepare this declaration, you have to provide the answers to the following questions:

1. Your name, NRIC, address, telephone
2. How did you get involved in the investment?
3. Which financial institution, branch, amount invested, date
4. What happened when you purchased the investment?
5. Were you alone or accompanied by another person? Who?
6. What did the representative (who sold the investment to you) tell you about investment?
7. Did the representative tell you about any guarantee on your investment?
8. Did they make you sign any form regarding the investment? Did you understand the content of the form? Was it given to you before or after you agreed to make the investment? Did you read the form? Did you understand the content?
9. Did you rely on the advice of the representative in making the investment? Which were the important aspects of the advice?
10. Do you have any other statements to make regarding this matter?

The lawyer fees include the fee payable to the Commissioner of Oath.

Fee $120 plus GST
Bernard & Rada Law Corporation
50 Robinson Road #08-00
VTB Building
Singapore 068882

Call Mr. Glenn Knight or his secretary, Ms Ivy Goh (Tel: 68999888)


Lost the sense of bonding and togetherness

Dear Mr. Tan Kin Lian

I am a retiree in my sixties and, like you, my heart sentiments and empathies are for the man-in-the- street, ordinary Singapore citizens, and the senior citizens, who are not able to express themselves on their plights and miseries, for lack of ability, education, literacy, IT skills and media know how.

The plight of the poor misguided uncles and aunties, and including my wife and I, who laboured all their lives trusting in the government's promise of a better life, when they can retire with their CPF nest eggs, have just had their dreams shattered and crumbled by the latest chain of events from the financial collapse from around the world. Some of us may be in the same age bracket as a few of our longstanding national leaders, some of whom have passed on, and some who are still giving counsel on the affairs of state. How does one compare the earning of a poor cleaner or bus or taxi driver, with that of those whose monthly salary income is 2000 times as much, or whose lifetime savings is not even one fifth of one months salary of some.

It is not my mission and agenda to protest against the establishment, just for protest sake. But we are now talking about retirees and hardworking citizens who have saved diligently and conscientiously for nearly all their working lives, and as they now walk into their sunset years, they have just suddenly seen the sun go down, without being sure whether it will rise up again the next day.

This is a very sad and human tragedy for Singaporean leaders to address quickly. There is no point in building more of the asset rich Singapore hardware, when the national heartware is in tatters. We have to offer a temple of hope, in order to create a real sense of community belonging in this small so called ' Red Dot island paradise'

Whilst we are shut out our city to entertain and accomodate our foreign guests, as they pop champagne and feast on caviar and veal, whilst they watch some silly machine zooming by, our taxi drivers, retailers and restaurants are hurting from lack of patronage and support. Whilst Rome burns, we are makiing sport.

It is paradox, and an irony, when well qualified and able young Singapore born sons and daughters, leave this 'island paradise' for greener pastures in Australia, NZ, the U.S., Canada, and may not come back home, and we then encourage new alien migrants from neighbouring feeder countries, offering them PR or Singapore citizenship after two years, because they can play better ping pong, or badminton, or football to add to our talent pool.

On the one hand we have full born and bred political opposition members who risk and sacrifice all they have and owned to speak up for the silent Singaporeans, but they are crucified on our court altar, for their their defiance and different points of view. Are we supposed to behave like obedient Singaporean sheep that goes "baa baa, yes sir, yes sir, you're right again,
all the time" .

What has happened to the days of the "gotong royong" when we were more kin and kind as near equals with 'cangkuls and poon kees' in hand, to re-build track roads and clean up the beaches. That was a time when we truly felt the kampong community spirit of collective self help, and we could relate and identify very strongly with our MPs and national leaders fighting for this country's survival. What has happened to the recognition and memories of some of our surviving pioneer old guards like Toh Chin Chye, Goh Keng Swee, Othman Wok, Ong Pang Boon, Jek Yeun Thong? Are they forgotten, because they have now become irelevant today? What about those who have also contibuted but are no longer with us - Devan Nair, S Rajaratnam., E.W Barker, Howe Yoon Chong, George Bogaars, Hon Sui Sen, Lee Siew Choh, Lim Chin Siong, J.B. Jeyaretnam and others.

This country and this nation's progress in the last 40+ years has been one of miraculous transformation, if we judge our report card by stainless steel, gleaming glass, bricks and mortar, and manicured trees and the landscaped gardens. No Singaporean in their 50 -80 years, would deny our government this credit. Our port, airport, CBD, MRT, highways, public housing, schools and institutions of learning stand out as wonderful trophies to our national sense of accomplishment, and much pride for the civil servants, town planners and estate managers. I, myself, have been a beneficiary of this economic progress, when I recall, as a kid, how I used to take my bath from a public stand pipe, or well, and poo into a bucket. Yes, I am grateful to this goverment for improving our creature comfort, dignity and quality of living, but not of life.

But somewhere along the way, coming to where we are today, we seem to have lost that sense of bonding and togetherness with our founding fathers. Our progress reminds me of the book "Animal Farm" by George Orwell. With the success of the physical transformation of the environment, there has also been an attitudinal and spiritual transformation of another kind. It has been a gradual process and shift of our cultural values and national priorities

As our leaders work and live in fine comfort, we the citizens of Singapore are mortgaged to our hilt, and now even our hard earned savings are going up in smoke, because the people in charge knows how to set up the traffic rules, but did not do anything to monitor and track the traffic flow.

Hence for many of us who continue to place our blind faith and trust in a government backed and publicly endorsed brand name, and then to be told when the bottom falls out, "you make your own bed, you lie in it". " If you fall down from bed, through no fault of your own, that's too bad. That's life. The market forces of caveat emptor will have to prevail "

It is like saying, we have proudly built for you a wonderful zebra crossing, but you can cross at your own risk, without the need for traffic light controls..

You are a brave man for doing what you are doing now, and I will refrain from egging you on, by being just an entertained spectator. Some people will do that, but when the riot vans come around, many will scatter and hide. I am a peace loving person, but like many Singaporeans who have helped to build and make this place our home, I too have my gripes and grouches, at the way we are often being programmed and manipulated by those who know what is best for us.

It will be interesting to see if the Prime Minister will still deliver on his national rally pledge, that no one will be left out of the national banquet and pie sharing, even in this difficult and trying time. To the rich dining in aircon comfort, an unfinished bowl of rice is only just $0.50 cents. To the impoverised and starving, that same bowl of rice, could represent a days wage, of burning and straining in the hot sun, or some bent old lady collecting tin cans and discarded cartons just to stay alive, let alone calling it a living.

May God bless, and keep you.


Today: Man with a Mission

.........How else would you describe a man who is “impatient, easily annoyed and often angry” — according to a former employee — but always having a heart for the man-on-the-street?

“It is completely consistent with his conduct at NTUC Income when he often commented publicly on various matters. I can’t see him keep quiet about something he feels is wrong and affects ordinary people,” said Mr Stanley Jeremiah, who was NTUC Income’s general manager of life and health insurance department between January and August 2006.

Mr Dharmendra Yadav, who was a corporate counsel at the insurance cooperative, added: “When I joined NTUC Income, my mentor told me, ‘Tan Kin Lian is one person who will stand up for what he thinks is right. And he is the one person who will let you do the same’.”

TV news on MAS conference

Read the TV news on the MAS conference and the media release in:

Investor meets HSBC Trustee

Dear Mr.Tan

I decided to vist HSBC Trustee's office because I could not get any satisfactory answers over their hotline. Two ladies in black pantsuits ushered me into a meeting rm. They appear to be quite senior in rank and asked for my identity card before taking my queries. I did not manage to obtain their names. Here are my questions and their replies:

1) Did you sieze the underlying assets and have examined them? Are they worthless, fraudulent or they are genuine and have value?

Answer: We are still examining and evaluating them.

2) What constitute the underlying assets of series 5 & 6 which were seized?

Answer: We cannot divulge this info.

3) MAS has directed you to keep investors informed what options are available to investors?

Answer: Presently some parties have approached them to look at the documents as potential new swap Counterparty but there are no offers. If after a period of time have lapsed and no offers are forthcoming they will proceed to liquidate.

4) You mean proceed with a fire sales in a frozen credit market? Can you hold it to maturity or for a year or two waiting for conditions to improve? or call an AGM to put it to shareholders?

Answer: AGM will be called only for the purpose of approving the new Swap Counterparty and 75% votes in $ terms is required. No shareholders approval is required for liquidation. As Trustee they cannot hold on to shareholders' assets indefinitely.


The replies given by HSBC Trustees are unsatisfactory. I hope that the trustees realise that they have a fiduciary duty to the investors to give a complete statement of account on a timely basis and to take necessary action to protect the best interest of the investors. I shall be consulting a lawyer on this matter to see if there areas of breach of duty.

Prompt reply to help "lost" investors

Dear Mr. Tan,

I wrote to you and you give me a reply to read this blog:

I understand that you must be very, very busy to attend to some many people, like me, who ask individual questions. We do so, because we are lost and do not know where to turn to.

But I understand that you must be facing a lot of pressure and take a lot of time to read some many personal problems. What I want to say is that, in spite of the pressure, you did bother to give me an immediate reply. This is wonderful.

I want to tell you that even the simple standard reply is helpful to me. I will attend the Saturday meetings at Speaker's Corner in Hong Lim to meet other investors in the same situation as me.

Thank you once again. Keep up the good work. Please consider to stand for President.

Interview with Zaobao

Dear Mr Tan,

Many of our readers and those who have invested in structured products are appreciative of your help in recent weeks but unfortunately quite a lot of them do not understand english and have not been able to act promptly.

In order for our readers to understand what actions they should be taking and to understand you as a person better, would you be able to grant us an exclusive interview.

On the current structured products saga
1. Congratulations Mr Tan, we understand from your blog that your granddaughter was born at 6pm on 11 October when you were speaking at the Speaker's Corner. You've said you'll like to nickname her "Speaker". Out of curiousity, is her chinese name going to be the Fang Lin (chinese for Hong Lim?)

Reply: My grand daughter's name is Nadya Zagarodnova. My son-in-law comes from Russia and now works in Nanyang Technological University. I like to give her the nickname of "Speaker" but this is between her and me. She has a Chinese name, but it is not Fang Lin.

2. Many of our readers only know you as the former CEO of NTUC Income. Could you share with us your recent work related engagements? What have you been involved in lately aside from helping distressed investors?

Reply: I am now a consultant to two insurance companies, one in Singapore and another in Indonesia. I also teach Risk Management & Insurance at Singapore Management University. I spend time to write a blog to educate the public about financial planning and insurance.

3. You are well known in the insurance industry and have always been giving consumers insurance advice. When did you start giving financial advice as well? Do you take an interest in consumer finance? Where do you get your financial information from?

Reply: I educate the general public about financial planning and insurance. I get my financial information through my own research, and the research of a few financial experts. I usually educate people about the basic tips on financial planning. This is general knowledge, but I am able to put them in a form that is easy for the public to understand.

4. What have you been doing for the investors in relation to this crisis? When did you start helping them? What made you do so?

Reply: I organise a Petition to ask the Singapore Government to investigate if there were any wrong doing or breach of the law by the financial institutions that created and marketed the structured products that has caused unexpected large losses to several thousand of risk adverse investors. The specific laws involved are the Financial Advisers Act (section 27), Securities and Futures Act (section 199) and the Trustees Act. Many investors said that they were misled by the advertisements, brochures and other materials and by the explanations and assurances given by the representatives of the financial institutions.

5. Although many Singaporeans were victimised by structured products, but there seems to be no one that would to take the leadership role in gathering fellow victims to take collective action, especially someone with a strong leadership background as yours. Do you see this as a problem with Singaporeans?

Reply: The proper people to provide the leadership should be the regulator, i.e. the Monetary Authority of Singapore, or the Consumer Association.

In the case of Hong Kong, the Monetary Authority has been pro-active in receiving the complaints of the retail investors and in investigating these complaints. This is a more satisfactory approach in addressing the concerns and complaints of the retail investors who have lose substantial amounts of their hard earned savings.

6. You're not an investor of the affected structured products. There are some who have queried your motivations and intentions for helping affected investors. They've also queried what you stand to gain from this. What is your response to these people?

Reply: I hope that more people can come forward to help other people who are weak and have suffered greatly from alleged misconduct by the financial institutions. Many of these investors felt strongly that they were "cheated" of their hard earned savings. I sympathise with their plight and help to articulate their anguish. I will also help them to find some redress. I have the assistance of a few other people who have come forward to help. Some are investors caught in these structured products. Others are non-investors but are willing to give their time to help the victims.

7. A year ago, you've started advising investors against structured products. Why so? How many structured product related emails do you receive in a day in the last one month?

Reply: I find these structured products to be unsatisfactory. The advertisements, marketing materials and prospectus are unsatisfactory. They are not transparent and cannot be understood by financial experts, like me. How can these products be approved to be sold to the general public in this form? As the risks cannot be clearly assessed and could lead to a loss of the entire principal, I strongly advised the general public to avoid these products. A few people have read my blog and took my advice. They now sent e-mails to thank me for saving them from making big losses of their savings.

8. What other products do you see to be at risk (eg. Dual currency deposits?)

Reply: I advise against Dual Currency Investments as well. I do not like products where the investors suffer the risk of large losses but are not given the benefit of large gains (as the major portion of the gains are taken by the financial institution). I find these products to be unfair to the investors. They are taken advatange of, due to their ignorance.

9. In your petition to MAS, you've requested for an independent inquiry to be set up. What results do you hope to achieve?

Reply: If there are wrong doings and breach of the regulations, e.g. misrepresentation, dishonesty or fraud, the authority can charge these alleged offenders to court. Alternatively, the alleged offenders can agree to give appropriate compensation to the victims who have suffered large financial losses due to the wrong doings.

10. What made you decide to organise a gathering at the Speaker's Corner? You plan to make weekly speeches for the next four Saturdays. What will you be talking about? Would you carry out the gathering differently from last Saturday considering many people were just clumped in groups, sharing about their grieviences but did not achieve the objective of taking collective action. Also, there were many elderly present who do not understand english. Do you plan to have a translator?

Reply: I feel it my responsibilty to meet with the people who signed the Petition to give them an update of the progress of the Petition. I also wanted them to have the chance to meet other investors who are in the same situation. This allows them to know each other and to discuss their collective response. They can keep in contact with the other investors in the future, until the issues are fully resolved.

I decided to hold weekly meetings at Speakers Corner to update the investors and allow them to meet with other investors in their sub-groups (according to the structured products or the distributors).

11. Besides setting up a new online petition to collect names of affected individuals, what are your other follow up plans?

Reply: I encourage the investors to visit the lawyer to prepare a statutory declaration. This will strengthen their case when they lodge he complaint against the financial institution or to the Financial Industry Dispute Resolution Center or FiDREC ( Some investors want to engage a lawyer to take collective legal action against the distributor. I will help them to find a good lawyer. I hope that the dispute can be settled through other means, but legal recourse will be the last resort.

On politics
12. There were some political figures who appeared at your speech at the Speaker's Corner last Saturday. Did it worry you that they might capitalise on your gathering for their own political agenda?

Reply: I hope that the elected Members of Parliament will attend the future meeting at Speaker's Corner to meet their constituents, hear their anguish and help them to seek appropriate redress. As this is a public meeting, it is within their rights for anyone (including political figures) who are interested in the matter to attend, especially if they are investors who are affected by the failure of the structured products.

13. Are worried that you might become a political figure?

Reply: I think that there is nothing to be ashamed about being a political figure. I do not have any wish to be involved in politics at this time.

14. Do you have any political aspirations? Some investors and members of the public have been encouraging you would to run for our next Presidential elections. Would you consider running for President of Singapore?

Reply: My wife does not like me to run as President of Singapore. She thinks that it is a foolhardy idea. I have to respect her wishes.

15. Some of our colleagues have commented that you remind them of Mr Ngiam Tong Dow. You were seen to be a supporter of government policies when you were helming NTUC Income. However, ever since you've retired, you've adopted an active role in voicing the grieviences of common folk. How do you see this?

Reply: I support policies that are good for the long term interest of Singaporeans and speak against policies that, in my view, are bad for Singaporeans. While I was head of NTUC Income, I have to avoid being involved in social or political issues as they may have a negative impact on the business interests of NTUC Income. After retiring from NTUC Income, I do not have this constraint. I am honoured to be compared with Mr Ngiam Tong Dow, as I respect him greatly.

On yourself
16. You seem to enjoy advising people. You've advised Singaporeans on a variety of things, ranging from the 3-day Diet that you've researched while you were at NTUC Income, to annuities, to insurance, to financial planning. Why so?

Reply: I like to share my knowledge and experience with the common people. I hope that they find my views to be useful to their lives, especially on their financial security. I like to educate the public about financial planning and insurance. I want them to make the right decision, so that they get good value for their savings, and are not given a poor deal.

17. What are your hobbies? You've created logic9 2 years ago and it was very popular then. Do you plan to create more of such games in future?

Reply: I will be publishing new books on Sudoku and Intelligence Quiz. I hope that people like them. I will also create simulation games on the internet to teach people about investing, financial trading and business strategy. I hope that people will find them to be educational, interesting and fun.

18. How many hours of sleep do you get? With so many committments, do you get to spend time with your family?

Reply: I have enough sleep each night. If not enough, I catch up during the weekends. I find time to spend with my family.

19. When did you start your blog? What are the most common questions that you've received? What is the weirdest question or comment you've received so far?

Reply: I started my blog 18 months ago. The cumulative visitors have now exceeded 500,000. It now receives 5,000 unique visitors a day. This is a temporary situation, due to the structured product crisis, Prior to the crisis, the average was 1,000 visitors a day. My blog is

20. You give people advise on financial planning. Do you mind sharing with us your personal investment portfolio? What do you invest in (stocks/commodities/bonds/fixed deposits)? What is your best investment so far? What was the worst?

Reply: I invest most of my money in shares and REITS. I believe that they will give the best return over the long term. So far, my share investments are showing a paper loss, but it is all right. I will keep them for 5, 10 or 20 years. The values will recover.

韩咏梅 Han Yong May
Digital Media Editor / Asscoiate Local News Editor
Lianhe Zaobao

Interview with Today Paper

1. Why are you doing this? What motivates you?

Reply: For the past 18 months, after I retired from NTUC Income, I have been writing a blog to educate the general public about financial planning and insurance. My blog is I wanted to educate them to make to make the right choice about financial and insurance products, so that they can get a reasonably good return on their savings.

I write several tips on various topics and kept them in my website, They cover investments, insurance, financial planning and other topics of interest to young people, retirees, parents and other situations.

A year ago, many people asked me about structured products. The products sold a few years ago were the capital guaranteed products. I found that these products guaranteed the safety of the principal, but also guaranteed an extremely low return. I advised people against investing in these products. They can get a better return and more security by investing in government bonds. I was proven right - the investors got a poor return on these capital guaranteed products after waiting patiently for five years.

When the credit-linked securities (such as the minibonds and pinnacle notes) were launched two years ago, I studiend these products with the help of another expert in financial analysis. We concluded that the product is highly risky and give a poor return to the investor (which is not commensurate with the risk). It seemed that the financial institution took away the bulk of the return and leave the high risk to the investor. I advised investors to avoid these products in my blog.

At that time, I was not aware about the extent of the risk, as it was not easy to understand the complex structure, and the prospectus did not give the relevant information.

I do not know how the authority could have approved a prospectus that was supposed to describe the product, when financial experts who spent many hours to read the propectus could not figure out what the structure was. How can you expect the general public who were sold these products to understand the risk that they were taking?

When several of these credit linked securities (which were linked to Lehman Brothers as issuer or as a reference party) were at risk due to the failure of Lehman Brothers, I became horrified to learn the true nature of the structure and the extent of the high risk. I was horrified to learn that so many people were misled into investing their hard earned savings or lifetime savings in these products, often on misrepresentations of the financial institution representatives, or the relationship managers.

It is very clear that most of these investors are risk adverse. They were only trying to earn a higher interest rate to make up for the high inflation of 7%. It is unfair to label them as "being greedy" to get a higher return. If there were properly advised, they should be putting their money on government bonds to earn 3% per annum over 5 years.

I decided to organise a Petition to ask the Singapore Government, in particular the Monetary Authority of Singapore and/or the Commercial Affairs Department to investigate if any law has been broken, particularly section 27 of the Financial Advisers Act, section 199 of the Securities and Futures Act or the Trustees Act. I received 983 signatories who signed the Petition. I lodged the Petition with a report that shows the possible areas that the law has been breached, and presented my arguments to these points.

I was also disappointed at the approach taken by the MAS in handing the complaints. The poor investors were left to lodge their complaints with the financial institutions who sold the products to them. When they lodge their complaints, they were challenged or ridiculed (in some cases) by the officers employed by these financial institutions. It was quite discouraging to hear their stories.

The Hong Kong Monetary Authority adopted a better approach. They set up a hotline and service center and employed 100 people to record the complaints and investigate the cases where there were evidence of mis-selling. They received more than 7,000 complaints (which is 10 times of the number of complaints lodged with the financial institutions in Singapore). This is more satisfactory to the victims.

What is my motivation? Nearly ten thousand people have lost their hard earned savings or their life time savings by being misled into investing in these structured products. The sums involved are huge, $100,000, $200,000, $300,000 or more. Most of them come from modest backgrounds. The invested sums represent 10, 20 or 30 years of hard work and frugality. Should I just stand back and say "Bad luck. If you take risk you have to bear with the consequences. Let's move on? " These people are victims of mis-selling and are helpless in how to seek redress.

These investors were told that these products are safer than bank deposits. If you talk to these investors, you will know that they are clearly careful and risk adverse. It is not just a few people with the others trying to join in the ride. The stories told by most of them are similar.

My motivation is to help these victims who have suffered losses to seek appropriate compensation. I like to see justice - which is a core value in the five stars of Singapore.

2. In bringing up the concerns of the man-in-the-street to the authorities, what is your strategy?

The Petition asked the Singapore Government to make a full and independent investigations into the creation and the marketing of these products and identify the law that could have been breached. It is signed by 983 petitioners. Many investors wanted to join in the Petition after it was closed. It is accompanied by my report giving areas where the law could have been breached.

I hope that the relevant authority could pursue these areas and gather the evidence of the victims of these structured products that have now wiped out their lifetime savings. If the evidence found that there were misrepresentation, dishonesty or fraud, the authority should charge the parties involved in court for wrong doing. It is their duty to investigage and enforce the law.

However, if the misrepresentation was an honest mistake by the distributor or their sales representative, it would be better to give a chance for the distributor to offer an appropriate compensation to the investor. In my view, an appropriate compensation is to share half of the loss sufffered by the investor.

My second approach. I also encourage the investors to take find a lawyer to write a statutory declaration, which is sworn under oath, to describe the circumstance in which they invested in the structured product. The statutory declaration will cover the verbal assurances and explanation given by the distributor's sales representatives or the marketing materials that were provided to the investor, and the state of mind of the investor when they agreed to invest in the recommended structured product.

I hope that this statement is made under oath, which is made under oath, will have a stronger impact when it is lodged to support the complaint lodged with the distributor, or with the Financial Industry Dispute Resolution Center (Fidrec, www; at the next stage.

If there are many customers who make similar sworn statments regarding the verbal representations given to them (which turned out to be wrong), it is quite likely that any indepenent person, such as a judge, will believe the sworn statements made by these people, even if they do not have any written record to support their statements.

If the matter is not resolved, I will help them to take collective legal action. But it will have to be their decision, as this course of action is expensive and the outcome is uncertain.

A third approach is my appeal to the distributor and the MAS to come forward and do the ight thing. If they have made a mistake in approving or selling the product, they should admit the mistake and find an appropriate way to compensate the investors who have suffered a large financial loss due to the mistake. They should make it easier for the investor to get the compensation and not make them suffer more through a difficult, lenghty and costly process.

3. How would you gauge your success?

My aim is to help the investors to get appropriate compensation for the financial loss that they have suffered, due to the misrepresentation of the product. I suggest that the distributor should compensate the investor for half of the loss, so that the full loss is shared equally between the investor and the distributor.

I also hope that MAS will change their approach in the future. They should appoint independent financial experts to analyse thse structured financial products (including long term life insurance products) to ensure that they are designed to suit a certain category of investors, that they are described properly and clearly and that the product is fair to consumers. The products should not be designed for the main purpose of making profit for the issuer or the marketer at the expense or detriment of the investor or consumer.

I also hope to see a more active enforcement of the law to protect the interest of the retail investors or consumer. If there is breach of the law, the offenders should be charged in court and be made to pay a heavy penalty. This will ensure a higher standard of conduct and responsibility.

4. Your consumer activism is to be lauded. But what you are doing is something unusual in apathetic Singapore. You don't see ex-politicians or ex-CEOs going into this area. Have anybody warned you of the possible pitfalls of your action? If so, what did you tell them?

Reply: A few people have warned me to "be careful". People are so scared to do the right thing in Singapore. They are only willing to do what the Government approves for them to do. It is such a sad state of affairs. I hope that more people can come forward and be courageous.

5. Analysing your actions on this issue, I get the sense that you are pushing this into a high-profile campaign against MAS. You tried an on-line signature campaign, then face-to-face meeting with MAS, litigation and now the Speakers Corner. What kind of results are you looking at, from a good case scenario and a worst case scenario points of view?

Reply: I do not wish to offend the Monetary Authority of Singapore. I see that the MAS is the best party to step forward and help the retail investors. I believe that it is their duty to take care of the investing public, so as to preserve confidence in the financial system in Singapore. I wish to help MAS in this task. If MAS can be pro-active, I do not need to work so hard, day and night.
6. Do you think the authorities are listening to you and the people who are affected?

Reply: So far, they are listening selectively. I hope that more people can shout louder, so that their voices can be heard more clearly. I will help them to convey the message.

7. What would you say to people who feels you have an axe to grind with officialdom?

Reply: This represents maybe 5% of the people. These are the sceptical Singaporeans. The majority, perhaps the remainign 95%, encouraged me to do what is right, to help the people who are victims of the structured products.

8. Can you tell us your experiences with the investors you have met? What kind of people are they, what are some of the stories they have told you? Whose was the most tragic story?

Reply: Most of the investors are ordinary working class people who are careful, risk adverse and save the money for their retirement or their children's education. It is so sad to see their years of hard work and savings being lost due to some flaws in our financial system. These people are the victims. They cannot be expected to shoulder the entire loss. They should not be made to suffer more, by going through a difficult process to lodge their claim. I hope that their grievances can be dealt with in a fairer way.

9. There is a view that people should be responsible for their actions, that those who went into structured deposits are themselves to blame. Do you share this view?

Reply: It is the duty of a trusted party, such as the financial institution or its representative, to give the correct information to the people who rely on their advice. Clearly, the risk of the structured products have not been clearly understood by the financial institution at the point of sale. This has caused a lot of confusion and unclarity. The advertisements and brochures give a misleading picture. The prospectus is not clear. The investors were assured by the sales representatives that these structured products are safe. Can they be asked to shoulder the entire loss,because they trusted the financial institutions to give them proper information and recommendation?

Many of the investors are willing to shoulder their share of the loss, as these structured products offered a higher return. But, it is not fair for them to shoulder the entire loss.

10. There has been suggestions on Internet forums for you to run for President- in light of all your efforts- is this a proposition that you would consider seriously?

Reply: If your newspaper can get 100,000 people to sign a Petition for me to run as President of Singapore, I will consider it seriously.

Friday, October 17, 2008

MAS Media Release on Structured Products

Opening Remarks by Heng Swee Keat, Managing Director, MAS, at the MAS Press Conference on the Sale of Structured Products to Retail Investors

Many individuals who purchased structured products linked to Lehman Brothers are worried about their investments. MAS has been actively working to ensure a fair resolution for these investors. We have also been communicating our actions to the public since the issue first came to light in the middle of September. Our first priority has always been to help affected investors. Let me touch on what we have done and how we have put in place a serious and impartial resolution process to deal with investors’ legitimate concerns.

2. First, we are making sure that HSBC Institutional Trust Services (Singapore) Ltd, the trustee for the Lehman Minibond Programme, carefully considers all options and acts in the interests of investors. If a new swap counterparty is available, investors would have the opportunity to vote on this option. In order to assist investors make an informed decision, MAS will appoint an independent financial adviser. We expect the trustee to know whether options will be available to noteholders by the end of next week.

3. Second, each FI now has an independent person to oversee the complaints handling process relating to the sale of the Lehman Minibond Programme, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 Linkearner Notes. These persons are Gerard Ee, Hwang Soo Jin and Law Song Keng. We recognise that the complaints handling process has not been easy, particularly for customers of some FIs. But as circumstances for each case may be different, this is the best way to deal with all the complaints. The independent parties will ensure that customers get a fair hearing. We have set a very clear timeline for complaints to be resolved. All the FIs have also set up internal review panels which are chaired by their CEOs. The panel is expected to conduct a thorough review of each complaint and decide on a course of action within four weeks. The decision will then be communicated to the customer.

4. Third, for affected investors who are not satisfied with the FIs decision on the matter, we have established a fast-track process to refer the case to the Financial Industry Disputes Resolution Centre (FIDReC). The FIDReC mediation process is free for consumers. If a case goes to arbitration, it will cost the consumer $50. FIDReC will consider all relevant evidence whether written or oral. Statements can be prepared by consumers themselves and need not be made under oath. All FIDReC’s adjudicators are well respected professionals. The chairman of FIDReC is Mr Goh Joon Seng, a retired High Court judge. As over 80% of customers invested S$50,000 and below, FIDReC is the right avenue for them to pursue their claims. FIDReC normally deals with claims not exceeding S$50,000. In the case of the structured products, however, the FIs have agreed for FIDReC to hear deserving cases.

5. We have also said that if there are breaches of our regulation, we will take action against the financial institution or individuals involved. MAS has required the independent parties to highlight these breaches and potential cases of mis-selling to MAS. They have already brought a number of possible cases to our attention and we are following up on them.

6. Normally, as you know, MAS does not comment on our dealings with individual institutions. However given public interest in this matter, MAS confirms that we have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the FIs or poor sales practices by their representatives. We will make an announcement on any actions we are taking when our inquiries are completed.

7. MAS urges any affected investor who has a genuine claim that you were mis-sold the product to make sure you lodge your complaint with your FIs. MAS requires FIs to have a rigorous process to look into every complaint and resolve them fairly, giving due weight to the views of the independent parties.

8. Clearly, there is a range of investors who bought these products. Some are well-educated professionals. Others are sophisticated investors. The group we are most concerned with are the vulnerable customers. We are focussing on cases of mis-selling to vulnerable customers and on cases where the products were clearly inappropriate for them given their circumstances. We have required the FIs to give priority to these cases. They should not take an overly legalistic approach to mis-selling in dealing with these cases.

9. For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor’s profile and circumstances, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility in such cases. We welcome this commitment and expect all FIs that have sold these products to take the same approach. They must do the right thing and ensure a quick and fair resolution for these customers. We have communicated this to their CEOs.

10. Thank you, I will now take your questions

Meeting at Speaker's Corner 18 Oct, 6-7 pm

All investors in credit linked securities are invited to attend. There will be two short speeches by Tan Kin Lian (in English) and another speaker (in Mandarin).

Tan Kin Lian will also speak on how three laws could have been breached:
> Securities and Futures Act
> Finaancial Advisers Act
> Trustees Act

The investors can meet with other investors in similar situations.

Ray of light and hope

Dear Mr. Tan,

I only wish to thank you for your honorable actions to many distressed Singaporeans at this point of time.

My parents especially, have been victims of this crisis and your blog has been very helpful and informational in assisting many people to get help.

I am very glad that in midst of all the fear and animosity in these dark times, there is a ray of light and hope and a firm voice from your good self and your team.

Thank you for your kindness. Kudos to the many unsung heroes behind you as well. May you be well and happy. Take care.

GL & family

Act with honour and integrity

I hope that our Monetary Authority of Singapore and the financial institutions will come forward to do the right thing.

Mistakes have been made in approving the credit linked securities and in selling these securities to the general public. At that time, these parties were probably not aware about the nature of these securities and the real risks.

Now that this matter is known, they can come forward to admit a mistake. They can offer a fair compensation to the investors. The investors cannot be made to shoulder the entire loss, due to mistakes made by people who should be more knowledgeable and institutions that they have trusted!

It is time to act honourably. This is what integrity is about.

HKMA refers Lehman cases to regulator

HKMA refers Lehman cases to regulator
The Standard

The Hong Kong Monetary Authority, the city's de facto central bank, referred 24 cases to regulators relating to the sale of investment products guaranteed by the collapsed Lehman Brothers Holding.

The cases involve "alleged mis-selling'' by two licensed banks in Hong Kong, the HKMA said, without naming the lenders.

After reviewing the evidence, the Securities and Futures Commission will consult with the HKMA on whether to impose sanctions, the statement said.

Sanctions may include suspension or revocation of registration, reprimands, fines or prohibition orders, it said.

More than 40,000 individuals in the city bought so-called minibonds, or investments guaranteed by Lehman and linked to the debt of some of the biggest Hong Kong companies.


Dow Jones: Hong Kong banks will buy back mini-bonds

HONG KONG (Dow Jones)--All the banks in Hong Kong will buy back the
mini-bonds backed by Lehman Brothers Holdings Inc. (LEH) that they sold to
retail investors, the Chinese-language Hong Kong Economic Journal reported
Friday, citing unnamed sources.

The paper said the banks and the Hong Kong Monetary Authority plan to
announce the details of the package Friday.

Monday, the Hong Kong Monetary Authority said Hong Kong''s banks sold
HK$20.17 billion (US$2.59 billion) worth of Lehman-related products to
retail investors, including HK$11.2 billion of mini-bonds, whose value
plunged after Lehman collapsed last month.

Separately, an 84-year-old woman and her mentally-ill son reached an
agreement with on a partial refund from DBS Group Holdings Ltd. (D05.SG) on
derivatives backed by Lehman, the South China Morning Post reported Friday,
citing the woman''s younger son.

The paper said it is the first case of settlement, but didn''t disclose the
details of the compensation.

-By Aries Poon, Dow Jones Newswires; 852-2832-2332;

Appeal to Financial Institutions - settle through mediation

I appeal to the financial institutions to act honorably. If your sales representatives have made a mistake and have given the wrong advice to the retail investors on the credit linked securities, please step forward and offer to settle this matter through mediation.

You can buy back the securities from the retail investors at a value that is higher than the current market value. Your institution will be able to hold the securities to the maturity date and realise a better value, compared to the current value. You will be able to minimise the loss.

You should also be prepared to offer more than the current value as your institution should bear some of the loss, due to the failure to advice the investors properly about the actual nature of the product or the risk.

I am willing to act as the mediator to get the investors to agree on a fair settlement, where both parties should share the loss fairly. Most investors are willing to take a cut on their original investment.

I suggest that the amount to be paid can be the current value plus half of the difference, i.e. the investor and distributor share the loss equally. If you like to consider this approach, please send an e-mail to

A new financial system - back to the safe old days

The current financial system has collapsed. This system was built on the following:

> private capital to fund the banks
> short term deposits
> greed of bankers, taking excessive risk

The central banks have to bail out the system by putting in taxpayers' money to recapitalised the banks. The outcome - governments will be the majority owner of most of the large banks. I think that this is a good outcome (contrary to what most other people think).

I believe that the new financial system should be built on the following pillars:

> public ownership of the large financial institutions
> a limited range of low cost, fair financial products (forget about the innovative complex products designed to cheat the public)
> government guarantee for long term bonds or deposits (better still, issued by the government)
> a bigger role for government, more government control

This was the financial system a few decades ago. Let us go back to the safe old days.

Ponzi Scheme

Dear Mr Tan,

Somebody put it in a nutshell on how the fortune of this world's musical money chair came to a grid lock.. called the Ponzi Scheme! Simple anedotal way to explain a complex situation... please publish it for the benefit of those who read your blogs. Thank you!


Starting Point
The Ponzi Scheme

The crux of the fraudulent Ponzi scheme is the twin pillars of:
) Fannie Mae & Freddie Mac – the two giant mortgage corporations of USA
2) The Derivative financial tool known as Credit Default Swap (CDS)

Once you have a grasp of these two concepts, you cannot but agree that we are facing total global banking collapse. Why? Because the entire global banking system has been built on these two financial pillars! But the system became irreparable in the last 7 years when CDS became the linchpin in the massive expansion of derivative trading and financial engineering.

The Mechanics
1. Banks became greedy and were unwilling to earn safe and steady profits from mortgages for housing and commercial properties which usually spread over a period of between 5 to 30 years.

2. Banks wanted massive profits in the shortest period of time and the ability to lend massive amounts and not be regulated as to how to do it.

3. The crooks devised a scheme. It was a simple idea.

4. Banks will provide mortgages to all and sundry.

5. I am going to use a simple example and using small numbers to illustrate for ease of calculation. Thus, assuming the Bank gave out US$1 million to finance mortgages, bearing interest at 10%.

6. The bank then sold the mortgages to Fannie Mae and Freddie Mac at a discount. Fannie Mae and Freddie Mac being Government Sponsored Companies (GSCs) are able to get cheap financing to purchase these mortgages as they were assumed to be "guaranteed by the US Government".

7. Fannie Mae and Freddie Mac then package these mortgages into all sorts of structured financial products and these were sold to investors (private as well governments) . Central Banks hold massive amounts of dollar reserves and they need to find a safe haven for them. Hence, and invariably, Central Banks invest their reserves in US Treasuries and financial "mortgage-backed" products issued by Fannie Mae and Freddie Mac as well as other US financial institutions.

8. With the payment of US$ 1 million by Fannie Mae / Freddie Mac, the bank by law, can lend ten times the amount after keeping 10% reserves i.e.US$100,000. Therefore, the bank can lend US$9 million by "creating money out of thin air" i.e. by crediting the borrowers in their loan accounts in amount of the loans extended. These US$9 million loans secured by mortgages are then sold to Fannie Mae / Freddie Mac again.

The cycle keeps repeating and the banks keep creating more and more loans.

It was so easy that the banks decided to create dubious loans called "Liars Loans" whereby the borrower need not state the actual income and or ability to repay.

9. As more and more of these loans were created, investors (government and private) demanded assurances that these loans were good for investments. The rating agencies (e.g. Moodys, Standard & Poor and Fitch etc.) who in collusion with banks, gave AAA ratings to what were essentially junks. This fraud led investors to believe that these financial products were good investments.

10. The rating agencies were only too aware that this scheme needed something more concrete to prolong the fraud and induce the investors to part with their monies.

11. The insurance companies like A.I.G. came into the picture. They were seduced by the idea that if they can insure against risks of accidents, storms etc., they could also insure risks against default by the mortgage holders. Thus was born the financial innovation – Credit Default Swap (CDS). Any financial product with a sound CDS would be rated AAA. It was as good as being guaranteed by Uncle Sam. Central banks all over the world fell for it – hook, line and sinker.

12. The scheme works out like this – AIG sells protection – i.e. in the event there is a default, AIG will pay out to the buyer who buys the protection (the CDS) in exchange for the payment of premiums covering the period of protection not unlike your usual insurance policy. It was easy money for everyone.

The banks get to sell their loans and have the liquidity to create more loans.

Fannie Mae / Freddie Mac and other financial institutions get the opportunity to repackage these loans / mortgages and sells them to investors with a tidy profit.

The investors are happy with their so-called guaranteed returns. The insurance companies, investment banks and other players get their premium income for selling protection. It was old fashion mafia loan sharking and protection business dressed up in modern financial jargon and everyone was too arrogant and greedy to see through the fraud.

13. When loans default and continue to be delinquent, the law (depending on each country) provides that if the loan is in default for 90 days or more, it should be declared a Non-Performing Loan (NPL) and banks must provide reserve to cover the loss.

14. What happened was banks were covering the defaults and kept them on the books for two years or more in the hope that no one would be wiser and interest income from new loans would cover the defaulted old loans – the classic ponzi modus operandi.

15. When the two years default reached critical proportions starting with the sub-prime loans, the fraud began to unravel. Investors began demanding their protection money for the losses arising from these defaults. It has been estimated that the market value of the CDS was in excess of US$60 trillion but the capital of the insurance companies like AIG are only in the billions. It is therefore a physical impossibility to make good the demand for payment for the defaults.

16. If AIG the No. 1 insurer in US and the world is in default, it means the rest are in deep shits. You can take it as a given that no one and no one has good coverage and protection anymore.

17. When there is no coverage and protection, how can there be AAA ratings for new issues of such financial products? Fannie Mae/Freddie Mac etc. cannot package these products for sale to investors and if they cannot sell, they will have no funds to buy more dubious mortgages from corrupt and fraudulent Wall Street banks. With no additional funds, these crooks in JP Morgan Chase, Goldman Sachs, Citigroup, Lehman Bros., Morgan Stanley, Merrill Lynch, Bank of America, UBS, Barclays, HSBC, Deutsche Bank, Credit Suisse, etc. will have difficulty extending new loans.

The "Musical Money Chair" will have to come to a complete halt. The entire system gets into a gridlock.

Given the above explanation, can the US government and the Fed continue to bail out banks and other financial institutions? When US is in deficit in both the budget and current accounts, where else can they get the extra monies except by creating out of thin air (virtually by keying digits into computers) or print more dollars.

If you are a sovereign lender or a private hedge fund, knowing the situation, would you lend more monies to the US Treasury knowing that each dollar issued (whether digitally or in printed notes) are not worth the value stated therein.


The bulk of our reserves are in US dollars. Our trade – petroleum products, palm oil and other exports are mainly traded in dollars. When the dollar dives into the cesspool of waste, what then?

Caring and responsible country

Comment posted in my blog

Though I am not a Singaporean but I follow your blog with keenness especially on the issues of losses suffered by the retail investors in the structured investments.

I believe that Mr. Tan has a point and a cause to fight for. Can you imagine those retiree who has been some how misled into these investments and now they have loss all or most of their hard earn saving.

It is only right that a caring and responsible country like Singapore should act in its upmost honesty and responsibility to get at least part if not all of the money invested by the innocents investors.

While saying that I do hope country like Singapore will set as a good example that follow what Hong Kong is doing it now.

May God bless all those who has suffered not because of their faults.

Petition to MAS - review sales training and marketing processes

I have extracted the particulars of 273 investors who signed the Petition to MAS to review the sales training and marketing process of the financial institutions. I will be sending the Petition to MAS today.

It does not matter that other people did not sign yet. The number of signatories is more than sufficient.

If MAS acts and carries out the review, and found that the bank has not provided sufficient training to the sales representatives, it will be helpful to the investors who have been misled.

Investors who bought directly from the brochures or advertisements, can claim that the sales materials were misleading, and that essential information have been withheld, or were presented in a misleading way. Your case is not as strong as those who were misled by the sales representatives, but there are grounds to support your case as well.

All the best!

HK: Tsang vows to get justice for minibonds investors

Tsang vows to get justice for minibonds investors
Bonnie Chen, Diana Leeand Beatrice Siu
Friday, October 17, 2008

Chief Executive Donald Tsang Yam- kuen has pledged to help those caught up in the Lehman Brothers minibond row get justice if any criminal or civil liability is identified.

"Officials found guilty of misconduct in handling the Lehman Brothers minibond saga will be punished but it is not an appropriate time to see who should be responsible - all efforts should be focused on tackling the matter," Tsang said in response to a question by financial services legislator Chim Pui- chung in the Legislative Council.

Much as he hopes litigation could be avoided, he promised to pursue cases to the end. "If cases are found to have criminal liability, we will follow up seriously," he said.

Banks involved in the case are expected to respond today to Tsang's ultimatum on a buyback proposal.

Also, the Hong Kong Association of Banks will announce the appointment of Ernst & Young to evaluate the value of all Lehman-related products, including minibonds and equity-linked notes, or ELNs. The ELN evaluation is expected to be completed next Friday.

Meanwhile, DBS Bank (Hong Kong) has reportedly settled with two clients. In one case, a man surnamed Chan said his 84-year-old mother and 50-year- old brother had bought HK$560,000 worth of ELNs from the bank.

Chan declined to disclose the amount of compensation but said the bank told his family that it was a capital preservation product that would have interest paid every three months. He said the bank staff admitted they realized his brother had a mental illness.

A spokeswoman for DBS Bank (Hong Kong), however, clarified that as of yesterday, "the bank has not made any settlements with any parties on the grounds of alleged mis-selling."

Tsang reiterated the administration will inject capital to the Consumer Legal Action Fund if necessary. "But I hope banks will not seek litigation. Reputation is an invaluable asset to banks. It will be shameful and troublesome to banks if they go to court and it is time-consuming too," he said.

Tsang rejected Chim's idea of setting up a special court to handle the Lehman saga as impractical. Neither did he accept Civic Party chairwoman Audrey Eu Yuet-mee's suggestion of settling the problem through arbitration.

Tsang said both parties had to agree on arbitration or the case will have to be handled by the court. The Hong Kong Monetary Authority, he said, will also set up a mediation group for this purpose.

Spokesmen for the Bank of East Asia, ABN Amro, ICBC (HK) and Dah Sing Bank said they are considering the buyout proposal.

Consumer Council chief Connie Lau Yin-hing declined to say whether the current HK$16 million litigation fund would be enough to help people caught up in the Lehman scandal. She also hoped the problem could be solved by mediation.
Up to yesterday, the council had received 1,702 complaints from investors, involving a total amount of HK$12

Petition to investigate the sales training

A financial institution has announced that they will compensate investors who can prove that they have been "mis-sold".

This Petition is to ask MAS to investigate the sales training process of the financial institutions. If the training materials did not show the actual nature and risks of the products, it will show that the sales representatives had provided the wrong information or recommendation to the retail investors, i.e. misrepresentation or mis-selling.

Please read the wordings of this petition carefully. If you agree with the content, you can sign the Petition.

Thursday, October 16, 2008

Who let the sharks in?

Here is a story told by Betsybug

The maritime watchdog (the Maritime Authority or MA) has put out a warning about the dangers of sharks - "look, long sharp teeth, large mouth, strong bite. Stay away at all costs. You could be killed by these predators".

After putting out this warning, it stands idly by when a seaside resort (let's call it the Delmar Beach Sports Seaside or DBSS) lets in sharks into its swimming lagoon. They have made a huge investment by advertising this new attraction at its resort. Many holiday-makers visit the resort as a result of this promotion. Nobody notices that the sharks were promoted as an exotic dog-fish species. In a foot-note in the promotion brochure, there is mention of the dog-fish species which called by its proper scientic name, "Carcharodon carcharias". Its layman's name is the Great White Shark. However, no-one quite understood all the marine biology jargon. Everyone thought this was a safe holiday at home, far from fears of terrorism and air-crashes.

The DBSS resort tells the holiday-makers, "Don't worry, this is a unique resort attraction. You are perfectly safe as long as you stay within the lagoon. It's not like you are swimming in the open sea. Go right ahead and swim and you will have a good time". The holiday-makers, being rather trusting of this reputable resort, proceed to wade out into the lagoon. Soon, entire families were having a wonderful time, splashing merrily in the cool waters of the lagoon. Everyone thought this was a perfect holiday.

The inevitable happens - someone has a little accident and suffers a small cut. Unfortunately, the sharks detected the minute amount of blood and their predatory instincts kicked in. They begin to attack and gobble up the poor swimmers. The carnage is quite heart-breaking. Young and old are killed or are maimed and injured. The swimming lagoon is awash with blood and gore, and very few managed to crawl out of the lagoon untouched.

The resort's lifeguards are not much help - after all, this was not something they trained for. They knew about CPR and water rescues, but shark attacks were completely new to them. Ambulances were called, but for many of the victims, help came too late. In the aftermath of the disaster, the DBSS management was hard to reach for comments. They asked that all enquiries be sent to its PR department, and that all queries will be handled in due time.

Meanwhile, MA said that the families of victims or surviving victims should put in their claims for compensation to DBSS. It said that DBSS is the correct party to judge whether the claims are valid or not. It also reminds everyone that it has issued a warning about sharks. An MA official said that there is inherent risk in every activity even on holidays. And the more fun you have, the greater is the risk you run.

A prominent marine biologist, Mr TK Lynch set up a support centre to counsel and answer the questions by the bewildered families who have lost their loved ones. He helps organise support group meetings, and writes to the MA to seek answers and redress. At the time of writing, nothing has yet happened. Meanwhile, throughout the country, at many wakes and funerals, the grieving continues and many heart-rending questions are sent skywards. But no answers descend.

Fearful about speaking

Hi Mr. Tan,
I am sure, there are many who quietly hope that you would, when the time comes, volunteer yourself for election into Parliament.

Whilst some may wish that you avail yourself for the chair of the Presidency, however, I personally feel your entry into Parliament can contribute more to the betterment of the Singapore society. Time for a change in the way how our lives is governed.

In the meantime, dear Mr. Tan, I hope to see you and your fellow cohorts in Hong Lim Park as often as it possibly permit.

It is a shame to suggest that you tread carefully in your speeches, and hence I hope you do not take offence to this reminder which I am sure you are also fully aware of.

I wish you well, dear Mr. Tan

Thank you. It is shameful that in Singapore, we cannot speak honestly and have to be fearful.

MAS International Advisory Panel (IAP)

Mr Lim Hng Kiang, Minister for Trade & Industry and Deputy Chairman of MAS (Chairman of IAP)
Dr Josef Ackermann, Chairman of the Group Executive Committee, Deutsche Bank AG
Mr Jacques Aigrain, Chief Executive Officer, Swiss Re
Mr Claude Bebear, Chairman of the Supervisory Board, The AXA Group
Mr Lloyd C. Blankfein, Chairman & Chief Executive Officer, Goldman Sachs, Inc
Mr Michael Diekmann, Chairman of the Board of Management, Allianz AG
Mr James L. Dimon, Chairman & Chief Executive Officer, J.P. Morgan Chase & Co.
Mr David Fisher, Chairman, Capital International
Mr Rijkman Groenink, former Chairman, ABN AMRO Bank N.V.
Mr Kenneth D. Lewis, Chairman, Chief Executive Officer & President, Bank of America Corporation
Mr John Mack, Chairman of the Board and Chief Executive Officer, Morgan Stanley Dean Witter & Co.
Mr Shigemitsu Miki, Senior Advisor, The Bank of Tokyo-Mitsubishi UFJ, Ltd
Mr Vikram Pandit, Chief Executive Officer, Citigroup Inc
Mr Michel Pebereau, Chairman, BNP Paribas
Mr Marcel Rohner, Chief Executive Officer, UBS AG
Mr Ratan Tata, Chairman, Tata Son Ltd
Mr John A. Thain, Chairman, Chief Executive Officer, Merrill Lynch & Co., Inc
Dr Junichi Ujiie, Chairman, Nomura Holdings, Inc
Mr John Varley, Group Chief Executive, Barclays PLC

Impact of an offer to settle

Dear Mr. Tan,
If there is a settlement, does it apply to everybody or only those who signed the Petition?

If there is a proposal from the distributor, it will be offered to those who fit into a certain category (e.g. who have been misled into the investment). It is subject to acceptance by the offered party.

Some investors may not be offered the settlement, e.g. they were not misled, or may not accept the offer (e.g. it was too low).

The offer for a settlement will have no unrelated to the signing of the Petition. Any party offered can accept or rejected the offer, regardless of whether they sign the Petition.

So far, none of the financial institutions have responded to my suggestion for a mediation. So, this question is premature.

Hong Kong Chief Talks Tough on Minibonds - Bravo

16 Oct 2008
South China Morning Post
Joyce Man

The chief executive appears to be losing his patience with banks over their handling of minibonds linked to bankrupt US bank Lehman Brothers – insisting they respond swiftly to a government buy-back proposal and warning the administration may fund legal action by minibond investors.

“They cannot keep dragging on,” he said in a strongly worded message after delivering his policy address.

He said investors had waited for weeks and the Monetary Authority had found evidence of mis-selling by some banks.

“Considering this situation, I am now requiring that banks reply this week,” he said.
Financial Secretary John Tsang Chun-wah announced the proposal on Monday last week, and said banks had a week to respond.

His proposal is that banks which sold the minibonds buy them back at their current value.

Investors bought HK$12.7 billion of minibonds issued or guaranteed by Lehman Brothers. They face losing much or all of their investment. Many claim that banks and brokers mis-sold them as low-risk. In fact, minibonds are high- risk creditlinked derivatives.

A further HK$3 billion has been invested in similar, equity-linked Lehman derivatives.
Several banks have responded positively to the proposal, but none of the 16 banks that sold minibonds have publicly agreed to a buy-back. Many banks say they cannot respond until they have a valuation. A taskforce set up under the Hong Kong Association of Banks will assess the minibonds’ current value.

The Monetary Authority has received more than 9,200 complaints about the sale of complex derivatives. Mr Tsang said it would set up an independent panel to mediate with banks in cases where it finds evidence of mis-selling.

If mediation fails, the Consumer Council will help complainants apply to its consumer legal action fund, which provides help for joint lawsuits. Mr Tsang promised the government would inject money into the fund if necessary.

“It’s a positive step,” said one man who bought HK$10 million in minibonds. He would welcome a buyback as long as it left him free to pursue his bank for the rest of his money.

Mr Tsang also ordered the banks to communicate with the complainants yesterday.
One bank, DBS, has agreed to buy back similar complex derivatives once it has valued them. Citibank has agreed to full refunds if its inquiries prove mis-selling by any of its agents.

Request for MAS to give an update on the Petition

I have sent this letter to Dr. Andrew Khoo, copied to Mr. Goh Chok Tong

Dear Dr. Khoo
Several signatories of the Petition have asked me for the response of MAS to the Petition. Can you give me a progress report, so that I can communicate with them? Does MAS find the issues raised in the Petition to have merit?

Statement by DBS CEO

Posted in my blog

DBS CEO Richard Stanley says in his message dated 19 September 08 that

"While we do not know how long the turbulence will last, at DBS, we are committed to upholding the highest standards of integrity. Of that, you have our deepest assurance"

Refer to website :

Is this DBS rhetoric or do they really mean it ? I guess we will find out from the outcome of how they handle this situation

Negotiate with financial institutions

Several investors have sent an e-mailed to me, indicating that they are willing to accept 50% of their investments. They asked me to negotiate with the financial institution. They wish to cut their loss.

I am not able to act on their behalf at this time. None of the financial institutions have contacted me to take up my offer of mediation.

I will arrange another "petition" letter for the interested investors to authorise me to approach their financial instition. Please wait a few days.

Hong Kong: Minibond fix may prove a risky business

Minibond fix may prove a risky business
Thursday, October 16, 2008

The worldwide financial turbulence has triggered widespread public concern over the marketing of retail structured products - in particular, minibonds backed by toppled investment bank Lehman Brothers.

Distributors of the minibonds include local and foreign banks, as well as brokerages.

From the investors' perspective, the concerns right now are twofold. Firstly, investors are claiming they were misled into buying the minibonds - believing they actually had bought "bonds" that were low risk.

As such, they have been demanding action against the intermediaries that sold them the products. Secondly, many are also demanding back the full amount or a substantial portion of their investments.

The financial regulatory authorities in Hong Kong, including the Hong Kong Monetary Authority and the Securities and Futures Commission, have launched investigations into the possible mis-selling of the complex financial products backed by Lehman. Part of the focus is on allegations that the full risks of the instruments were not fully disclosed and explained to the investors.

The pressure is growing for the government to bail out the investors, who are not satisfied with a government proposal for the distribution banks to buy back the minibonds at prevailing market prices so investors quickly get back their money, although not in full. The banks are considering the proposal.

Regulators have been blamed for lax oversight and there are now demands for them to strengthen supervision of the marketing and selling of financial products. This has resulted in discussions as to whether a ban on banks selling complex financial products should be imposed to protect unsophisticated investors.

However, that is not an appropriate move. Firstly, access to capital is vital for financial institutions. This is why once formidable investment banks such as Goldman Sachs and Morgan Stanley are transforming themselves into commercial banks.

Secondly, many of the retail banks registered in Hong Kong are part of global and/or regional financial institutions. These institutions should be well-equipped to provide the necessary training for staff to undertake the selling process.

If we consider restricting the business of selling financial products to participants such as brokerages or independent financial advisers, I do not see how they will do better than the banks without improvements to existing regulation. The solution is to strengthen supervision of the distributors of such products, especially the selling process.

From the distributors' perspective, whether they have adequate guidelines for selling the products, have provided sales staff with adequate training and monitored staff performance should be investigated.

Parties found to have committed wrongdoings should be penalized. These investigation areas should also form the basis for new regulations.

From the staff perspective, the selling process should also be investigated to identify if it has been in accordance with the institutions' own guidelines and in compliance with regulations. Staff should be held responsible for any wrongdoings only if they are found to have not followed regulations.

As investigations are ongoing, it is premature for the government to recommend banks buy back the minibonds at prevailing market prices. Part or full compensation for losses for investors should only be considered if investigations show that investors were misled by the bank or its sales staff during the selling process.

Compensation for minibond investors before any evidence of misleading sales is found is not the way things are supposed to work in a free economy such as Hong Kong.

If intermediaries are required to buy back the products before any malpractice is confirmed and just because investments in the product suffer losses, this will have a significant and long-lasting impact on all kinds of intermediary businesses, including property agencies and brokerages.

Wednesday, October 15, 2008

New "petition" to collect particulars of investors

I have created a new "petition" to collect updated particulars of investors of the credit-linked securities.

I wish to invite investors who signed the Petition previously and new investors who missed the earlier Petition, to provide your particulars again. I am using this platform to collect particulars. I am NOT organising a new petition.

Click here:

Jubilee Series 3 LinkEarner Notes

At the request of an investor, I draft this letter for your use. You can sign and send it to the trustee. Please send it on your own, immediately. I am not organising a collective letter.


HSBC Trustee
(take the address or fax number from the letter that you received from them)


I am an investor in the above Notes. I was informed by the distributor that the redemption value of my investment is nil.

My particulars are:
Account reference:
Amount invested: $

I wish to ask you, as the trustee, to provide the following information to me within 14 days:

a) A full statement of account showing the money invested by all the investors into the Notes, the charges that are taken out of the fund (showing the amount, payee, purpose of payment), the investment of the fund (showing the amount invested and realised value, and loss incurred) and other relevant information.

b) Why were the investors not informed earlier about the intention of the arranger to liquidate the underlying assets? What is the provision of the trust deed relating to this matter?

c) Why were the assets liquidated at this time, when the prices are at rock bottom, due to the lack of liquidity? Was it possible to wait for a better time to liquidate the assets? Which were the parties that bought the assets? How were the prices of these assets determined? Which broker handled the transactions?

d) Please provide details of the underlying assets that led to a total loss of the principal invested in these Notes.

I wish to register my protest at the disposal of the underlying assets at this bad time, and want to be assured that, as the trustee, you have dischrage your fiduciary duty in looking after my interest in the disposal of the assets.

(name of investor,

cc Monetary Authority of Singapore

Facilities at Speaker's Corner

1. Can we use the stage, instead of the grass mound?
The stage belongs to the community center. I asked the manager, but he told me that it is not available for booking for the purpose of giving a speech.

2. What are the contingency plan in case of rain?
Bring an umbrella. Wait for the rain to stop.

3. Can we book an indoor auditorium or hall?
It is quite expensive. Can cost $2,000 or more. We do not have the budget.

4. Can we use a sound system?
The NParks does not allow a sound system.

Strategy Committee for CLS

Latest: I have sufficient members for this committee for the time being. Thanks for responding.

I wish to ask for volunteers to serve in the Strategy Committee. This committee will meet once a week to discuss the strategy to be recommended for the retail investors. It should comprise of people who are knowledgeable about law or the financial market.

If you are willing to serve in this strategy committee, please send your particulars to

Your name
Amount invested, product, distributor
Any special expertise?

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