Saturday, December 13, 2008

Public transport in Singapore

I have resumed my postings in this blog:

Do visit it regularly and give your feedback and views.

Guide - how to lodge a complaint on credit linked notes

If you wish to lodge a complaint on credit linked note, you can refer to this guide:

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.

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, 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.


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,

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.

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

New online form (optional particulars)

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

Volunteers to help in getting signatures:

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. ...

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

Friday, December 12, 2008

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

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.

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

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

December 12, 2008
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

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%

Thursday, December 11, 2008

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

Why we need a minimum wage policy in Singapore

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%

Wednesday, December 10, 2008

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:

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

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.


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.

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.

Gilbert Goh

Tuesday, December 09, 2008

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:

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:

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.

Monday, December 08, 2008

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?

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:

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.

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.

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?

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:

Sunday, December 07, 2008

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

.... 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:

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?



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:

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