Tan Kin Lian's Blog: Collapse of Pinnacle Notes Series 3

Thursday, December 17, 2009

Collapse of Pinnacle Notes Series 3

Hi Mr Tan,

Just when the public thought the toxic structured products saga has been settled, another one of the Morgan Stanley's Pinncale Notes Series has gone into mandatory redemption. Hong Leong Finance, one of 7 distributors of the Series 3 has informed me(see attached)that there is a mandatory redemption event and investors will lose all or substantially all their original principle invested. This happened not because of a reference entity like Lehman has collapsed but simply because the Notes have invested in a lot of unknown companies that have now defaulted.

Many S'pore investors are just being told of this shocking Christmas present and more bad news may come as Series 2 and 6 are also sinking.

Please post this in your blog as the creator and distributor of this product should not be allowed to get away with this. They used big corporate names as Reference entities to misled public into investing the product but actually invested something else!

36 comments:

Anonymous said...: You have my sympathy as we are also
conned by Hong Leong Finance in the PRU3 and Minibond investment by
Kay Hian brokerage firm.
But we are helpless and resigned as the Govt have refused to help,
MAS instead encouraged us to sue.
We have been let down by long-time
friends who sold us the investments and who turned away when things go wrong, not even talking to us.
We believe in retribution, let God
be the judge.; December 17, 2009 9:36 AM
Concerned said...: Morgan Stanley is still standing strong in Singapore doing all sorts of business they are good at in the CBD. Why allow it, unlike Lehman Brothers which goes into bankruptcy.; December 17, 2009 9:56 AM
Anonymous said...: Fellow Singaporeans. The investors and FI's employees are all victims of the whole saga.

When I helped my wife in the complaint process, I can see the FI's employees are tongue-tight, ill-conscience and drained by the process of complaint handling. The complaint process put the investors in crossed-path with the FI's employees, many are just like the investors trying to make a living. The time-cost, salaries, Fidrec contributions, lawyer fee, social costs could well all add up to be higher if FI were to give 100% compensation. Really sad to see Singaporeans pitching Singaporeans.

I have no answer to this saga. I can only say we are all victims. May God help us. CASHEW NUTS; December 17, 2009 10:21 AM
Anonymous said...: Election is around the corner. I will let my vote do the talking. Sad days indeed for many investors.; December 17, 2009 12:41 PM
Anonymous said...: REX comments
To all intents and purposes, i think Pinnacle 6 notes has aleady collapsed since many many months ago, even though mandatory redemption not activated. To my knowledge, residual values of all these notes had been less than 1% for a very long time, nothing new had changed even compared with the Series 3 notes. There is no difference between 1% and 0% for practical purposes, one doesnt have to wait for the "official letter of mandatory redemption". ALL Those notes are long since kaput!!

I'm trying to get back more from Hong Leong for a relative of mine. They called for interview already and we met them for 2 hours to discuss how to settle. To be frank, they were quite polite and helpful. They said it would take 3 months to make a decision.

REX; December 17, 2009 1:06 PM
OneOfTheVictims said...: I'm one of the victims. Went to Hong Leong to place a FD but was psychoed to buy the notes as the financial advisor told me it's tied to the 7 banks which make the notes very secure!! How can I seek help as I do not qualified under the vulnerable group (Primary school education, over 70 etc)?; December 17, 2009 1:56 PM
Anonymous said...: Some even used IFA unethically to mislead people.
They know the products were risky, so they sell via IFA to gain people's trust, and to eran big commission.
Ill-gotten money will not last!!!!!; December 17, 2009 1:57 PM
A Singaporean said...: Apparently, the same Christmas nightmare is being unraveled in Hong Kong under the name of Octave Notes. Well, well, well. How low will Morgan Stanley go?; December 17, 2009 3:15 PM
Anonymous said...: For affected investors first step is to write to the distributors and wait for their reply. If claim is rejected proceed to Fidrec. Long process no doubt but you hv no choice as the authorities are not going to help.; December 17, 2009 3:22 PM
Anonymous said...: An important lesson from the minibond compensation is that investors who are proactive in organising investors to fight for fair compensation are likely to be offered better settlement terms.

Conversely if you sit back and keep quiet, then the FI is likely to offer you very poor compensation.; December 17, 2009 3:53 PM
Anonymous said...: Election may be aroung the corner. But I am not sure PAP is afraid of this Minibond saga afterall only 10,000 investors are involved.; December 17, 2009 5:03 PM
Anonymous said...: How many political leaders are appointed as adviser to big banks like MS, Citigroup etc? There is a conflict of interest in their .......and .....; December 17, 2009 5:08 PM
Anonymous said...: Sorry if this comment is not directly appropriate in this column. for minibonds holder, did anyone asked this very important question: " Why did the trustee and PWC unwind the position of minibond". Who specifically ask them to? I think it is pretty clear who influence them to do it (while claiming that as a regulator, they have no power)

I see the unwinding as the same as your broker selling your stocks for you without your permission and telling you that it is good for you!

Someone should seriously studying this and perhaps a class-action will bring out more details.

To me, the trustee and auditor are in no position to do anything on behalf of the minibond holders without explicit permission; further they did not provide any valuations or indicative worth of minibond. If the stock I bought at $1 is worth one cent, selling it only means that I have no chance of recovering it. Case in point is DBS HN2, at its lowest point, it is probably worth only 8 cents to the dollar but it has since been redeem at full value. The main point is that no information was provided throughout the whole saga; in the end one just had to accept it. This seems to be the same style as our garmen.

So my key question is who authorised the trustee and PWC to unwind the position? I believe that the regulator indeed played a huge part in "influencing" the trustee...The "half bake" action taken by our regulator simply goes to show how incompetent they are. We are far behind HK, Taiwan and the mainland when it comes to solving the entire credit linked notes problem.

Yes, the election is near by.....; December 17, 2009 6:41 PM
Anonymous said...: The facts remains - we loss money.
Why? How?
Anyone beneifted?; December 17, 2009 8:52 PM
Anonymous said...: i don't disagree that we all lost $. But it is your choice what you do next.....I had huge amount of paper-lost when the market crash, but i cannot blame anyone because I went in with my eyes wide-open....but not the case for all this credit-link products. Highly complicated and toxic....

Like my previous post, I had since move on, but i will never forget.; December 17, 2009 10:35 PM
Anonymous said...: I am one of the Notes owner and we were seen as losers when LB collapsed. As time passed, with the help of Hong Lim Park gathering, private suit and more information on these toxic notes helps to change public mindset on us i.e. they realized there were lots of misrepresentation. Due to my limited resources, I stick to FIDREC even though I thought it was hopeless as FIDREC is funded by FIs. In addition, investors who done their adjudication in 2nd Quarter were not impressed as they were given no or low compensation. Few months ago, I done my adjudication. I was compensated fairly and I move on. It felt good especially when I gave a good rundown of my FI people during the adjudication meeting.

So, my suggestion is for Pinnacle victims to go to FIDREC and file your case. You have nothing to lose and it is a way you can voice the injustice done to you during the selling process. At the end of the process, you can still decide whether to accept or reject the judge judgement. After 6 months of adjudication and public education, I felt the judges are fairer now. Sitting, waiting and hoping is not going to help. If injustice has been done, voice out and go after those people responsible. Banks and FIs will continue to take short cut by compensating you nothing or less then what you deserve.; December 18, 2009 10:32 AM
Anonymous said...: Whether your experience with FIDREC is good or bad is like "tikam tikam".
I went into adjudication room and found the FI reps and the adjudicator joking with one another.
During the interview, the adjudicator guided the FI against me.
The retired judge appeared unintelligent and anxious to get the interview over quickly.
I got nothing and the adjudicator got paid for easy work.; December 19, 2009 8:06 AM
Anonymous said...: Same experience for me. Instead of being fair in the hearing the Judge actually told me to me he has already heard all he needs to hear about toxics product and he wants to hear something fresh....whether any miss-selling on the part of the FI. My FI is a broking house. When I mentioned that the marketing material clearly mentioned the reference Entities and since the FIs name are printed on the material the FIs are accountable to the misrepresentation, the Judge asked me back -so think you shd complaint against the arranger or who ? The whole experience really sucks. Independent as what our elite party claim ? I can say from my experience the Judge may not even have made any serious attempt to read and digest your letters of complaints. Judges are too legalistic. I understand investors are more successful if their case is heard by lawyers.; December 19, 2009 12:21 PM
Anonymous said...: Prospectus and Pricing Statement are too complicated for some of the adjudicators, do not expect them to know too much of this toxic products! I heard some judgements even mentioned FI's were not responsible for the toxic products. Their job is to sell and make commission???; December 19, 2009 12:51 PM
Anonymous said...: For those suay suay who currently holds other toxin instruments besides the Minibonds, do be prepared for a long battle ahead.

The FIs have compensated quite a substanstial sums for trafficking these products.

With future claims coming in, rest assured they are not going to make life simple for the claimants.

They will want to "bite off" your ears for listening to their RMs; purchase the notes recommended and then start seeking for compensation.

(From the Chinese Almanac, once upon a time, a mother visited her son in prison (with all the prison bars). The son asked the mother to lean forward and the lady obliged.

What happened next? The son bite (off)the mother's ear. The mother asked why? The son said this was to reciprocate for all the years the mother had been listening to blindly him and which had led him to end up in goal. -my dad explained the Almanac pictures to me about 50years ago).

Do your homework. Go through whatever sales documents you have and tick out all discrepancies and contradictory statements in those documents.

Unless you are prepared to go thro the legal process, then there is no choice but to present your case factually on the circumstances that lead you to the purchase.

Generally statements like public opinions on "misleading" will not help you win your case. This is your hard earned money. Do not give up.

Get yourself real prepared for those interviews with the FIs. Put your facts clearly on paper before you attend any interview.

In this way you will have a better chance of getting your message across.

I've gone through 2 "financial" battles and frankly, it's just very stressful.; December 19, 2009 4:40 PM
Anonymous said...: Blame the regulator for all this. If the regulator has done a good job by regulating the salesmen and the FIs none of these would happen.
The problem is salesmen were selling these products and there was no advisory need analysis before the product was recommended, ie, the product must come after the analysis. Unfortunately the product was pushed upfront. The process was wrong. You wouldn't know which product suits the customers until finding out his or her needs. Like the doctor, he wouldn't know waht product to prescribe until he finds out the illness.Imagine the doctors peddling products and make a living pushing drugs and medicine that earn high commission.
This process is supposed to be controlled by MAS and MAS failed .
Why??????
The truth is MAS was helping the FIs to push products and product pushing and peddling is FASTER, CHEAPER and BIGGER.
Who benefited from this process? The salesmen....and the FIs.
The suckers?????? the suckers are YOU.; December 19, 2009 6:57 PM
Anonymous said...: Somebody made mistakes, we suffered.
The innocents & the ignorants suffered.; December 19, 2009 10:47 PM
Anonymous said...: We have to thank Mr Tan for having this blog to educate us on this subjct. It is a great source of information for us.
Thank you Mr Tan.; December 20, 2009 7:42 AM
Anonymous said...: To blame MAS is a waste of time as they are not going to lift a finger to help while continue to draw salary from tax payers. Regreting buying Pinnacle Notes is something one has to get over as hard earn money is already stuck there. Going forward, even though it is stressful at times, you must fight for what you believe is rightfully yours. If you own Pinnacle Notes and has no resources to get a private suit, what are you going to do? Wait for MAS to implement the same solution as Hong Kong SEC? Remember who owns DBS? In my opinion, DBS HN5 is a dead end. Same goes with the HN5 private suit. How can the Civil Servant Judge punish DBS for misrepresentation while DBS is represented by Davinder Singh who has never lose a case? If you don't fight for your own right, who will? What is going to happen to your hardearn money if you sit on your hand and wait for someone to recover for you? Nothing will happen. Remember TKL done a series HL park sessions. It is to help us to help ourselves. Good luck and best wishes.; December 20, 2009 5:00 PM
Anonymous said...: Election fever is brewing. Do what is right ! Rope in your family's support !; December 21, 2009 8:17 AM
Anonymous said...: Mr Tan

Firstly, I would like to thank you for providing this blog to help us getting connected and educating us on this kind of financial products.

I realise that I am not the only victim of this Pinnacle Notes Series 3. I would like to seek your advice on how we can act together to protect our interests and fight for our rights instead of waiting and hoping...

I bought this note from Hong Leong Fiance and was given information that this note is credit-linked to 7 seven referece entities: Standard Chartered Bank, HSBC, Bank of China, The Korea Development Bank, Malayan Bank. DBS and UOB. Moreover, these banks do not have any issues of failure to pay, restructure or bankruptcy.

I would like to seek your advice on how we can get back what we have invested from Hong Leong Finace - one of the 7 distributors of the Morgan Stanley's Pinncale Notes Series. Does Hong Leong
Finance (distributor) has to share their legal responsibility for selling us this finanical product that gone into mandatory redemption events.

Thanks in advance for your advice; December 21, 2009 9:31 AM
Anonymous said...: Hi, I am not a PNotes victim but a MB.

From what I have gone through since Sept 08, the below are the possibilities:-

i) Complaint to HL finance for FA mis-rep and mis-sell.
ii) Once HL Fiinance reject your complaint, go to FIDREC at 112 Robinson road to file complaint against your FI.
iii) FIDREC wil try to negotiate and if it fails, pay $50 to go to Adjudication meeting where a semi-retire Judge will listen to both parties. After 1-2 months, Judge will make a judgement which you can accept or reject. Judge's decision is binding to FI i.e. FI must fulfil if you accept the judgement.

Alternatively, you can approach Campus Conrad, the lawyer helping MB and PNotes now.

Regards,; December 21, 2009 2:47 PM
Anonymous said...: You can seek compensation from your FIs first before approaching Conrad Campos if you lost money to pinnacle notes. He is suing Morgan Stanley, not the distributors.

so, (1) contact your FI, (2) meet them and seek compensation, (3) go to FIDREC, and get some money back if your could. (4) use the money you get to sue Mongan stanley with the help of Conrad campos.; December 21, 2009 5:34 PM
Anonymous said...: To those current victims, what are you waiting for? What are you hoping for?

Pick up a pen and a piece of paper, and start writing up your case. Send out your letter to the FI concerned immediately.

Follow the same step as MB.

The earlier you proceed with the complaint, the earlier you end your distress.

As I had commented, will be a hard time ahead. Do it now unless you are willing to throw away your hard-earned money.; December 21, 2009 11:09 PM
Anonymous said...: PNotes owners should know that nothing is going to happen from now on. PNotes/MBNotes are history. The door to complaint is closing slowly. Once this window is miss, there is nothing much you can do.

For me, I owned MB Notes and I did everything and anything until I received my compensation fairly. I refused to accept my bank rejection of my complaint. I was ignored by the bank in the first FIDREC negotiation i.e. no a meeting held. I worked and fought hard in the Adjudication meeting. The Judge believed me and my FA admitted they were wrongly trained. My case has closed but I have the satisfaction even though I still lost money.

I am wiser now about investment.
I stopped trusting FA or RM except myself
I looked at banks & FA differently now.

Some years from now when I looked back, I am glad I have tried my very best to seek what is rightfully mine....; December 22, 2009 1:45 AM
Anonymous said...: All these structures are meant to lure the unwary investors. One of the Pinnacle notes series even boldly printed Temasek and Singapore Government as Reference Entities. Don't tell me these names are used without their knowledge and consent ? Investors suffered total lost in their savings.For me these are money for my retirement. Where is justice ? Morally the authorities are also involved. But do they care ? I hv since lost trust in the govt.; December 22, 2009 8:37 AM
Anonymous said...: "One of the Pinnacle notes series even boldly printed Temasek and Singapore Government as Reference Entities. Don't tell me these names are used without their knowledge and consent ? "

I wonder why no one come forward and clearify whether such reference entities receive any commission for putting their names there? Again and again, people I met in Hong Lim Park told me the ref entities do earn something for having their names on the brochure. Probably they knew the risk and the nature of the products but did not know the product owner & FA misled the investors in order to close deals. This is my opinion.; December 22, 2009 9:05 AM
Anonymous said...: We bought our pinnacle notes from UOB kay hian, a brokerage. Do we have a weaker case than those that bought pinnacle notes from a bank? Please shed light on this issue if you know the answer. Thanks.; December 22, 2009 1:13 PM
Anonymous said...: Do read the MAS investigation report dated 07 July 09. It contains lots of information I used during my adjudication meeting. Generally my understanding is the FIs are responsible when the FAs is not properly train, misrepresenting the facts and misled the customers. The bank may be execute-only and pass the selling to LFAs, but they are responsible for the product. Do read chapter 9 on OSPL investigation.; December 22, 2009 7:18 PM
Anonymous said...: The chances of getting some compensation is higher if you bought the notes from the banks. For those who bought from broking house it will be a challenge as they will argue that they only act as executor.; December 22, 2009 10:33 PM
Anonymous said...: 10:30pm. I think those who bought from brokerages can argue that the names of the brokerages are displayed on the pinnacle notes advertisements. by association, they are as responsible as morgan staley for the untruthful advertisements, and therefore should offer compensation.

they are not just an executor. an executor would not lend its name to the issuer when the product is advertised.; December 23, 2009 9:41 AM

Thursday, December 17, 2009

Collapse of Pinnacle Notes Series 3

36 comments:

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