Saturday, January 17, 2009

SCMP:Singapore ruling on minibonds bring HK hope

Fox Yi Hu

Holders of Lehman Brothers minibonds in Hong Kong have been cheered by news that one in four Singaporean complainants will receive a full refund from banks which fraudulently sold them the products.

They hope the Hong Kong government will be pressured to speed up the handling of their complaints about sales of similar investment products backed by bankrupt US bank Lehman Brothers.

The Monetary Authority of Singapore yesterday said financial institutions would make full or partial settlement to 58 per cent of complainants. It said in a statement that 25 per cent of complainants would get all their money back and 33 per cent some of their money.

“Almost all elderly investors with little income, little formal education and little investment experience have been offered full or partial settlement,” the statement said.

By Wednesday, 10 financial institutions that sold DBS High Notes 5, Lehman Minibond programme notes and Merrill Lynch Jubilee Series 3 LinkEarner notes had received 5,381 complaints, according to the Singaporean central bank.

It said Lehman minibond programme notes worth S$508 million (HK$2.63 billion) had been issued. Of the total issue, S$375 million was sold to about 8,000 retail investors through nine distributors.
Hong Kong resident Chan Hongyuk, 63, who spent about HK$1.2 million buying minibonds through Bank of China (Hong Kong), said he hoped the local government would follow suit. “It seems the Singaporean government is willing to help the victims but our government ignored us,” Mr Chan said. “ Now I feel a bit more encouraged. I thought I might lose all the investment.”

Housewife Ms Yan, who bought minibonds through Citic Ka Wah Bank, said she hoped the Hong Kong government would act more decisively after Singapore had set an example.

“We took to the streets a few times but the government seemed to be dragging its feet,” said Ms Yan, who is in her 40s. “ If the Singaporean government has assumed its responsibility and looked into problematic sales, the Hong Kong government should do something.”

Ng Siu-shin, who bought minibonds through four banks, said Singapore’s quicker pace had set Hong Kong an example. “ It shows Hong Kong how another government is working,” he said.

Minibonds are not corporate bonds, but consist of high-risk creditlinked derivatives. They are marketed as a proxy investment in well-known companies.

Difficulties faced by migrant workers

The Online Citizen has many stories of migrant workers who faced a difficult time in Singapore. There is a racket where the migrant workers were misled into paying a lot of money to come to work in Singapore for jobs that did not exist.

While Singaporeans complain about losing jobs to migrant workers, we should also spare a thought for these workers who borrowed a lot of money to come to work in Singapore. In some cases, they were cheated by people who made money from them through scams. 

I hope that the Government will put a stop to the exploitation of the migrant workers.
Cast your vote here:

Blog will hit 1 million visitors by 23 Feb 2009

Earlier, this blog was expected to hit 500,000 visitors by 11 Nov 2008. This was hit much earlier, due to the minibond crisis. 

Based on the current trends, this blog is expected to hit 1 million visitors by 23 Feb 2009 (i.e 3 months after the earlier target date).

Complaint on mis-selling of CLN

MAS has announced the decision made by the financial institutions on the 5,000 complaints received from the holders of the credit-linked notes (i.e. minibond, high note, jubilee note).

The other holders who have not lodged their complaints can still lodge them now. If you do not know how to lodge this complaint, I suggest that you see a lawyer to prepare a statutory declaration containing the truthful 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?

This declaration can be used to support your complaint to the financial institution that sold the credit linked note to you. It can also be used for your complaint to the Financial Industry Dispute Resolution Center (if you have to take it to the second stage). As this statement is made under oath, it is likely to have a stronger impact.

However, you should take note that it is not compulsory for you to have a statutory declaration).

You can contact the following lawyer:

Fee $150 plus GST plus disbursement (total $201.55)
Assomull & Partners
111 North Bridge Road
#22-04/05/06 Peninsula Plaza
Singapore 179098
Contact Person: Ms. Lauereth Loh, Tel: 63394466

You can also contact any of the lawyers listed here:

Here is the guide for lodging a complaint to FIDREC:

Queen's Counsel opinion

My lawyer contact has sent a request to the Queen's Counsel a week ago. We have still not received a reply from the Queen's Counsel on the cost of the opinion. Hence, the QC opinion will not be ready this month. I hope that it can be ready next month - provided that the cost is within budget.

Full refund of $100,000

Dear Mr. Tan,

My mother-in-law obtained a full refund of $100,000 from the financial institution on the minibond that she bought. We positioned our complaint based on the advice given in your blog. (Specific details have been removed, due to non-disclosre requirements). I wish to thank you for your help.

Thought for the day - who will speak the words that need to be heard?

" If reporters don't report and universities don't debate; if the "open society" is really just a hushed conversation within a gated community; if information is ground under by right-wing think tanks - in short, if power is admired and truth despised - then who will speak the words clearly that need to be heard"
Roger Langen 
Contributed by Ho Cheow Seng

Friday, January 16, 2009

MAS statement: Compensation for credit linked notes

Further details of the compensation are shown in MAS website:

According to the MAS statement, the investors would be informed about the compensation offer in stages over the next few weeks. This could explain why so few investors have received their offer of compensation so far.  

Mis-selling of structured products

Almost all elderly investors with little income, formal education or investment experience were compensated.
By Francis Chan

MORE than half of the reviewed complaints of structured products of Lehman Minibonds, DBS High Notes 5 and Merril Lynch Jubilee Series 3 Linkearner Notes have received some compensation, said the Monetary Authority of Singapore on Friday. In the latest update, MAS says 58 per cent of investors who have lodged complaints of mis-selling to the financial institutions that sold them the products have received a full or partial settlement.
About 25 per cent of those received full settlements, while 33 per cent got partial settlements.

According to the MAS, almost all elderly investors with little income, formal education or investment experience have been fully or partially compensated.

MAS deputy managing director for market conduct, Shane Tregillis said: 'MAS is satisfied that FIs have carefully reviewed the complaints based on principals of fairness without taking strict legal positions. This is reflected in the settlements offers that the FIs are making to the investors.'

Thursday, January 15, 2009

Learn about insurance

You can find some common concepts explained in a simple way in:

Investor wants to sue the relationship manager

Dear Mr. Tan

Seek your views on the following:
Q1 Can sue the RM personally for mis-selling and mis-representation, if I am not happy with FI investigation.

Q2 If I sue the RM, do you think the FI will defend her or the RM has to defend herself.

Q3 Do you think Leonard Loo is a possible choice, or get another lawyer?

Actually, money loss can be earned back. It saddened me that many uncles and aunties may not even know they are intoxicated OR those who are intoxicated may not know how to fight on ground of mis-selling and mis-rep which is a legal concept.

I think MAS is making it worst for investors. Imagine, we are cheated, now we have to prove that we are “idiot” ie “vulnerable or mis-selling or mis-rep” to get back our money?

"Pinnacle Action Group" formed to work on a possible Class Action

(1) A working committee of 6 investors (informally called "Pinnacle Action Group") have come together to work on a possible class action for Series 1,2,3,5,6,7,9 & 10 of the Pinnacle Notes. Series 9 & 10 have been declared worthless and the other Series were notified in December 2008 that they are close to but not yet declared worthless. The fate of these other series now hang in the balance. The group feels that we cannot allow this tragic event to go unchallenged

(2) We have briefed several Senior Counsel (SC)and the proposed class action will,unlike the case of Minibonds, be against the arranger of the Notes, viz Morgan Stanley Singapore. An official website to facilitate the organizing of the proposed class action will be launched as soon as one of the SC briefed has been appointed to take on the case.

(3)The proposed class action will target 1000 or more affected investors in the various series to join in .The legal fee structure proposed will be simple and affordable - perhaps as low as only about $1000/- per head - on an all-inclusive basis right up to appeal stage , win or lose. To do this , we need 1000 or more to join in. The process will also be kept simple and the issues raised will be easy to understand for all who wish to join in the proposed class action and try and recoup their losses.

To be kept informed, before the launch the official "Pinnacle Class Action" website, Pinnacle investors are urged to contact us at the email address given below. Please provide us with your:

(a) name; (b) Series bought; (c) email address, and (d) contact tel

Thank you.

"Pinnacle Action Group"

(J C Chan, S Tan, C S Lim, P Loh, B T Tee and C Y Boey)


Going to extremes to find a job

Wednesday, January 14, 2009

Value and character

I teach a course in Singapore Management University.

Apart from the syllabus of the course, I like the students to learn some values and tips that will be useful for them to cope with the challenges of life.

I will share some of the values that guide my character. I hope that these values will be useful as a guide to the students. 

How to identity a bubble

Someone asked, "How to identify a bubble?"

The answer: "Nobody knows". Alan Greenspan, the former chairman of the US Federal Reserve Board said that one knows a bubble after it has burst. This is not helpful. It turned out to be disastrous, as the bursting of the US housing bubble has led to the global financial crisis.

Is there a rule of thumb to identify a bubble? Nobody has dared to stick out his thumb. But I shall try.

You get a bubble when the current price is 50% or 100% higher than the average price for the past 5 years. Maybe, we should look at the actual statistics and see if 50% or 100% is a better indicator.

For example, the average oil price during the past 5 years prior to 2008 must be around US$40. When it exceeded US$80, it was a bubble. After it burst, it returned to US$40.

When the high end property prices in Singapore doubled in value in 2008 compared to the past years, it was a bubble. It burst soon after.

A new way to do business - by conference call

I have to discuss a business proposal with a Telco. Their marketing managers were busy and could not find a convenient time for a meeting. We decided to have a conference call. It went smoothly. There was no need for a face to face meeting. This is a new way to do business. It is more efficient.

Thought for the day - Injustice

If you are neutral in situations of injustice, you have chosen the side of the oppressor. If an elephant has its foot on the tail of a mouse and you say that you are neutral, the mouse will not appreciate your neutrality:[ Bishop Desmond Tutu]

Contributed by Ho Cheow Seng

Tuesday, January 13, 2009

Invest in assets at deflated prices

In normal times, investment in shares give a dividend yield of around 3%. In a crisis, when the share price dropped by 50%, the dividend yield increase to 6%. It is likely that the company will suffer lower profits, so the dividend will be reduced. After reduction, the yield is likely to be still quite attractive.

If business conditions are bad, the company has the choice to reduce their cost by downsizing their operations. When their profit stabilizes, their share price will also stop dropping. When the profit increases with the return of economic growth, the share price will show a good gain.

It may take a few years or longer, but it will eventually happen. In the meantime, the dividend yield will continue to be quite attractive. To avoid the risk of selecting the wrong shares (i.e. of a company that may go bust), it is important th diversify the investment into a fund (e.g. an exchange traded fund).

My view: Invest when the share price is deflated, due to the pessimistic situation. Invest for the long term.

Beware of bubbles

A bubble occurs when market prices are inflated beyond their real values. This has happened with the property market, stock market and more recently, with the commodity market, oil market, China stockmarket and India stockmarket.

All bubbles will lead to a collapse. All the markets mentioned above have collapsed.

Many people may not realise that there is another safe market that is in a bubble. It is the Government bond market. Due to risk aversion, many people put their money in long term Government bonds. The excess demand has pushed up the price and reduce the yield.

If the long term yield for safe Government bonds should be 4% (to cover inflation and cost of money) and excess demand causes the yield to drop to 2%, the price has gone up by about 25% in the case of a 15 year bond. If the yield returns back to the real value of 4%, the price will drop by 20% to get back to the normal level. It is possible to have a bubble in safe investments as well.

If you are caught with long term bonds yielding 2% (and the market price has dropped by 20%, you still have the option of keeping your money at the low yield of 2% for the 15 years).

Lesson: Avoid bubbles. Avoid paying a high price for your investment. Take a long term view.

Insurance that worsen crunch

Read this article. It explains the challenges faced by the economy during the global credit crisis.

Insurance that worsen crunch

The solution? Credit insurance should be operated by the government as a non-profit business.

SCMP:Regulators' reports raise more questions than answers

13 Jan 2009
Enoch Yiu

The two regulators' reports on the Lehman Brothers minibond fiasco have raised many questions but failed to find a solution to prevent a recurrence of the problem.

The 83-page report by the Hong Kong Monetary Authority and the 76-page report by the Securities and Futures Commission have been dissected and analysed since they were published last Thursday.

The stakes were high - the government ordered the two to report on the issue after 43,000 investors suffered losses from minibond products issued or guaranteed by Lehman, which collapsed in September.

But White Collar is disappointed the reports offer too few effective solutions to prevent such events from happening again. In fact, they only raise the prospect of a power struggle between the HKMA and the SFC on how to regulate banks' selling of similar types of products in future.

For one thing, the reports show that the regulators have no intention of banning complicated products such as the Lehman minibonds being sold to retail investors, which White Collar believes is the core of the problem.

A key complaint about the Lehman minibonds was why such a product, which are derivatives of credit-linked notes, could be sold to a 90-year-old housewife or 88-year-old retirees through bank branches as an alternative to time deposits.

Under the current regulatory system they did not need any regulatory approval, just the SFC green light on the marketing material.

Both the HKMA and the SFC say such an approach is good enough as they claim it should be the intermediaries who should see to the suitability of the products for investors. The two regulators also argue that investors may mistakenly believe that products approved by the regulators are safe.

The regulators said this was in line with international practices but White Collar urges our regulatory friends to rethink.

Unlike markets in Australia, Britain or the United States, where retail investors invest through fund products, Hong Kong retail investors are trading all types of investment products. This makes Hong Kong different from other markets.

If the regulators relied on intermediaries to recommend suitable products for clients, it is tantamount to downward delegation and this paves the way for mis-selling.

Such a disclosure approach is only adopted in the stock market - all listed companies in Hong Kong must first get SFC and stock exchange approval for them to go public and sell shares to investors.

Why do other investment products such as Lehman minibonds or derivatives such as accumulators not need regulatory approval before being sold to investors?

Britain is consistent with the disclosure base regulatory philosophy adopted by the Alternative Investment Market (AIM) which allows companies to list without regulatory approval. They only need to disclose information and to have a sponsor support their listing. In Hong Kong, the stock exchange has rejected the AIM model during discussions to reform the Growth Enterprise Market, saying that many retail investors are not ready to move to such a model.

If they are not ready for a Hong Kong version of AIM, they are also not ready for minibonds or accumulators.

What the two reports will surely lead to is a power struggle between the HKMA and the SFC on how to regulate banks' securities departments.

The HKMA said it should be the sole regulator and should take over the SFC's power to investigate and punish bank staff involved in securities dealing.

But the SFC said banks should set up subsidiaries to handle investment sales and let the commission regulate it. Neither proposals are perfect.

If the HKMA proposal is adopted, then it is bound to be opposed by stockbrokers as the HKMA would no longer use the same standards that the SFC applies to brokers. What is more, how can the authority punish banks?

While the SFC can publicly reprimand, revoke or suspend operations of brokers and their staff, such actions would be difficult to impose on a lender as that would affect the public's confidence in the lender, which may well lead to a bank run.

If the government adopts the SFC model, then the HKMA would not have the full picture on all operations of the bank and there may be a danger that losses incurred in the securities subsidiaries may affect its parent banking group.

The two reports have raised more questions than answers.

Monday, January 12, 2009

Part Time Work

There is strong interest in looking for part time work $6 to $10 an hour, preferably near the home. I will approach someone to create a portal to allow the matching of part time workers and employers.

I hope that this will create a new type of employment. The employer can engage a part time worker initially, and offer full time work if the worker is found to be suitable.

Sunday, January 11, 2009

TABS - Taxi Automated Booking Service (8202 8866)

You can test TABS now by sending a zone code (from 01 to 82) to TABS 82028866. If a taxi is available, you will get a SMS stating that a taxi will call you on your mobile phone. Actually, you will get a dummy taxi (during this testing period). You will get the SMS, but there is no actual taxi at this time.

If no taxi is available, you will be placed on the queue for the next "dummy" taxi to be available. You should get a SMS within 5 minutes.

Give it a try. The zone should be the first two digit of the postal code of your home, office or wherever you happen to be.

Send ZZ (01 to 82) to 82028866. Test the system now. It is FREE.

Hilarious sayings of George W Bush

And they have no disregard for human life."—Describing the brutality of Afghan fighters, Washington, D.C., July 15, 2008

I remember meeting a mother of a child who was abducted by the North Koreans right here in the Oval Office."—Washington, D.C., June 26, 2008

"We want people owning their home—we want people owning a businesses."—Washington, D.C., April 18, 2008

"How can you possibly have an international agreement that's effective unless countries like China and India are not full participants?"—Camp David, April 19, 2008

More here

SCMP:Two women sue bank over minibond losses

11 Jan 2009
Yvonne Tsui

A 69-year-old woman and her daughter-in-law are seeking a full refund and damages from the Bank of China (Hong Kong) over their losses in Lehman Brothers minibonds.

Chin Yee-ching, a retired woman living in Malaysia, and her daughterin-law Chan Lai-mei, who lives in Po Shan Road, filed a writ in the High Court against Bank of China (Hong Kong) on Friday.

The bank is accused of being negligent in failing to “ correctly and accurately disclose and explain the real nature and structure of the product” and the true risk involved in their minibond investments.

Minibonds are not corporate bonds, but consist of high-risk creditlinked derivatives. They are marketed as a proxy investment in well-known companies.

In the writ, the pair also allege the bank failed to provide sufficient information and time for them to consider and make investment decisions about the products.

It said that Ms Chin and Ms Chan were approached by Cheng Kit-yee, a bank officer at a branch in Connaught Road Central, and Ms Cheng persuaded them to buy a series 35 minibond.

The claim said Ms Cheng told Ms Chan that the minibond was very low risk and the interest yield was good. Ms Cheng allegedly told her that the product was just like a time deposit and was very safe, while the interest was a little bit higher.

Ms Chan then agreed to early uplift of her US dollar fixed time deposit of US$ 80,000 so she could buy the minibonds, and Ms Cheng helped her apply for a waiver of the early uplift penalty. The writ said Ms Chan further agreed to use HK$ 400,000 savings to purchase the minibonds.

Having allegedly suggested the product was low risk and a conservative investment, Ms Cheng advised Ms Chin to invest her HK$1.48 million savings in minibonds.

However, another bank officer, Kenneth Lam, informed the pair in late September that the collapse of the American bank on September 15 affected their minibond investments.

Yield during the Great Depression of the 1930s

Dr. Money wrote in The New Paper:

For example, if you bought US shares in 1929, it would have taken 28 years – until 1957 – before you got back all your investment. Other markets have taken even longer.

It is true that stocks earn 10 per cent against 3 per cent for bonds – in the long-run. But that can be very long.

Here is my perspective.

If you buy shares now, when it has dropped 50% and it takes 28 years to reach its previous peak (i.e. 100% gain from the current price), the effective yield is 2.5% per annum. If it takes a shorter time to reach the previous peak, the yield will be higher than 2.5% per annum.

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