Saturday, January 05, 2013

Review investment regulations

Due to the prevailing low interest rates, consumers look for investment
opportunities that allow them to earn a return that can at least offset

Many of them were unfortunately badly advised to invest in risky products,
such as the credit linked notes, currently linked notes and other 
structured products based on derivatives. In most cases, the bad advice
was given by the relationship managers working for the banks that they 
had trusted for years.

Some of them were misled into investing in unregulated products, such as
the "guaranteed pay-back" schemes that offer a high return. Recently, 
Geneva and Profitable Plots were raided by the Commercial Affairs Department
for alleged fraudulent practices in promoting these types of schemes.

The Financial Services Consumer Association have been educating the public
about the merits of investing in an index fund, such as the 
STI Exchange Traded Fund that is offered in the Singapore Exchange. This is 
a low cost, diversified fund that is invested mainly in blue chips, and is suitable
for conservative, risk adverse investors to invest for the long term.

Another suitable type of investment is in an insurance linked policy that is offered by
life insurance companies, except that most of these products in the market 
take away 3% to 4% from the yield earned on the investment each year, compared to 
0.3% from the index fund. The high charges in the investment linked policies
make them unsuitable for the public.

While the index fund is the best type of investment for the conservative investors, 
the regulations imposed by the Monetary Authority of Singapore
make it almost impossible for the general public to invest in this asset class. 

The investor is required to pass an online test that requires knowledge of warrants, options,
futures, exchange traded notes, extended settlement contracts, discount certificates and 
callable bull and bear contracts. 

Although I am qualified as an actuary and have over 30 years of investment experience, 
I am not familiar with some of these investment products and would most certainly advice 
the general public to avoid them. Why educate them in the products that should be avoided?

If investors are denied the option to invest in the index fund, some are likely to end up 
speculating in penny stocks and  questionable investments, including overseas stocks, that 
are not suitable for long term investors.

I urge the Monetary Authority of Singapore to review their existing regulation and make it easy
for the general public to invest in the cash-based indexed funds that do not have nay leverage
or derivatives.


zhummmeng said...

Before allowed to enter the casinos customers must be made to an online test about the games they want 'invest'. If they pass then they are allowed in otherwise they need to retake until they pass.

Jp69 said...

The UK has just processed a first successful prosecution against two individuals involved in Land Banking.

The people involved got six years in Prison.

Hopefully this will discourage those offering worthless plots of UK greenbelt land to people in Asia.

Jp69 said...

The UK has just prosecuted the first case for Land Banking. The people involved got 6 years in prison.

The maths made the fraud hugely ­lucrative - one field they bought near Folkestone in Kent for £42,000 was divided into 106 house-sized plots which they sold for £10,000 each. But the land had no chance of being developed - some was in an Area of Outstanding Natural Beauty, some was on a hill so steep that it was suitable only as a ski slope and some wasn't even theirs to sell.

But the Judge was scathing about the authorities for allowing such frauds to flourish, calling on the Government to "look with some urgency at regulating these sorts of businesses", which the National Fraud Authority says costs victims £1.2billion annually.

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