21 July 2009
Investors who bought complex investment products - called Octave Notes - linked to Lehman Brothers have accused the government of offering them no help since the collapse of the US investment bank on September 15.
At a meeting last night at which they agreed to negotiate jointly for compensation, one tearful woman said: "As early as September 16, I already knew that my Octave Notes were worth nothing. But how come the government is only helping Lehman minibond victims?"
She was one of 80 investors at the meeting, which the Democratic Party organised.
A total of 48,000 Hongkongers put HK$20 billion into Lehman Brothers-linked minibonds - which, despite their name, are complex, credit-linked derivatives - and lost most of their money with the bank's collapse. The affair has spawned a Legislative Council inquiry and investigation by the city's two watchdogs of thousands of investor complaints that local banks mis-sold the products.
"We hope to press the government to handle the Octave Notes matter together with the minibond debacle," said Ran Leung So-chun, who bought notes worth US$130,000.
Those at last night's meeting had the same complaint as minibond buyers: bank staff neither properly explained to them the risks in buying the complex products nor performed risk assessments before they agreed to put their money into them.
Octave Notes were issued by US investment bank Morgan Stanley; 16 local banks sold HK$2.1 billion of them to about 8,300 customers between 2004 and 2007.
Like most minibonds, the notes contain synthetic collateralised debt obligations (CDOs) - conceptual products that mimic the financial health of a pool of companies. When these businesses collapse, the CDOs lose value. Many of the Octave Notes were connected to the performance of firms that went bust - among them Lehman Brothers.
Tuesday, July 21, 2009
The Standard:Banks facing China claims
21 July 2009
Hong Kong bankers still trying to calm Lehman Brothers minibond investors are likely to face a second wave of claims _ this time from mainlanders.
The banks are expected to reach agreement with the Securities and Futures Commission this week about their settlement with local minibond clients, sources said yesterday.
But a group of mainland accumulator investors will hold a press conference in Hong Kong this week to seek compensation from Hong Kong banks, according to Sing Tao Daily, sister publication of The Standard. ``Some of the victims in our group have started litigation. We will fight against unscrupulous banks until the end,'' a representative of the group said in an e-mail.
Protection of Investors Association president Lui Chi-wah said Hong Kong banks have been promoting high-risk accumulator products in the mainland. Lui predicts the banks will face claims from investors who made losses.
State-run China Central Television ran two episodes recently on how Hong Kong banks sold accumulators to mainland investors. The investor group has set up a website to attract more people. Meanwhile, the 16 banks which sold Lehman minibonds have reached a tentative compromise with the SFC as they are reportedly willing to repay more of the collaterals sold. It was earlier reported that the banks agreed to pay investors 60 percent of the principal. On top of this they may now repay investors 30 percent of the value of collaterals sold, sources told Sing Tao Daily.
Assuming an investment of HK$100, banks will repay HK$60 plus an extra HK$21 if the collaterals are worth HK$70, taking the total settlement amount to HK$81.
A source said the Bank of China HK (2388) and Standard Chartered Bank (2888), the two largest lenders involved in minibonds distribution, were among the lenders seeking more time to agree on a compensation formula.
Hong Kong bankers still trying to calm Lehman Brothers minibond investors are likely to face a second wave of claims _ this time from mainlanders.
The banks are expected to reach agreement with the Securities and Futures Commission this week about their settlement with local minibond clients, sources said yesterday.
But a group of mainland accumulator investors will hold a press conference in Hong Kong this week to seek compensation from Hong Kong banks, according to Sing Tao Daily, sister publication of The Standard. ``Some of the victims in our group have started litigation. We will fight against unscrupulous banks until the end,'' a representative of the group said in an e-mail.
Protection of Investors Association president Lui Chi-wah said Hong Kong banks have been promoting high-risk accumulator products in the mainland. Lui predicts the banks will face claims from investors who made losses.
State-run China Central Television ran two episodes recently on how Hong Kong banks sold accumulators to mainland investors. The investor group has set up a website to attract more people. Meanwhile, the 16 banks which sold Lehman minibonds have reached a tentative compromise with the SFC as they are reportedly willing to repay more of the collaterals sold. It was earlier reported that the banks agreed to pay investors 60 percent of the principal. On top of this they may now repay investors 30 percent of the value of collaterals sold, sources told Sing Tao Daily.
Assuming an investment of HK$100, banks will repay HK$60 plus an extra HK$21 if the collaterals are worth HK$70, taking the total settlement amount to HK$81.
A source said the Bank of China HK (2388) and Standard Chartered Bank (2888), the two largest lenders involved in minibonds distribution, were among the lenders seeking more time to agree on a compensation formula.
Kedah, Malaysia
I am now in Kedah, Malaysia. I arrived on last Saturday. I shall return to Singapore on Wednesday.
Monday, July 20, 2009
Petition to Prime Minister (3)
266 people have signed the online petition to the Prime Minister, asking the PM to help investors get the same type of compensation that is being offered to investors in Hong Kong.
Our target is to get 1,000 signatures by 29 August. Please pass the word around and get the other investors to help. For those who have already signed, please help to get other people to sign as well.
The petition can be found here.
Our target is to get 1,000 signatures by 29 August. Please pass the word around and get the other investors to help. For those who have already signed, please help to get other people to sign as well.
The petition can be found here.
Sunday, July 19, 2009
SCMP: Clear up the mess
18 July 2009
The incessant dispute over compensation for Lehman Brothers minibond victims could seriously tarnish Hong Kong's image as an international financial centre. And without proper closure, protests by victims will continue to be a common sight outside banks in Central. Nearly a year after Lehman collapsed, leaving behind HK$30 billion in now virtually worthless minibonds, some 40,000 local customers are still awaiting a resolution and proper compensation.
After the crisis exploded, all the political parties immediately swung into action to help victims, a special Legislative Council subcommittee was set up to investigate the debacle, and the government also moved quickly last October to push banks to devise suitable buy-back packages.
Despite the slow progress, we are beginning to see some breakthroughs in negotiations. There have been reports that 16 banks are offering to settle with minibond investors for about 60 to 70 per cent of their principal investment. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
But, Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the offer is unacceptable because the underlying assets are worth more than 60 per cent. Investors want to be fully compensated for their principal investments.
About 48,000 Hongkongers lost billions of dollars when the value of minibonds credit-linked to Lehman Brothers plunged after the US investment bank collapsed last year. Critics question whether banks that offer to buy back the minibonds at only 60 or 70 per cent should still have full title to the collateral.
The market values of collateralised debt obligations (CDOs) are determined by numerous factors, and a slight economic rebound in recent months could have pushed up their values. But the question is: does the modest recovery truly reflect the beginning of a bull market? We would do well to remember that we might not have experienced the full impact of the financial crisis.
All things considered, it is doubtful whether the market values of CDOs could retain the 60-70 per cent level for a sustainable period. Market trends are incredibly erratic, thus the buy-back offer is realistic and reasonable. The tug of war over compensation should not be allowed to drag on indefinitely; the longer the process drags on, the fewer benefits investors will receive.
It is understandable that investors want to hold out, hoping for a better deal. But it's baffling to see why the Securities and Futures Commission has been involved in negotiations. It has flatly rejected the offer on behalf of investors and asked banks to pay a higher value of the principal investment.
The minibond crisis has exposed a myriad of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of crisis management in the event of the failure of a large firm. And the SFC must shoulder a fair share of blame.
Frustrated at the lack of compensation, many minibond investors have criticised the lengthy negotiations with the sellers and the lack of clear guidelines from the regulators about handling their complaints. They are also confused as to where they should take their case - the Monetary Authority, which regulates banks, or the SFC, which regulates the securities market.
Still, we cannot ignore the fact that the SFC has failed to police banks and brokers that sold toxic investment products to ill-informed investors. It has been grossly negligent in performing due diligence in regulating Hong Kong's increasingly complex financial markets. And now it has put on a futile political show by assuming the role of saviour, which will benefit no one at best, and damage its reputation and that of the government at worst.
Our regulatory system has failed to evolve with the times, despite the emergence of increasingly obscure and complex financial products.
The ever-increasing amount of cross-sector selling has intensified calls for reform. But the key question is: do we have the will and the wit to move forward?
The incessant dispute over compensation for Lehman Brothers minibond victims could seriously tarnish Hong Kong's image as an international financial centre. And without proper closure, protests by victims will continue to be a common sight outside banks in Central. Nearly a year after Lehman collapsed, leaving behind HK$30 billion in now virtually worthless minibonds, some 40,000 local customers are still awaiting a resolution and proper compensation.
After the crisis exploded, all the political parties immediately swung into action to help victims, a special Legislative Council subcommittee was set up to investigate the debacle, and the government also moved quickly last October to push banks to devise suitable buy-back packages.
Despite the slow progress, we are beginning to see some breakthroughs in negotiations. There have been reports that 16 banks are offering to settle with minibond investors for about 60 to 70 per cent of their principal investment. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
But, Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the offer is unacceptable because the underlying assets are worth more than 60 per cent. Investors want to be fully compensated for their principal investments.
About 48,000 Hongkongers lost billions of dollars when the value of minibonds credit-linked to Lehman Brothers plunged after the US investment bank collapsed last year. Critics question whether banks that offer to buy back the minibonds at only 60 or 70 per cent should still have full title to the collateral.
The market values of collateralised debt obligations (CDOs) are determined by numerous factors, and a slight economic rebound in recent months could have pushed up their values. But the question is: does the modest recovery truly reflect the beginning of a bull market? We would do well to remember that we might not have experienced the full impact of the financial crisis.
All things considered, it is doubtful whether the market values of CDOs could retain the 60-70 per cent level for a sustainable period. Market trends are incredibly erratic, thus the buy-back offer is realistic and reasonable. The tug of war over compensation should not be allowed to drag on indefinitely; the longer the process drags on, the fewer benefits investors will receive.
It is understandable that investors want to hold out, hoping for a better deal. But it's baffling to see why the Securities and Futures Commission has been involved in negotiations. It has flatly rejected the offer on behalf of investors and asked banks to pay a higher value of the principal investment.
The minibond crisis has exposed a myriad of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of crisis management in the event of the failure of a large firm. And the SFC must shoulder a fair share of blame.
Frustrated at the lack of compensation, many minibond investors have criticised the lengthy negotiations with the sellers and the lack of clear guidelines from the regulators about handling their complaints. They are also confused as to where they should take their case - the Monetary Authority, which regulates banks, or the SFC, which regulates the securities market.
Still, we cannot ignore the fact that the SFC has failed to police banks and brokers that sold toxic investment products to ill-informed investors. It has been grossly negligent in performing due diligence in regulating Hong Kong's increasingly complex financial markets. And now it has put on a futile political show by assuming the role of saviour, which will benefit no one at best, and damage its reputation and that of the government at worst.
Our regulatory system has failed to evolve with the times, despite the emergence of increasingly obscure and complex financial products.
The ever-increasing amount of cross-sector selling has intensified calls for reform. But the key question is: do we have the will and the wit to move forward?
Friday, July 17, 2009
6 day detox programme (3)
Here is the final report of my 6 day detox programme. Several of my blog readers and friends have decided to try the programme. I will ask for their assessment and post them here.
TODAY: On the issue of responsibility
MAS was asked about its accountability in the minibonds saga at the press conference:
About the Lehman saga, there were some comments that MAS sort of allowed such instruments to be marketed to consumers. Do you think MAS should take some responsibility?
Mr Heng Swee Keat, managing director of MAS, replied: “I have highlighted a number of things that MAS has been doing in terms of regulation and the supervision of financial institutions (FIs).
“And if you go through the investigation report which has been issued, you will notice that there is a fairly detailed report that goes into the operation of the FIs, and quite a lot of those are operational lapses.
“I emphasised in my remarks that those are the actions that we expect board and senior management of FIs to take, to ensure that guidelines and standards are complied with.”
Would it be fair to say that MAS has no responsibility for the crisis?
Mr Shane Tregillis, MAS deputy managing director of market conduct, said: “We outlined the steps that we took before. In terms of setting the rules, in terms of inspecting, you can clearly outline what we have done since the problems emerged.”
About the Lehman saga, there were some comments that MAS sort of allowed such instruments to be marketed to consumers. Do you think MAS should take some responsibility?
Mr Heng Swee Keat, managing director of MAS, replied: “I have highlighted a number of things that MAS has been doing in terms of regulation and the supervision of financial institutions (FIs).
“And if you go through the investigation report which has been issued, you will notice that there is a fairly detailed report that goes into the operation of the FIs, and quite a lot of those are operational lapses.
“I emphasised in my remarks that those are the actions that we expect board and senior management of FIs to take, to ensure that guidelines and standards are complied with.”
Would it be fair to say that MAS has no responsibility for the crisis?
Mr Shane Tregillis, MAS deputy managing director of market conduct, said: “We outlined the steps that we took before. In terms of setting the rules, in terms of inspecting, you can clearly outline what we have done since the problems emerged.”
MySudoku Contest 17 July
Try the MySudoku contest in My Paper (Wo Bao) today. It appears on Fridays. Rules of the contest can be found here: http://www.tankinlian.com/mysudoku/
The prize is TKL Sudoku Vol 1. This book of challenging puzzles can be bought at: http://www.easyapps.sg/iShop/public/common/Home.aspx
Thursday, July 16, 2009
Petition to Prime Minister (2)
Read this online petition to the Prime Minister of Singapore. It ask the Prime Minister to get the Monetary Authority of Singapore and/or other relevent body to get the financial institutions to offer compensation similar to what is being offered in Hong Kong.
If you agree with the Petition, please sign it and encourage other investors (who have not been compensated) to join in.
The working committee agreed to lodge the Petition is there are at least 300 signatures. If there is insufficient signatures, we will not lodge the Petition.
If you agree with the Petition, please sign it and encourage other investors (who have not been compensated) to join in.
The working committee agreed to lodge the Petition is there are at least 300 signatures. If there is insufficient signatures, we will not lodge the Petition.
This Petition is dated 29 August 2009. We will get additional signatures from investors who attend the gathering on 22 August, especially those who are not able to use the internet.
Shape Quiz book is now ready
The long awaited shape quiz books is now ready. It is quite attractive. Available for only $7.90 here.
Here are two Youtube videos on how 6 year old Cheyenne solve the shape quiz. The quiz is suitable for children, adults and seniors. It is challenging and fun. You can also organise a competition for a group of friends, to see who can get the shape first.
6 day detox programme (2)
I have now completed 5 days out of the 6 day detox programme. The results have been satisfactory. Read my experience here.
Wednesday, July 15, 2009
SCMP:Cleaning up the mess after a big player falls
15 July 2009
In the last part of a series, Enoch Yiu examines proposals on how to deal with future financial failures. The Lehman Brothers minibond crisis showed just how ill-prepared Hong Kong is for the collapse of a new breed of hybrid investment products.
Bank deposits are insured up to HK$100,000, which may soon be raised to HK$500,000. Consumers can recoup up to HK$150,000 in the case of a failed broker, although the investments themselves are not covered. And the insurance industry is considering its own compensation fund in the case of failures.
But crossover products have left consumers without protection. Ten months after Lehman collapsed, leaving behind HK$20 billion in now virtually worthless minibonds, customers are still awaiting a resolution.
Regulators are trying to negotiate compensation. The government is mulling the creation of an ombudsman. Meanwhile, banks are rehearsing ways to handle any collapse, and other industries are looking on with interest.
Many Lehman minibond investors, frustrated at the lack of compensation, criticise the lengthy negotiations with the minibond sellers and the lack of clear guidelines from the regulators about handling their complaints.
They are even confused about where they should take their case - the Hong Kong Monetary Authority, which regulates banks, or the Securities and Futures Commission, which regulates the securities market.
"I did not know where to file my complaint, so I ended up contacting the Democratic Party to help me out," said investor May Chan.
The quick answer: Investors who bought minibonds from banks should go to the HKMA; those that bought them from brokers need to go to the SFC. But the whole process has left investors confused and angry.
In its negotiations with financial institutions, the SFC has so far only been able to prod full compensation for investors out of Sun Hung Kai Financial (HK$85 million) and KGI (HK$1.6 million). The SFC wanted the same compensation from banks but failed. Banks are negotiating with customers on a case-by-case basis.
Bank of China (Hong Kong) reportedly suggested compensation at 60 per cent of the minibond investment. But SFC chief executive Martin Wheatley told legislators last week that it was unacceptable, because banks should pay the higher value of the principal investment.
Permanent Secretary for Financial Services and the Treasury (Financial Services) Au King-chi said the government would consult soon about whether Hong Kong needed to set up a new agency, a financial services ombudsman, to handle complaints and negotiations between banks and customers in disputes like that over the Lehman minibonds.
"The SFC has asked for the power to compel compensation, while the HKMA has not," said Ms Au.
The government will consider the experiences of financial services ombudsmen in Britain, Singapore, Australia and Canada.
But legislator Kam Nai-wai believes an ombudsman would have little effect. "What we need is a real super-regulator that has the power to add tough regulations on banks and brokers that sell investment products to investors. We do not need another complaint channel," he said.
There is also the question of what mechanism should exist to deal with the collapse of a large investment bank or broker. Banks have already held rehearsals. In 2006, Hong Kong introduced its deposit protection scheme - initially set at HK$100,000, with a proposed rise to HK$500,000. A year later, it conducted its first annual rehearsal to deal with failed banks. Another rehearsal was conducted at the end of last year.
"Such an exercise cost several million dollars and a whole week, but it is all worth it," said Raymond Li Ling-cheung, the chief executive of the Deposit Protection Board. "The rehearsal makes sure we have a group of contracted providers, such as accountants, lawyers, cheque printers and PR firms, that are prepared for the worst. This will allow us to give cheque payments to the depositors within 14 days of a bank collapse."
Hong Kong Stockbrokers Association chairman Kenny Lee Yiu-sun said such rehearsals could be expanded to the securities market.
"It is worth it for the SFC and the related regulators to have similar rehearsals to inform the public about the impact of the collapse of a giant player like Lehman," he said.
When Lehman collapsed on September 15 last year, the SFC banned the exchange clearing house from taking the cash and stock of Lehman to settle the trades it made on the previous trading days. The clearing house was thus forced to trade in the market to settle the transactions.
Since the market fell 1,052 points that day, the trades were executed at prices lower than had been agreed upon. The result was a loss of HK$160 million, forcing the exchange to make a provision.
Legislator Chim Pui-chung said the restrictions on the Lehman settlements were a mistake. In previous cases, the clearing houses took stock and cash from the collapsed firms to make settlement, which was international practice in the Lehman case.
"Luckily, Lehman did not have a large volume of unsettled trades in Hong Kong," said Mr Chim. "The clearing house would go bankrupt if the SFC imposed curbs on collapsed brokers with unsettled trades valued at HK$20 billion or HK$30 billion."
Mr Chim urged the SFC to confirm it would not repeat the practice.
However, the SFC argued that the powers of the commission to issue a restriction notice are set out clearly in the law, although it agreed to learn from the Lehman experience. "Based on the experience with Lehman, we have been working closely with the Hong Kong exchange to establish internal guidance as to how future restriction notices will be dealt with," the commission spokesman said.
The collapse of a giant player like Lehman is rare. Nevertheless, it exposed a range of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of preparation in the event of the failure of a large firm. The question is whether the government is prepared to fix the problems before another giant goes down.
In the last part of a series, Enoch Yiu examines proposals on how to deal with future financial failures. The Lehman Brothers minibond crisis showed just how ill-prepared Hong Kong is for the collapse of a new breed of hybrid investment products.
Bank deposits are insured up to HK$100,000, which may soon be raised to HK$500,000. Consumers can recoup up to HK$150,000 in the case of a failed broker, although the investments themselves are not covered. And the insurance industry is considering its own compensation fund in the case of failures.
But crossover products have left consumers without protection. Ten months after Lehman collapsed, leaving behind HK$20 billion in now virtually worthless minibonds, customers are still awaiting a resolution.
Regulators are trying to negotiate compensation. The government is mulling the creation of an ombudsman. Meanwhile, banks are rehearsing ways to handle any collapse, and other industries are looking on with interest.
Many Lehman minibond investors, frustrated at the lack of compensation, criticise the lengthy negotiations with the minibond sellers and the lack of clear guidelines from the regulators about handling their complaints.
They are even confused about where they should take their case - the Hong Kong Monetary Authority, which regulates banks, or the Securities and Futures Commission, which regulates the securities market.
"I did not know where to file my complaint, so I ended up contacting the Democratic Party to help me out," said investor May Chan.
The quick answer: Investors who bought minibonds from banks should go to the HKMA; those that bought them from brokers need to go to the SFC. But the whole process has left investors confused and angry.
In its negotiations with financial institutions, the SFC has so far only been able to prod full compensation for investors out of Sun Hung Kai Financial (HK$85 million) and KGI (HK$1.6 million). The SFC wanted the same compensation from banks but failed. Banks are negotiating with customers on a case-by-case basis.
Bank of China (Hong Kong) reportedly suggested compensation at 60 per cent of the minibond investment. But SFC chief executive Martin Wheatley told legislators last week that it was unacceptable, because banks should pay the higher value of the principal investment.
Permanent Secretary for Financial Services and the Treasury (Financial Services) Au King-chi said the government would consult soon about whether Hong Kong needed to set up a new agency, a financial services ombudsman, to handle complaints and negotiations between banks and customers in disputes like that over the Lehman minibonds.
"The SFC has asked for the power to compel compensation, while the HKMA has not," said Ms Au.
The government will consider the experiences of financial services ombudsmen in Britain, Singapore, Australia and Canada.
But legislator Kam Nai-wai believes an ombudsman would have little effect. "What we need is a real super-regulator that has the power to add tough regulations on banks and brokers that sell investment products to investors. We do not need another complaint channel," he said.
There is also the question of what mechanism should exist to deal with the collapse of a large investment bank or broker. Banks have already held rehearsals. In 2006, Hong Kong introduced its deposit protection scheme - initially set at HK$100,000, with a proposed rise to HK$500,000. A year later, it conducted its first annual rehearsal to deal with failed banks. Another rehearsal was conducted at the end of last year.
"Such an exercise cost several million dollars and a whole week, but it is all worth it," said Raymond Li Ling-cheung, the chief executive of the Deposit Protection Board. "The rehearsal makes sure we have a group of contracted providers, such as accountants, lawyers, cheque printers and PR firms, that are prepared for the worst. This will allow us to give cheque payments to the depositors within 14 days of a bank collapse."
Hong Kong Stockbrokers Association chairman Kenny Lee Yiu-sun said such rehearsals could be expanded to the securities market.
"It is worth it for the SFC and the related regulators to have similar rehearsals to inform the public about the impact of the collapse of a giant player like Lehman," he said.
When Lehman collapsed on September 15 last year, the SFC banned the exchange clearing house from taking the cash and stock of Lehman to settle the trades it made on the previous trading days. The clearing house was thus forced to trade in the market to settle the transactions.
Since the market fell 1,052 points that day, the trades were executed at prices lower than had been agreed upon. The result was a loss of HK$160 million, forcing the exchange to make a provision.
Legislator Chim Pui-chung said the restrictions on the Lehman settlements were a mistake. In previous cases, the clearing houses took stock and cash from the collapsed firms to make settlement, which was international practice in the Lehman case.
"Luckily, Lehman did not have a large volume of unsettled trades in Hong Kong," said Mr Chim. "The clearing house would go bankrupt if the SFC imposed curbs on collapsed brokers with unsettled trades valued at HK$20 billion or HK$30 billion."
Mr Chim urged the SFC to confirm it would not repeat the practice.
However, the SFC argued that the powers of the commission to issue a restriction notice are set out clearly in the law, although it agreed to learn from the Lehman experience. "Based on the experience with Lehman, we have been working closely with the Hong Kong exchange to establish internal guidance as to how future restriction notices will be dealt with," the commission spokesman said.
The collapse of a giant player like Lehman is rare. Nevertheless, it exposed a range of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of preparation in the event of the failure of a large firm. The question is whether the government is prepared to fix the problems before another giant goes down.
SCMP:Tsang's disapproval rating at record high
Chief Executive Donald Tsang Yam-kuen's disapproval rating has reached a record high after the July 1 protest, a poll shows.
Forty-five per cent of 1,006 people interviewed on the phone last week said they lacked confidence in him, the highest proportion to hold that view since he became the chief executive in 2005.
The figure was also 6 percentage points higher than that recorded in the previous survey late last month, the University of Hong Kong's public opinion programme found.
At the same time, the proportion of people who approved of Mr Tsang's performance dropped from 45 to 40 per cent.
His support rating also fell by 1.6 points to 53.8 points.
"Both in terms of the support rating and the approval rate, the popularity of Donald Tsang has dropped again after a rebound two weeks ago, probably due to the effect of the July 1 rally," Robert Chung Ting-yiu, director of the programme, said.
The latest poll was conducted after thousands of people marched on July 1 to air a range of demands, including calls for Mr Tsang's resignation and universal suffrage.
Some protested against the outsourcing of civil servants' work, while a group of investors who lost money on minibonds, a high-risk derivative investment, demanded compensation for their losses.
A spokesman for the Office of the Chief Executive said Mr Tsang respected the findings of the poll.
Forty-five per cent of 1,006 people interviewed on the phone last week said they lacked confidence in him, the highest proportion to hold that view since he became the chief executive in 2005.
The figure was also 6 percentage points higher than that recorded in the previous survey late last month, the University of Hong Kong's public opinion programme found.
At the same time, the proportion of people who approved of Mr Tsang's performance dropped from 45 to 40 per cent.
His support rating also fell by 1.6 points to 53.8 points.
"Both in terms of the support rating and the approval rate, the popularity of Donald Tsang has dropped again after a rebound two weeks ago, probably due to the effect of the July 1 rally," Robert Chung Ting-yiu, director of the programme, said.
The latest poll was conducted after thousands of people marched on July 1 to air a range of demands, including calls for Mr Tsang's resignation and universal suffrage.
Some protested against the outsourcing of civil servants' work, while a group of investors who lost money on minibonds, a high-risk derivative investment, demanded compensation for their losses.
A spokesman for the Office of the Chief Executive said Mr Tsang respected the findings of the poll.
Earthquake and tsunami
I received an e-mail on 14 July containing this message:
Quake and Tsunami Predicted on July 22 2009 Hello there. I just wanted to let you know that please stay away from the beaches all around in the month of July. There is a prediction that there will be another tsunami or earthquake hitting on 22 July 2009. It is also when there will be sun eclipse. Predicted that it is going to be really bad and countries like Malaysia (Sabah & Sarawak), Singapore , Maldives , Australia , Mauritius , Sri Lanka , India , Indonesia , Philippines
I just saw the news headlines on Channel News Asia (15 July):
* 7.8 earthquake off New Zealand
* Tsuname alert given out.
I don't know whether there will be another earthquake on 22 July. We have to wait and see.
6 day detox programme
I have started a 6 day detox programme, which is working well. My experience so far (after completing 3 days) is shown here.
True cost of life assurance
Many people know that life assurance is useful to provide for the financial security of their family. But they are not aware that the protection can be obtained at a low cost using term insurance or accident insurance.
They are recommended to buy a whole life, endowment, critical illness or a specially designed plan (marketing under branded names) that have high hidden cost and gives a poor return on their savings.
This FAQ explains the true cost of life assurance. It will help you to make a better choice in buying your life assurance in the future. It does not help the policyholders who already bought the life assurance and the past and has already paid the high upfront cost.
Read this FAQ and pass it to the younger people to be educated, before they buy the wrong life assurance policy.
Financial consumers need new watchdog: Obama admin
By Kevin Drawbaugh and David Lawder
WASHINGTON (Reuters) - The U.S. government's fragmented system for protecting financial consumers is "designed to fail" and must be replaced by a single, powerful new agency, a senior U.S. Treasury official said on Tuesday.
As the Obama administration seeks support for a sweeping package of financial regulation reform proposals, Treasury Assistant Secretary Michael Barr urged lawmakers at a hearing to create a new Consumer Financial Protection Agency.
"The present system of consumer protection regulation is not designed to be independent or accountable, effective, or balanced. It is designed to fail," Barr told the Senate Banking Committee. "It is simply incapable of earning and keeping the trust of responsible consumers and providers ..."
"We have to have a fresh start with a new agency whose sole mission is standing up for the American people."
His call for change met general support from Democrats.
"While we can tailor this a little bit better, the reality is we need this," said Democratic Senator Robert Menendez.
Some Republicans resisted the proposal, following lines of attack already set by lobbyists for the financial industry, which sees the agency as a threat to its profitability.
"This is a tremendous overreach ... This is way out of bounds," said Republican Senator Bob Corker at the hearing.
Senator Richard Shelby, the committee's top Republican, called the proposed new agency "a radical departure."
President Barack Obama last month unveiled a wide-ranging package of proposals to rewrite the rules for banks and capital markets in response to a severe financial crisis that has dragged down economies worldwide for more than a year.
He wants to enact new laws by the end of the year. His proposals are expected to move rapidly through the House of Representatives, where Democrats are in firm control, with the closely divided Senate likely to move more slowly.
The Consumer Financial Protection Agency (CFPA) would take over consumer protection duties on mortgages, credit cards, payday loans and other products. At present, more than 10 agencies, including the Federal Reserve, handle these issues.
"We expect the agency to have strong and stable funding through a mix of appropriations and fees. The agency would have transferred to it the staff, the resources, and the fees collected by the bank agencies," Barr said in an interview with Reuters Television.
The Financial Services Roundtable, which represents most of the nation's largest financial groups, in remarks to be delivered at a House committee hearing on Wednesday, said:
"We strongly oppose the creation of a separate, free-standing Consumer Financial Protection Agency."
Rather, the group -- whose members include Citigroup, JPMorgan Chase & Co and UBS AG -- said it supports beefing up consumer protection in existing agencies.
But Senate Banking Committee Chairman Christopher Dodd said at the hearing on Tuesday that the present oversight system broke down in the recent crisis in a "spectacular failure."
He said, "Stronger consumer protection could have stopped this crisis before it started.
"We are in a radical situation ... The classical model (of regulation) has fallen apart."
(Reporting by Kevin Drawbaugh and David Lawder; Editing by Diane Craft)
WASHINGTON (Reuters) - The U.S. government's fragmented system for protecting financial consumers is "designed to fail" and must be replaced by a single, powerful new agency, a senior U.S. Treasury official said on Tuesday.
As the Obama administration seeks support for a sweeping package of financial regulation reform proposals, Treasury Assistant Secretary Michael Barr urged lawmakers at a hearing to create a new Consumer Financial Protection Agency.
"The present system of consumer protection regulation is not designed to be independent or accountable, effective, or balanced. It is designed to fail," Barr told the Senate Banking Committee. "It is simply incapable of earning and keeping the trust of responsible consumers and providers ..."
"We have to have a fresh start with a new agency whose sole mission is standing up for the American people."
His call for change met general support from Democrats.
"While we can tailor this a little bit better, the reality is we need this," said Democratic Senator Robert Menendez.
Some Republicans resisted the proposal, following lines of attack already set by lobbyists for the financial industry, which sees the agency as a threat to its profitability.
"This is a tremendous overreach ... This is way out of bounds," said Republican Senator Bob Corker at the hearing.
Senator Richard Shelby, the committee's top Republican, called the proposed new agency "a radical departure."
President Barack Obama last month unveiled a wide-ranging package of proposals to rewrite the rules for banks and capital markets in response to a severe financial crisis that has dragged down economies worldwide for more than a year.
He wants to enact new laws by the end of the year. His proposals are expected to move rapidly through the House of Representatives, where Democrats are in firm control, with the closely divided Senate likely to move more slowly.
The Consumer Financial Protection Agency (CFPA) would take over consumer protection duties on mortgages, credit cards, payday loans and other products. At present, more than 10 agencies, including the Federal Reserve, handle these issues.
"We expect the agency to have strong and stable funding through a mix of appropriations and fees. The agency would have transferred to it the staff, the resources, and the fees collected by the bank agencies," Barr said in an interview with Reuters Television.
The Financial Services Roundtable, which represents most of the nation's largest financial groups, in remarks to be delivered at a House committee hearing on Wednesday, said:
"We strongly oppose the creation of a separate, free-standing Consumer Financial Protection Agency."
Rather, the group -- whose members include Citigroup, JPMorgan Chase & Co and UBS AG -- said it supports beefing up consumer protection in existing agencies.
But Senate Banking Committee Chairman Christopher Dodd said at the hearing on Tuesday that the present oversight system broke down in the recent crisis in a "spectacular failure."
He said, "Stronger consumer protection could have stopped this crisis before it started.
"We are in a radical situation ... The classical model (of regulation) has fallen apart."
(Reporting by Kevin Drawbaugh and David Lawder; Editing by Diane Craft)
Tuesday, July 14, 2009
The New Paper:The real problem? Underwriters hiding product's risk
14 July 2009
For the first time, the Monetary Authority of Singapore has banned 10 banks and brokers from selling structured notes for six to 24 months.
The ban doesn't affect other structured products. POSB still advertises 2.78 per cent interest in the first year for its five-year structured deposit linked to four Singapore blue chip companies.
That one is safe but, as usual, it is impossible to calculate the yield you can expect after five years.
Banks won't tell what we really need to know: A history of actual versus advertised yields for structured deposits.
Banks and brokers sold us billions of dollars of structured notes. Defaults stand at $686 million. Some have become worthless, like DBS High Notes 5. Others still have value, like Minibonds.
MAS report
In the just-released 119-page MAS report, 10 banks and brokers describe how they measure customer risk attitudes. It's useful but doesn't address the real problem: Underwriters hiding the product's risk.
Structured notes promise a safe-looking yield of around 5 per cent per year. But underwriters invest your money in risky bonds that yield much more, like 15 per cent. They keep the difference of 10 per cent, which is called 'expenses'.
The problem is, they don't disclose expenses or total yield in the prospectus or anywhere else. Investors see only their 5 per cent yield, which is low enough not to trigger any alarm bells.
That is half the story. The other half is a built-in conflict: Underwriters have fixed expenses and can earn more by investing your money in high-yielding, risky bonds.
Those bonds are more likely to default but underwriters have that covered too. A typical contract is written so that investors lose everything if only 10 to 15 per cent of the bonds default.
Investors must then forfeit the remaining 85 to 90 per cent of 'good' bonds to the underwriter. An example of this is Pinnacle Notes 9 and 10.
Underwriters get an even better deal when a 'reference entity' - like Lehman Brothers - defaults. It triggers transfer of 100 per cent of investors' money to the underwriter. An example is DBS High Notes 5.
In that case, DBS said it sold its rights to the $103m of investor losses. I asked, but the bank declined to say when it sold, how much it received and whether the buyer was an affiliated company.
Next, DBS set aside $70m to refund losses here and in Hong Kong.
The 7 Jul MAS report shows DBS made refunds of $7.6m to High Notes 5 investors. That is 11 per cent of the $70m DBS allocated to reimburse Singapore and Hong Kong investors.
The low payouts here may be explained by higher payouts in Hong Kong.
Compensation by HK v S'pore banks
WE HAVE heard that 63 per cent of decided structured note cases received full or partial refunds.
That is impressive, but the number falls considerably when you look at dollars paid to all investors.
The data comes from the 7 Jul MAS report, a 26 Jun speech by Senior Minister Goh Chok Tong and losses reported for Pinnacle Notes 9 and 10.
It shows $107m out of $686m of defaulted notes - 16 per cent - was returned to investors.
Contrast that with Hong Kong banks. On 7 Jul, The Standard newspaper there reported that 16 distributors for Minibonds met with the Securities and Futures Commission on 29 Jun to indicate they would pay 60 per cent of the amount invested. A few investors - aged 65 and above - would receive 70 per cent.
To recap, our banks paid investors 16 per cent. Hong Kong banks propose paying at least 60 per cent.
For the first time, the Monetary Authority of Singapore has banned 10 banks and brokers from selling structured notes for six to 24 months.
The ban doesn't affect other structured products. POSB still advertises 2.78 per cent interest in the first year for its five-year structured deposit linked to four Singapore blue chip companies.
That one is safe but, as usual, it is impossible to calculate the yield you can expect after five years.
Banks won't tell what we really need to know: A history of actual versus advertised yields for structured deposits.
Banks and brokers sold us billions of dollars of structured notes. Defaults stand at $686 million. Some have become worthless, like DBS High Notes 5. Others still have value, like Minibonds.
MAS report
In the just-released 119-page MAS report, 10 banks and brokers describe how they measure customer risk attitudes. It's useful but doesn't address the real problem: Underwriters hiding the product's risk.
Structured notes promise a safe-looking yield of around 5 per cent per year. But underwriters invest your money in risky bonds that yield much more, like 15 per cent. They keep the difference of 10 per cent, which is called 'expenses'.
The problem is, they don't disclose expenses or total yield in the prospectus or anywhere else. Investors see only their 5 per cent yield, which is low enough not to trigger any alarm bells.
That is half the story. The other half is a built-in conflict: Underwriters have fixed expenses and can earn more by investing your money in high-yielding, risky bonds.
Those bonds are more likely to default but underwriters have that covered too. A typical contract is written so that investors lose everything if only 10 to 15 per cent of the bonds default.
Investors must then forfeit the remaining 85 to 90 per cent of 'good' bonds to the underwriter. An example of this is Pinnacle Notes 9 and 10.
Underwriters get an even better deal when a 'reference entity' - like Lehman Brothers - defaults. It triggers transfer of 100 per cent of investors' money to the underwriter. An example is DBS High Notes 5.
In that case, DBS said it sold its rights to the $103m of investor losses. I asked, but the bank declined to say when it sold, how much it received and whether the buyer was an affiliated company.
Next, DBS set aside $70m to refund losses here and in Hong Kong.
The 7 Jul MAS report shows DBS made refunds of $7.6m to High Notes 5 investors. That is 11 per cent of the $70m DBS allocated to reimburse Singapore and Hong Kong investors.
The low payouts here may be explained by higher payouts in Hong Kong.
Compensation by HK v S'pore banks
WE HAVE heard that 63 per cent of decided structured note cases received full or partial refunds.
That is impressive, but the number falls considerably when you look at dollars paid to all investors.
The data comes from the 7 Jul MAS report, a 26 Jun speech by Senior Minister Goh Chok Tong and losses reported for Pinnacle Notes 9 and 10.
It shows $107m out of $686m of defaulted notes - 16 per cent - was returned to investors.
Contrast that with Hong Kong banks. On 7 Jul, The Standard newspaper there reported that 16 distributors for Minibonds met with the Securities and Futures Commission on 29 Jun to indicate they would pay 60 per cent of the amount invested. A few investors - aged 65 and above - would receive 70 per cent.
To recap, our banks paid investors 16 per cent. Hong Kong banks propose paying at least 60 per cent.
Petition to the Prime Minister
Several investors have suggested that a petition be sent to the Prime Minister to ask him to get the banks to offer compensation similar to Hong Kong, namely 60% now and 40% of the proceeds at maturity. Is there any point to organise this petition? Can it be the focus of the Gathering on 22 August in Hong Lim Park?
MySudoku Contest 10 July 2009
539 entries were received for this contest. Three winners will be picked by a draw from those who submitted the correct answers in accordance with these rules. The winners will be contacted by SMS.
The next MySudoku contest will be on 17 July 2009.
Additional contests that are still open:
TKL Intelligence Quiz
Name The Shape.
Improve your intelligence through practice and exercise your mind with the puzzle books here.
Watch this Youtube video on how to solve the Shape Quiz.
The next MySudoku contest will be on 17 July 2009.
Additional contests that are still open:
TKL Intelligence Quiz
Name The Shape.
Improve your intelligence through practice and exercise your mind with the puzzle books here.
Watch this Youtube video on how to solve the Shape Quiz.
Logic9 (Sudoku pocket books)
Dear Mr. Tan,
A few years ago, NTUC printed Logic9, which is the same as Sudoku. I like the size of Logic9 which is small to fit into the pocket. It is very useful when I am in a plane or train. I looked for it in a few bookstores, but it is not available. Where can I buy it?
REPLY
NTUC Income stopped selling the Logic9 (Sudoku) books two years ago. They do not have the stock any more. I have some stock of Vol 2 to 4. I have placed them for sale at my website at a 20% discount for 3 volumes). You can click on "details" to see a photo of the books.
The stock is limited and will run out soon. If you are interested, you should place your order now. It is useful as a gift.
A few years ago, NTUC printed Logic9, which is the same as Sudoku. I like the size of Logic9 which is small to fit into the pocket. It is very useful when I am in a plane or train. I looked for it in a few bookstores, but it is not available. Where can I buy it?
REPLY
NTUC Income stopped selling the Logic9 (Sudoku) books two years ago. They do not have the stock any more. I have some stock of Vol 2 to 4. I have placed them for sale at my website at a 20% discount for 3 volumes). You can click on "details" to see a photo of the books.
The stock is limited and will run out soon. If you are interested, you should place your order now. It is useful as a gift.
Monday, July 13, 2009
Maximise shareholder value
During the past 15 years, Singapore businesses have adopted the concept of maximise shareholder value. This is implemented not only in the private sector, but in the government-linked companies also. This concept has led to salaries of top executives ballooning to several million dollars a year.
There are several flaws in this concept, as stated in this article. It is this concept that has led to the widening income gap in Singapore. Shareholder value is enhanced, when wages are depressed or profits are made at the expense of fair treatment of customers.
I hope that this flawed concept is changed soon.
Tan Kin Lian
There are several flaws in this concept, as stated in this article. It is this concept that has led to the widening income gap in Singapore. Shareholder value is enhanced, when wages are depressed or profits are made at the expense of fair treatment of customers.
I hope that this flawed concept is changed soon.
Tan Kin Lian
Low interest rate
Interest rate globally is at a low level. Central banks have pumped a lot of money into the economy to stimulate its recovery. The hope is that low interest rate will encourage some people to buy to buy houses or cars, or businesses to invest and produce goods.
Low interest rate is bad for savers. They will not earn sufficient interest on their savings. To earn a higher return, they have to take the risk and invest in stocks or other assets.
Eventually, the economy will recover. At that time, the prices of equity, property and other assets will increase. Those who take the risk now will benefit from the recovery.
The alternative is to avoid risk and accept the low rate of interest, which is now less than 1% per annum. This is not sufficient to cover inflation. In my case, I prefer to remain fully invested and wait for the recovery.
Tan Kin Lian
Low interest rate is bad for savers. They will not earn sufficient interest on their savings. To earn a higher return, they have to take the risk and invest in stocks or other assets.
Eventually, the economy will recover. At that time, the prices of equity, property and other assets will increase. Those who take the risk now will benefit from the recovery.
The alternative is to avoid risk and accept the low rate of interest, which is now less than 1% per annum. This is not sufficient to cover inflation. In my case, I prefer to remain fully invested and wait for the recovery.
Tan Kin Lian
Tiered interest rate
Several banks have offered tiered interest rate on savings accounts. A different interest rate is applied to different tranches of savings. This type of complicated structures bring two issues:
a) does the bank state clearly how the interest is to be computed?
b) is the customer able to check that the correct amount of interest has been credited?
In a savings account, the balance can fluctuate every day. Does the bank apply the tiered interest calculation on the daily balance?
Will the bank be willing to show each customer how the interest credited in each month is calcuated?
I hope that bank customers are given the correct amount of interest and are not short changed, due to their inability to check on the calculation of the interest.
a) does the bank state clearly how the interest is to be computed?
b) is the customer able to check that the correct amount of interest has been credited?
In a savings account, the balance can fluctuate every day. Does the bank apply the tiered interest calculation on the daily balance?
Will the bank be willing to show each customer how the interest credited in each month is calcuated?
I hope that bank customers are given the correct amount of interest and are not short changed, due to their inability to check on the calculation of the interest.
Ask for investigation report through FIDREC
Dear Mr Tan,
I have filed my case with FIDREC and I am waiting for FI's investigation report. I will decide, after getting the report, on whether to proceed to the next step, i.e. to get FIDREC to adjudicate the case. It is important for me to get the investigation report first.
For any investor who wants to go through legal action, it is necessary to get FI's investigation report. In Chinese, we have to know the enemy to win the battle.
Currently, when we were interviewed by the FI, it is one direction. We have to answer many questions, but FI do not need to answer us anything.
REPLY
I agree with your approach. It is important for the complainant to get the report from the financial institution and decide how to present your case for mis-representation. You should submit documentary evidence or witnesses who can attest to your side of the story.
I have filed my case with FIDREC and I am waiting for FI's investigation report. I will decide, after getting the report, on whether to proceed to the next step, i.e. to get FIDREC to adjudicate the case. It is important for me to get the investigation report first.
For any investor who wants to go through legal action, it is necessary to get FI's investigation report. In Chinese, we have to know the enemy to win the battle.
Currently, when we were interviewed by the FI, it is one direction. We have to answer many questions, but FI do not need to answer us anything.
REPLY
I agree with your approach. It is important for the complainant to get the report from the financial institution and decide how to present your case for mis-representation. You should submit documentary evidence or witnesses who can attest to your side of the story.
The Emperor's Clothes
Edited from Wikimedia
"The Emperor's New Clothes" is a fairy tale by Danish poet and author Hans Christian Andersen about an emperor who unwittingly hires two swindlers to create a new suit of clothes for him.
The tale is one of Andersen's most popular. It appears often in selected collections of his work and is frequently published in illustrated storybook editions for children. The tale has seen adaptations in animated film, and television drama.
Plot
An emperor of a prosperous city who cares more about clothes than military pursuits or entertainment hires two swindlers who promise him the finest suit of clothes from the most beautiful cloth. This cloth, they tell him, is invisible to anyone who was either stupid or unfit for his position. The Emperor cannot see the (non-existent) cloth, but pretends that he can for fear of appearing stupid; his ministers do the same. When the swindlers report that the suit is finished, they dress him in mime. The Emperor then goes on a procession through the capital showing off his new "clothes". During the course of the procession, a small child cries out, "But he has nothing on!" The crowd realizes the child is telling the truth. The Emperor, however, holds his head high and continues the procession.
"The Emperor's New Clothes" is a fairy tale by Danish poet and author Hans Christian Andersen about an emperor who unwittingly hires two swindlers to create a new suit of clothes for him.
The tale is one of Andersen's most popular. It appears often in selected collections of his work and is frequently published in illustrated storybook editions for children. The tale has seen adaptations in animated film, and television drama.
Plot
An emperor of a prosperous city who cares more about clothes than military pursuits or entertainment hires two swindlers who promise him the finest suit of clothes from the most beautiful cloth. This cloth, they tell him, is invisible to anyone who was either stupid or unfit for his position. The Emperor cannot see the (non-existent) cloth, but pretends that he can for fear of appearing stupid; his ministers do the same. When the swindlers report that the suit is finished, they dress him in mime. The Emperor then goes on a procession through the capital showing off his new "clothes". During the course of the procession, a small child cries out, "But he has nothing on!" The crowd realizes the child is telling the truth. The Emperor, however, holds his head high and continues the procession.
Morale
How do you tell the Emperor that things are going wrong, or things that he does not like to hear?
Sunday, July 12, 2009
Brain Workout in The New Paper
The Brain Workout in the New Paper is taken from my book, TKL Intelligence Quiz. The puzzles in this book is based on the famous quiz created by Albert Einsten. Einsten said that 98% of the people in the world could not solve the quiz. My book teaches the reader on how to be among the 2%.
There are 72 quizzes in my book: 24 at each of three levels. The first level is based on 4 houses and is easier to solve. The next level is based on 5 houses and is the same as Einstein's quiz. The third level is based on 6 houses and is more challenging than Einstein's quiz.
After practicising a few quizzes, the reader will be able to master the technique and be able to solve the quizzes quite quickly. This quiz is also suitable for a challenge among several competitors - to see who can solve the quiz first.
www.easyapps.sg/iShop
There are 72 quizzes in my book: 24 at each of three levels. The first level is based on 4 houses and is easier to solve. The next level is based on 5 houses and is the same as Einstein's quiz. The third level is based on 6 houses and is more challenging than Einstein's quiz.
After practicising a few quizzes, the reader will be able to master the technique and be able to solve the quizzes quite quickly. This quiz is also suitable for a challenge among several competitors - to see who can solve the quiz first.
www.easyapps.sg/iShop
Serangoon North HUDC Privatisation
Dear Mr Tan,
Hope you can post this article in your blog site. Hopefully someone out there may be able to offer the residents in Serangoon North HUDC estate some ideas on how they can proceed from the present jam they are in.
Hope you can post this article in your blog site. Hopefully someone out there may be able to offer the residents in Serangoon North HUDC estate some ideas on how they can proceed from the present jam they are in.
Aik Theng Chong
Saturday, July 11, 2009
Idling ships clog up Singapore shores
Friday, July 10, 2009
Rebuttals to editorial in Straits Times
Dear Kin Lian
I was very upset with the editorial in today ST because the editorial is full of errors. I am wondering if you will be putting up a rebuttal in your blog on this article.
It is easy to rebute the factual inaccuracy of the article (rebuttals in bold italic)
> Unfortunately, Lehman brothers turns out to be a company in their basket of "reference entities" - this is not the case
> 10 FIs here weren't selling anything that was unknown to tetail investors. Hundreds of varieties were sold during boom years - this is not the case
> Many investors happily pocketed returns much higher than what could be earned in comparable time deposits - this is not the case
> A fine that is unduly large will raise alarm bells over the fairness with which Singapore's internationally oriented financial sector is run, especially given the difficulties of assign blame in this matter - in HK, financial institutions voluntarily proposed that they compensate ALL investors a minimum 60% to 70% of their invested amount.
There are many more errors that you could probably can point out than me.
S
I was very upset with the editorial in today ST because the editorial is full of errors. I am wondering if you will be putting up a rebuttal in your blog on this article.
It is easy to rebute the factual inaccuracy of the article (rebuttals in bold italic)
> Unfortunately, Lehman brothers turns out to be a company in their basket of "reference entities" - this is not the case
> 10 FIs here weren't selling anything that was unknown to tetail investors. Hundreds of varieties were sold during boom years - this is not the case
> Many investors happily pocketed returns much higher than what could be earned in comparable time deposits - this is not the case
> A fine that is unduly large will raise alarm bells over the fairness with which Singapore's internationally oriented financial sector is run, especially given the difficulties of assign blame in this matter - in HK, financial institutions voluntarily proposed that they compensate ALL investors a minimum 60% to 70% of their invested amount.
There are many more errors that you could probably can point out than me.
S
Issues not addressed by MAS investigation findings
Dear Mr. Tan,
I am disappointed that the MAS investigation findings did not address the following issues:
1) Are minibond products suitable for the retail investors?
2) Are ordinary investors with education level above primary 6 able to comprehend the complexity of the prospectus?
3) Are minibond products defective?
4) Whether minibond products are fair with respect to the return and risk?
5) Whether the newspaper advertisements misled the investors into believing that minibond is a bond from the six leading banks?
6) Whether the sales brochures misled the investors into believing that it is a bond from the six leading banks?
7) Whether the prospectus confusing and/or misleading?
8) Whether the sales brochures and prospectus omitting any important information?
9) Whether conflicts of interest arise: can Lehman alone being the arranger, issuer and swap counterparty?
Thank You,
P
I am disappointed that the MAS investigation findings did not address the following issues:
1) Are minibond products suitable for the retail investors?
2) Are ordinary investors with education level above primary 6 able to comprehend the complexity of the prospectus?
3) Are minibond products defective?
4) Whether minibond products are fair with respect to the return and risk?
5) Whether the newspaper advertisements misled the investors into believing that minibond is a bond from the six leading banks?
6) Whether the sales brochures misled the investors into believing that it is a bond from the six leading banks?
7) Whether the prospectus confusing and/or misleading?
8) Whether the sales brochures and prospectus omitting any important information?
9) Whether conflicts of interest arise: can Lehman alone being the arranger, issuer and swap counterparty?
Thank You,
P
Law Suit on DBS High Notes
SINGAPORE, July 10 (Reuters) - More than 200 customers have sued Singapore's DBS Bank, a unit of DBS Group Holdings , in a bid to recover investment losses of around S$17 million ($11.6 million) arising from the collapse of Lehman Brothers, the Straits Times reported on Friday.
Siraj Omar, a director at Premier Law, told Reuters his firm had filed a claim in a Singapore court on behalf of 204 investors but declined to discuss the case. The investors had purchased a callable basket of credit-linked notes, called High Notes 5, from DBS.
A DBS spokeswoman confirmed receipt of the claim, saying the suit was without merit and that DBS planned to defend the lawsuit.
Siraj Omar, a director at Premier Law, told Reuters his firm had filed a claim in a Singapore court on behalf of 204 investors but declined to discuss the case. The investors had purchased a callable basket of credit-linked notes, called High Notes 5, from DBS.
A DBS spokeswoman confirmed receipt of the claim, saying the suit was without merit and that DBS planned to defend the lawsuit.
Coverage of Lehman cases in Hong Kong
Hi Mr. Tan,
Why is there no coverage of what is happening with the Lehman cases in Hong Kong in our newspapers? Surely, this is relevant to the investors in Singapore, to know what is happening to similar cases in HK. The main source of this information is your blog - thank G!
REPLY
I want to thank a volunteer who seaches the online version of the Hong Kong newspapers every day and sends the articles to me. Without his help (and he did it without my asking), I would not be able to put up these news clippings. My job is to check that they are relevant to the readers.
I wish that our daily newspapers would be active in covering the developments in Hong Kong. This is what a free and independent media should do. I hope that they will be more active in this coverage in the future.
Why is there no coverage of what is happening with the Lehman cases in Hong Kong in our newspapers? Surely, this is relevant to the investors in Singapore, to know what is happening to similar cases in HK. The main source of this information is your blog - thank G!
REPLY
I want to thank a volunteer who seaches the online version of the Hong Kong newspapers every day and sends the articles to me. Without his help (and he did it without my asking), I would not be able to put up these news clippings. My job is to check that they are relevant to the readers.
I wish that our daily newspapers would be active in covering the developments in Hong Kong. This is what a free and independent media should do. I hope that they will be more active in this coverage in the future.
MySudoku Contest in MyPaper
A fair solution to the toxic product crisis
Several letters were printed in the Straits Times during the past two days. The writers indicated that the punishment meted out to the financial institutions for mis-selling the credit linked notes was inadequate. There is no point in banning them from the sale of structured notes, when no customer will be buying them anyway over the next two years.
It is quite unjust that the retail customers, who have lost large sums of money due to the wrongdoings of the financial institutions, were left to seek compensation on their own. Most of them do not have the financial means or the knowhow to take legal action. Their chance of winning is at best uncertain, considering the ability of the financial institutions to engage the best lawyers in town, and the perception that the authority is siding these institutions.
In most countries, it is the duty of the authority to implement the law and ensure that the ordinary people are treated fairly. If there are wrongdoings, especially by the stronger people, the authority should step in to put matters right and look after the interest of the weak.
I hope that the Monetary Authority of Singapore will use its influence to get the financial institutions to offer to share the loss equally with the retail investors. A possible apporach is for the institution to take over the credit notes and pay the retail investors 50% of the invested sum now (less any payment that they have received earlier) and 50% of the proceeds of the notes at the time of maturity or earlier redemption or sale of these notes.
This step will be seen by many people to be fair to all parties. I believe that it will be accepted by the invstors in Singapore, although it may appear to be less generous that the compensation of 60% or 70% that is being considered in Hong Kong.
Tan Kin Lian.
Here are the URL to the ST letters:
http://www.straitstimes.com/ST%2BForum/Story/STIStory_400745.html
http://www.straitstimes.com/ST%2BForum/Story/STIStory_401138.html
http://www.straitstimes.com/ST%2BForum/Story/STIStory_401136.html
It is quite unjust that the retail customers, who have lost large sums of money due to the wrongdoings of the financial institutions, were left to seek compensation on their own. Most of them do not have the financial means or the knowhow to take legal action. Their chance of winning is at best uncertain, considering the ability of the financial institutions to engage the best lawyers in town, and the perception that the authority is siding these institutions.
In most countries, it is the duty of the authority to implement the law and ensure that the ordinary people are treated fairly. If there are wrongdoings, especially by the stronger people, the authority should step in to put matters right and look after the interest of the weak.
I hope that the Monetary Authority of Singapore will use its influence to get the financial institutions to offer to share the loss equally with the retail investors. A possible apporach is for the institution to take over the credit notes and pay the retail investors 50% of the invested sum now (less any payment that they have received earlier) and 50% of the proceeds of the notes at the time of maturity or earlier redemption or sale of these notes.
This step will be seen by many people to be fair to all parties. I believe that it will be accepted by the invstors in Singapore, although it may appear to be less generous that the compensation of 60% or 70% that is being considered in Hong Kong.
Tan Kin Lian.
Here are the URL to the ST letters:
http://www.straitstimes.com/ST%2BForum/Story/STIStory_400745.html
http://www.straitstimes.com/ST%2BForum/Story/STIStory_401138.html
http://www.straitstimes.com/ST%2BForum/Story/STIStory_401136.html
Thursday, July 09, 2009
Part Time Work Portal
I am relaunching this portal to help people to find part time work and employers to look for these workers. This is relaunched as a free service to serve the community. There is no charge to register in this portal or to search for workers.
I have asked the job seekers to provide their residential postal sector, type of work and the hourly rate. I encourage employers to search for part time workers who live close to the place of work. This will save travelling time and cost, and keep the cost low for employers.
This portal is useful for people who are now not employed and for students during the vacation.
Please help to promote this portal.
I have asked the job seekers to provide their residential postal sector, type of work and the hourly rate. I encourage employers to search for part time workers who live close to the place of work. This will save travelling time and cost, and keep the cost low for employers.
This portal is useful for people who are now not employed and for students during the vacation.
Please help to promote this portal.
Name the Shape Contest
Take part in this Contest. Participation is Free. Win an autographed copy of the Shape Quiz Book.
TKL Intelligence Quiz Contest
Here is a chance to win an autographed copy of my TKL Intelligence Quiz book. Participation is free. Contest.
The Standard:Ip supports banks' offer in minibond settlement
9 July 2009
Eight independent lawmakers, led by Regina Ip Lau Suk-yee, yesterday met representatives of the Hong Kong Association of Banks in an attempt to resolve the Lehman minibonds saga.
The meeting was mainly focused on the settlement offer by 16 distributor banks that was revealed by The Standard last week, which has won the support of many lawmakers, sources said.
The meeting between the HKAB and the lawmakers went smoothly and the banks were close to concluding an offer, said Ip, who is also the founder of the Savantas Policy Institute, a think-tank.
Ip said the eight lawmakers in her delegation were speaking on behalf of 3,000 Lehman minibond investors in Hong Kong and they hope to resolve the issue of compensation as soon as possible.
" The investors have been seeking help from us, and I have received 1,000 cases," she said.
Other lawmakers in Ip's delegation included Lam Tai-fai, Jeffrey Lam Kin- fung, Samson Tam Wai-ho, Leung Ka- lau, Paul Chan Mo-po, Chan Kin-por and Philip Wong Yu-hong, sources said.
The lawmakers cited the report issued by the Monetary Authority of Singapore on Tuesday, which said up to 75 percent of the investors in the city state may be able get some of their money back as they had filed complaints. "They said the MAS report showed only a 32.2 percent repay ratio, which is much lower than the current proposal [from 16 Hong Kong distributor banks] which calls for paying back up to 70 percent," a banking source said.
Lawmakers were said to support the banks' proposal as it was "more reasonable" and a better offer when compared with the MAS deal, according to sources familiar with the situation. Last week, representatives from the banks approached the Securities and Futures Commission, presenting a formal proposal to settle the issue concerning compensation for investors who had bought minibonds linked to the collapsed US financial firm Lehman Brothers.
The proposal said banks would offer an average of 60 percent of principal invested or 70 percent to those investors aged over 65. They also agreed to top up the difference if collateral is sold at higher prices in the future.
Meanwhile, Democratic Party legislator Kam Nai-wai suggested Hong Kong follow the Singapore model.
Kam yesterday said he would meet the financial secretary to discuss the matter.
"According to the Singapore model, up to 95 percent of investors could get their money," Kam said, offering data different from that quoted by the HKAB.
Eight independent lawmakers, led by Regina Ip Lau Suk-yee, yesterday met representatives of the Hong Kong Association of Banks in an attempt to resolve the Lehman minibonds saga.
The meeting was mainly focused on the settlement offer by 16 distributor banks that was revealed by The Standard last week, which has won the support of many lawmakers, sources said.
The meeting between the HKAB and the lawmakers went smoothly and the banks were close to concluding an offer, said Ip, who is also the founder of the Savantas Policy Institute, a think-tank.
Ip said the eight lawmakers in her delegation were speaking on behalf of 3,000 Lehman minibond investors in Hong Kong and they hope to resolve the issue of compensation as soon as possible.
" The investors have been seeking help from us, and I have received 1,000 cases," she said.
Other lawmakers in Ip's delegation included Lam Tai-fai, Jeffrey Lam Kin- fung, Samson Tam Wai-ho, Leung Ka- lau, Paul Chan Mo-po, Chan Kin-por and Philip Wong Yu-hong, sources said.
The lawmakers cited the report issued by the Monetary Authority of Singapore on Tuesday, which said up to 75 percent of the investors in the city state may be able get some of their money back as they had filed complaints. "They said the MAS report showed only a 32.2 percent repay ratio, which is much lower than the current proposal [from 16 Hong Kong distributor banks] which calls for paying back up to 70 percent," a banking source said.
Lawmakers were said to support the banks' proposal as it was "more reasonable" and a better offer when compared with the MAS deal, according to sources familiar with the situation. Last week, representatives from the banks approached the Securities and Futures Commission, presenting a formal proposal to settle the issue concerning compensation for investors who had bought minibonds linked to the collapsed US financial firm Lehman Brothers.
The proposal said banks would offer an average of 60 percent of principal invested or 70 percent to those investors aged over 65. They also agreed to top up the difference if collateral is sold at higher prices in the future.
Meanwhile, Democratic Party legislator Kam Nai-wai suggested Hong Kong follow the Singapore model.
Kam yesterday said he would meet the financial secretary to discuss the matter.
"According to the Singapore model, up to 95 percent of investors could get their money," Kam said, offering data different from that quoted by the HKAB.
Relevance of Animal Farm
Read this article.
Although this book was written as a satire to the Russian Revolution, some bloggers have started to compare it with what is happening in Singapore today.
I cannot help but think of Boxer as reflecting the workers of Singapore – hard working, dedicated and loyal, but were let down when they grow old. After a lifetime of work, they could not afford to retire and were asked to continue working. They have no security, no pension, no savings for old age (many lost through the credit linked notes) and cannot afford the expensive health care.
I like to mention the wise old donkey Benjamin in the story. He could read as well as any pig, but preferred to have a low profile. Benjamin had known about the pigs' wrongdoing the entire time, but he said nothing to the other animals. He represented the cynics in society or the intellectuals who had the wisdom to stay clear of the purges, but take no action themselves.
Are we having our own Animal Farm in Singapore? Are there too many Benjamins in our midst? What are your views?
Tan Kin Lian
Tyranny and liberty
"When the people fear their government, there is tyranny; when the government fears the people, there is liberty." - Thomas Jefferson
Wednesday, July 08, 2009
Cheyenne does Shape Quiz (2)
SCMP:SFC does not need to complete all minibond inquiries, chief say
8 July 2009
The Securities and Futures Commission did not need to conclude all the investigations into the 20,000 complaints by those who invested in Lehman Brothers minibonds to reach a deal with affected banks, its chief executive, Martin Wheatley, told lawmakers yesterday.
"We are working at the institutional level and looking at whether adequate systems and controls are in place to ensure they comply with the code of conduct. We don't need a conclusion on all the thousands of cases to reach a conclusion," he said.
"What our investigation is trying to do is to reach a conclusion for all of the banks' clients in one go."
Outgoing Hong Kong Monetary Authority chief Joseph Yam Chi-kwong has told lawmakers he hopes 70 per cent of the complaints can be dealt with by March.
The authority is investigating complaints about the way banks sold credit-linked derivatives, including minibonds, issued or guaranteed by Lehman, which collapsed during the credit crunch last year. The authority can refer cases to the commission if further action is warranted.
Minibonds are not corporate bonds, but high-risk, credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
Testifying before the Legislative Council subcommittee probing the Lehman debacle for the fourth time, Mr Wheatley said investigations had dragged on for too long. He hoped banks would agree to settlement terms similar to those offered by Sun Hung Kai Investment Services last week.
The brokerage firm and KGI Asia settled with 329 customers by fully compensating them for their principal investments. The two firms are now entitled to a distribution from the underlying collateral of the minibonds, which is expected to offset a significant part of the buy-back costs.
"It is our hope that we can enter into such agreements with other banks that would achieve a much speedier outcome than the outcomes that we've talked about," Mr Wheatley said.
He said the commission had been in talks with affected banks about a possible deal.
Media reports have disclosed that 16 banks were offering to settle with minibond investors for about 60 per cent of their principal investment.
Investors aged 65 or above would receive about 70 per cent. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
"We're involved in settlement discussions, which are supposed to be confidential, with a number of banks," Mr Wheatley said. "Specific details {hellip} have been leaked."
The Securities and Futures Commission did not need to conclude all the investigations into the 20,000 complaints by those who invested in Lehman Brothers minibonds to reach a deal with affected banks, its chief executive, Martin Wheatley, told lawmakers yesterday.
"We are working at the institutional level and looking at whether adequate systems and controls are in place to ensure they comply with the code of conduct. We don't need a conclusion on all the thousands of cases to reach a conclusion," he said.
"What our investigation is trying to do is to reach a conclusion for all of the banks' clients in one go."
Outgoing Hong Kong Monetary Authority chief Joseph Yam Chi-kwong has told lawmakers he hopes 70 per cent of the complaints can be dealt with by March.
The authority is investigating complaints about the way banks sold credit-linked derivatives, including minibonds, issued or guaranteed by Lehman, which collapsed during the credit crunch last year. The authority can refer cases to the commission if further action is warranted.
Minibonds are not corporate bonds, but high-risk, credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
Testifying before the Legislative Council subcommittee probing the Lehman debacle for the fourth time, Mr Wheatley said investigations had dragged on for too long. He hoped banks would agree to settlement terms similar to those offered by Sun Hung Kai Investment Services last week.
The brokerage firm and KGI Asia settled with 329 customers by fully compensating them for their principal investments. The two firms are now entitled to a distribution from the underlying collateral of the minibonds, which is expected to offset a significant part of the buy-back costs.
"It is our hope that we can enter into such agreements with other banks that would achieve a much speedier outcome than the outcomes that we've talked about," Mr Wheatley said.
He said the commission had been in talks with affected banks about a possible deal.
Media reports have disclosed that 16 banks were offering to settle with minibond investors for about 60 per cent of their principal investment.
Investors aged 65 or above would receive about 70 per cent. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
"We're involved in settlement discussions, which are supposed to be confidential, with a number of banks," Mr Wheatley said. "Specific details {hellip} have been leaked."
SCMP:Chief keeps quiet over calls for his resignation
8 July 2009
He lambasted pan-democrats for disrupting his speech and denied he was a "fugitive" from environmental protection. But during a rowdy Legislative Council question time, the chief executive left one issue unanswered: calls for his resignation.
In the heat of the battle, Donald Tsang Yam-kuen was also accused of turning a blind eye to the plight of people who lost money on Lehman Brothers-linked minibonds. They, and several other groups, formed a banner-waving mob blocking almost all entrances to the Legco building.
"Tsang Yam-kuen, step down!" shouted the protesters, among them minibonds victims seeking government help, green groups and pan-democrats demanding a speedy introduction of universal suffrage.
But when the convoy of chauffeur-driven vehicles arrived at the Legco building, Mr Tsang stepped out of his car and determinedly walked towards the entrance, ignoring the petitions thrust at him.
Adopting the same attitude, Mr Tsang tried to tackle the political controversy over the July 1 march during his speech to open question time.
But among his conclusions on the "two categories" of July 1 demands, he left out the two strongest calls demanded by marchers: his resignation and government assistance to minibonds victims.
He was interrupted three times by legislators from the League of Social Democrats, who demanded to know why he had ignored the plight of minibonds victims, including one who recently killed herself.
"You are really shameless for ignoring them," shouted League legislator Leung Kwok-hung, before he was removed. "A Lehman Brothers' victim has killed herself - her [ghost] is waiting for you outside."
Democratic Party lawmaker James To Kun-sun and unionist Lee Cheuk-yan accused Mr Tsang of playing up youth drug abuse to divert attention from universal suffrage and governance problems.
"The chief executive did not calm people's anger on July 1. He had no response to the people's demands, including universal suffrage and the minibonds saga," Mr Lee said.
There was an uproar when Mr Tsang cut short Legco president Tsang Yok-sing's announcement of the end of the meeting to air grievances "suppressed inside me for a long time".
The chief executive then read a prepared script lambasting lawmakers for interrupting him earlier, thus dishonouring the Hong Kong spirit of inclusiveness. When he was done, Democrat Lee Wing-tat protested, saying the Legco president was biased because he allowed the chief executive to speak but stopped others when they tried to question him.
Meanwhile Chief Secretary Henry Tang Ying-yen found an easier way to avoid protesters. "Of course I am not scared," he said, when caught using the rear entrance. "I always like using the elevator at the back."
He lambasted pan-democrats for disrupting his speech and denied he was a "fugitive" from environmental protection. But during a rowdy Legislative Council question time, the chief executive left one issue unanswered: calls for his resignation.
In the heat of the battle, Donald Tsang Yam-kuen was also accused of turning a blind eye to the plight of people who lost money on Lehman Brothers-linked minibonds. They, and several other groups, formed a banner-waving mob blocking almost all entrances to the Legco building.
"Tsang Yam-kuen, step down!" shouted the protesters, among them minibonds victims seeking government help, green groups and pan-democrats demanding a speedy introduction of universal suffrage.
But when the convoy of chauffeur-driven vehicles arrived at the Legco building, Mr Tsang stepped out of his car and determinedly walked towards the entrance, ignoring the petitions thrust at him.
Adopting the same attitude, Mr Tsang tried to tackle the political controversy over the July 1 march during his speech to open question time.
But among his conclusions on the "two categories" of July 1 demands, he left out the two strongest calls demanded by marchers: his resignation and government assistance to minibonds victims.
He was interrupted three times by legislators from the League of Social Democrats, who demanded to know why he had ignored the plight of minibonds victims, including one who recently killed herself.
"You are really shameless for ignoring them," shouted League legislator Leung Kwok-hung, before he was removed. "A Lehman Brothers' victim has killed herself - her [ghost] is waiting for you outside."
Democratic Party lawmaker James To Kun-sun and unionist Lee Cheuk-yan accused Mr Tsang of playing up youth drug abuse to divert attention from universal suffrage and governance problems.
"The chief executive did not calm people's anger on July 1. He had no response to the people's demands, including universal suffrage and the minibonds saga," Mr Lee said.
There was an uproar when Mr Tsang cut short Legco president Tsang Yok-sing's announcement of the end of the meeting to air grievances "suppressed inside me for a long time".
The chief executive then read a prepared script lambasting lawmakers for interrupting him earlier, thus dishonouring the Hong Kong spirit of inclusiveness. When he was done, Democrat Lee Wing-tat protested, saying the Legco president was biased because he allowed the chief executive to speak but stopped others when they tried to question him.
Meanwhile Chief Secretary Henry Tang Ying-yen found an easier way to avoid protesters. "Of course I am not scared," he said, when caught using the rear entrance. "I always like using the elevator at the back."
A Doctor by Choice, a Businessman by Necessity
Read this article. In a commercialised world, many doctors have to carry out unnecessary tests to earn income to meet their operating expenses and produce a profit. The unnecessary tests are wasteful and add to the cost of the health care, which has to be borne by the patients or tax payers. This is sad.
Ban on selling structured notes
A journalist told me that the ban imposed by MAS is from selling structured notes. The ban does not apply to other types of structured products. Frankly, I do not understand the distinction. Can anyone enlighten me? What kind of structured products are not covered by the ban?
Let your views be heard
Someone commented that there is no point in putting the suggestions in my blog, as the Government will not be reading them or consider them for implementation.
My purpose is to educate the people who visit and read my blog. I hope that more people will come forward to express their genuine views, either anonymously (if they prefer privacy) or, better still, with their actual names.
I also hope that the authority will hear the genuine grievances, and come forward to find a solution.
My purpose is to educate the people who visit and read my blog. I hope that more people will come forward to express their genuine views, either anonymously (if they prefer privacy) or, better still, with their actual names.
I also hope that the authority will hear the genuine grievances, and come forward to find a solution.
Gathering at Speaker's Corner, 22 Aug at 5 pm
Someone asked me, "What is the purpose of the gathering at Speaker's Corner in August? What is the strategy to get compensation for the investors?"
The purpose is to allow the investors to attend and meet other investors. Many of them have been rejected. They want to express their unhappiness. This is the least that the investors can do, compared to the rallies and demonstrations that have been held in Hong Kong.
Many investors have concluded that they have to take a class action to seek compensation. There are many obstacles to organise this class action. I shall try to explore some avenues.
The purpose is to allow the investors to attend and meet other investors. Many of them have been rejected. They want to express their unhappiness. This is the least that the investors can do, compared to the rallies and demonstrations that have been held in Hong Kong.
Many investors have concluded that they have to take a class action to seek compensation. There are many obstacles to organise this class action. I shall try to explore some avenues.
Section 27 of Financial Adviser's Act
I post below, the wordings of section 27 of the Financial Advisers Act. I believe that MAS should consider if the licensee (i.e. distributor) has breached this section and ask them to compensate the investor for the loss or damage as required under sub-section (3). But I am not sure if I have read this section correctly, in respect of the mis-representations to the investor of the credit linked notes. What are your views?
Recommendations by licensees
27. —(1) No licensee shall make a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation if the licensee does not have a reasonable basis for making the recommendation to the person.
(2) For the purposes of subsection (1), a licensee does not have a reasonable basis for making a recommendation to a person unless —
(a) he has, for the purposes of ascertaining that the recommendation is appropriate, having regard to the information possessed by him concerning the investment objectives, financial situation and particular needs of the person, given such consideration to, and conducted such investigation of, the subject-matter of the recommendation as is reasonable in all the circumstances; and
(b) the recommendation is based on the consideration and investigation referred to in paragraph (a).
(3) Where —
(a) a licensee, in making a recommendation to a person, contravenes subsection (1);
(b) the person, in reliance on the recommendation, does a particular act, or refrains from doing a particular act;
(c) it is reasonable, having regard to the recommendation and all other relevant circumstances, for the person to do that act, or to refrain from doing that act, as the case may be, in reliance on the recommendation; and
(d) the person suffers loss or damage as a result of doing that act, or refraining from doing that act, as the case may be,
then, without prejudice to any other remedy available to that person, the licensee is liable to pay damages to that person in respect of that loss or damage.
(4) In this section, a reference to the making of a recommendation is a reference to the making of a recommendation expressly or by implication.
(5) This section shall not apply to any licensee or class of licensees in such circumstances or under such conditions as may be prescribed.
Recommendations by licensees
27. —(1) No licensee shall make a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation if the licensee does not have a reasonable basis for making the recommendation to the person.
(2) For the purposes of subsection (1), a licensee does not have a reasonable basis for making a recommendation to a person unless —
(a) he has, for the purposes of ascertaining that the recommendation is appropriate, having regard to the information possessed by him concerning the investment objectives, financial situation and particular needs of the person, given such consideration to, and conducted such investigation of, the subject-matter of the recommendation as is reasonable in all the circumstances; and
(b) the recommendation is based on the consideration and investigation referred to in paragraph (a).
(3) Where —
(a) a licensee, in making a recommendation to a person, contravenes subsection (1);
(b) the person, in reliance on the recommendation, does a particular act, or refrains from doing a particular act;
(c) it is reasonable, having regard to the recommendation and all other relevant circumstances, for the person to do that act, or to refrain from doing that act, as the case may be, in reliance on the recommendation; and
(d) the person suffers loss or damage as a result of doing that act, or refraining from doing that act, as the case may be,
then, without prejudice to any other remedy available to that person, the licensee is liable to pay damages to that person in respect of that loss or damage.
(4) In this section, a reference to the making of a recommendation is a reference to the making of a recommendation expressly or by implication.
(5) This section shall not apply to any licensee or class of licensees in such circumstances or under such conditions as may be prescribed.
A fair compensation
Since the start of the Minibond crisis, I have suggested that a fair settlement is for the distributor and the investor to share the loss equally. I believe that both parties should share the blame equally for this unfortunate event.
The difficulty is that some of the notes have residual values that may change during the period prior to maturity. They may be worth more than 50% at the time of settlement or at maturity. Other notes may be worth less. How are these different notes to be dealt with?
I have since found a possible solution. The distributor should buy back the note at 50% of the invested sum now (less any interest that have been paid), take over the notes and refund back 50% of the future proceeds. The distributor is in a better position to decide on future actions, e.g. to hold or dispose of the notes prior to maturity.
I hope that some of the distributors will consider this proposal, in the interest of fair treatment of their customers.
Tan Kin Lian
The difficulty is that some of the notes have residual values that may change during the period prior to maturity. They may be worth more than 50% at the time of settlement or at maturity. Other notes may be worth less. How are these different notes to be dealt with?
I have since found a possible solution. The distributor should buy back the note at 50% of the invested sum now (less any interest that have been paid), take over the notes and refund back 50% of the future proceeds. The distributor is in a better position to decide on future actions, e.g. to hold or dispose of the notes prior to maturity.
I hope that some of the distributors will consider this proposal, in the interest of fair treatment of their customers.
Tan Kin Lian
Follow up action on MAS investigation report
The report released by MAS has been disappointing. The financial institutions that were found to be breached the regulation have been banned from selling structured products for 6 to 24 months. This will not affect them financially, as the sale of structured products have virtually disappeared during the past months, and is unlikely to revive over the next two years.
More importantly, the mis-guided investors, who have lost a large sum of savings in these products and were looking for some compensation for their loss, had their hopes dashed. They posted their views strongly in this blog.
There were reports that investors in Hong Kong are likely to get compensation of 60% to 70%. Someone worked out that the compensation paid to Singapore investors to be less than 20% (but this is not verified due to lack of complete information).
During the past two weeks, I have been talking to lawyers and the insurance broker to see if the "after the event" insurance can be obtained for investors who wish to take legal action against the distributor on the legal grounds of mis-representation. They are several obstacles to be overcomed, but I am working on them.
If the obstacles can be overcomed, investors (who are not involved in any existing class action) can consider a new class action to be arranged. The larger investors can consider taking individual legal action. I like to ask you to complete this survey, to see if there is sufficient interest.
A team of volunteers is helping me to plan a gathering of investors at Speaker's Corner in Hong Lim Park on Saturday 22 August 2009 at 5 p.m. Keep the date free. If you wish to help in the organisation, you can join this Google Group.
On a separate matter, I like to ask investors to write your story for publication in a book. Share your experience with the future generation. Write your story to cover how you were misled into investing in the toxic product and the months of agony that you went through in trying to get compensation. You can send them to me at kinlian@gmail.com.
Tan Kin Lian
More importantly, the mis-guided investors, who have lost a large sum of savings in these products and were looking for some compensation for their loss, had their hopes dashed. They posted their views strongly in this blog.
There were reports that investors in Hong Kong are likely to get compensation of 60% to 70%. Someone worked out that the compensation paid to Singapore investors to be less than 20% (but this is not verified due to lack of complete information).
During the past two weeks, I have been talking to lawyers and the insurance broker to see if the "after the event" insurance can be obtained for investors who wish to take legal action against the distributor on the legal grounds of mis-representation. They are several obstacles to be overcomed, but I am working on them.
If the obstacles can be overcomed, investors (who are not involved in any existing class action) can consider a new class action to be arranged. The larger investors can consider taking individual legal action. I like to ask you to complete this survey, to see if there is sufficient interest.
A team of volunteers is helping me to plan a gathering of investors at Speaker's Corner in Hong Lim Park on Saturday 22 August 2009 at 5 p.m. Keep the date free. If you wish to help in the organisation, you can join this Google Group.
On a separate matter, I like to ask investors to write your story for publication in a book. Share your experience with the future generation. Write your story to cover how you were misled into investing in the toxic product and the months of agony that you went through in trying to get compensation. You can send them to me at kinlian@gmail.com.
Tan Kin Lian
Tuesday, July 07, 2009
The Standard:Illegal Lehman protest targets Tsang home
6 July 2009
Dozens of angry Lehman Brothers minibond investors staged a noisy protest outside Government House yesterday, calling on Chief Executive Donald Tsang Yam-kuen to accept responsibility for their losses and step down.
Holding banners and shouting slogans, the protesters broke through police barriers on Upper Albert Road but returned to the pavement following police persuasion.
More than 50 people took part in the unauthorized demonstration, police said.
The protesters maintained Tsang has failed to supervise the banks and is not doing enough to help them.
Allied Victims of Lehman Products chairman Peter Chan Kwong-yue had initially suggested the protesters would refuse to leave until Tsang talked to them.
Chan, who organized the demonstration, had also expected a turnout of 200 to 300, but traffic diversions and the rain took their toll.
The group will now be applying for permission from the police to stage a protest outside the Legislative Council tomorrow when Tsang arrives for a question and answer session, Chan said. He expects between 400 and 500 people to attend.
Nobody from the government came forward to accept a letter from the group yesterday. And banks involved have not replied to investors even though the group has reached out to them, Chan said.
Upper Albert Road was reopened by early evening yesterday, with all protesters dispersed by 6pm.
A police spokesman said the force had not been informed in advance of the protest so the group violated the Public Order Ordinance. While there were no arrests, an investigation is under way.
Sixteen distributor banks for Lehman Brothers minibonds last Monday met the Securities and Futures Commission to indicate they would pay most investors 60 percent of the principal invested, while investors aged 65 or above would receive 70 percent of their investment. An official proposal was sent to the regulator on Thursday.
SFC chief executive Martin Wheatley said on Friday that the suggestion of paying investors only 60 percent of principal on average was not fair.
A 52-year-old woman linked to Lehman Brothers products reportedly jumped to her death from a Kowloon Bay apartment building on Friday.
Dozens of angry Lehman Brothers minibond investors staged a noisy protest outside Government House yesterday, calling on Chief Executive Donald Tsang Yam-kuen to accept responsibility for their losses and step down.
Holding banners and shouting slogans, the protesters broke through police barriers on Upper Albert Road but returned to the pavement following police persuasion.
More than 50 people took part in the unauthorized demonstration, police said.
The protesters maintained Tsang has failed to supervise the banks and is not doing enough to help them.
Allied Victims of Lehman Products chairman Peter Chan Kwong-yue had initially suggested the protesters would refuse to leave until Tsang talked to them.
Chan, who organized the demonstration, had also expected a turnout of 200 to 300, but traffic diversions and the rain took their toll.
The group will now be applying for permission from the police to stage a protest outside the Legislative Council tomorrow when Tsang arrives for a question and answer session, Chan said. He expects between 400 and 500 people to attend.
Nobody from the government came forward to accept a letter from the group yesterday. And banks involved have not replied to investors even though the group has reached out to them, Chan said.
Upper Albert Road was reopened by early evening yesterday, with all protesters dispersed by 6pm.
A police spokesman said the force had not been informed in advance of the protest so the group violated the Public Order Ordinance. While there were no arrests, an investigation is under way.
Sixteen distributor banks for Lehman Brothers minibonds last Monday met the Securities and Futures Commission to indicate they would pay most investors 60 percent of the principal invested, while investors aged 65 or above would receive 70 percent of their investment. An official proposal was sent to the regulator on Thursday.
SFC chief executive Martin Wheatley said on Friday that the suggestion of paying investors only 60 percent of principal on average was not fair.
A 52-year-old woman linked to Lehman Brothers products reportedly jumped to her death from a Kowloon Bay apartment building on Friday.
Singapore bars 10 firms from selling structured notes
By Lee Siew Hoon, Channel NewsAsia | Posted: 07 July 2009 1728 hrs
SINGAPORE: The Monetary Authority of Singapore (MAS) has, for the first time, imposed bans on the sale of structured notes by 10 financial institutions (FIs) which had distributed toxic structured notes linked to the collapsed US financial institution Lehman Brothers.
The bans took effect on July 1 and will remain in place until MAS is satisfied there are adequate measures to address the findings of its investigation into the sale of the failed structured products last year.
The 10 FIs are ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Philip Securities and UOB Kay Hian.
MAS revealed this as it released the findings of its investigations into the sale of the failed structured products last year.
The regulator found that the 10 FIs had policies, procedures and controls in place for the sale and marketing of the structured notes, but the extent of due diligence and level of internal controls differed among them.
As a result, MAS said there were various forms of non-compliance with its notices and guidelines on the sale and marketing of these investment products.
MAS said some of the specific failings included insufficient steps taken by some FIs to ensure that all their financial advisory representatives were properly trained before marketing and selling these products.
The regulator also noted that some FIs had assigned risk ratings to the products that were inconsistent with risk warnings stated in the prospectus and pricing statement.
According to MAS, there were also weaknesses in how some FIs ensured that their sales representatives were properly equipped with accurate and complete information about the structured notes.
As a preventive measure, the regulator said FIs must rectify all weaknesses identified in the investigations, appoint an external person identified by MAS to review action plans and report on implementation, and appoint senior management staff to oversee compliance with MAS' direction.
MAS said that until it is satisfied with the measures put in place, the FIs will not be able to distribute structured notes.
MAS also gave details about how the FIs have compensated investors who bought structured notes.
Hong Leong Finance paid S$57.6 million to 2,048 investors who bought the structured notes that it distributed. This is the highest amount of compensation paid out to retail investors.
Hong Leong Finance is also barred from selling structured products for two years.
Maybank offered S$25.3 million to 1,100 investors, while ABN Amro paid 262 investors S$14.1 million.
DBS Bank compensated 197 investors S$7.6 million.
The three banks will be banned from selling structured products for six months.
According to MAS, the total settlements for decided cases amounted to S$105 million.
The six brokerage firms, which also sold the structured notes, paid a total of
S$2.74 million to 297 investors.
UOB Kay Hian and DMG & Partners will get a six-month ban, while the others will be barred from selling structured notes for a year each.
http://www.channelnewsasia.com/stories/singaporelocalnews/view/440970/1/.html
SINGAPORE: The Monetary Authority of Singapore (MAS) has, for the first time, imposed bans on the sale of structured notes by 10 financial institutions (FIs) which had distributed toxic structured notes linked to the collapsed US financial institution Lehman Brothers.
The bans took effect on July 1 and will remain in place until MAS is satisfied there are adequate measures to address the findings of its investigation into the sale of the failed structured products last year.
The 10 FIs are ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Philip Securities and UOB Kay Hian.
MAS revealed this as it released the findings of its investigations into the sale of the failed structured products last year.
The regulator found that the 10 FIs had policies, procedures and controls in place for the sale and marketing of the structured notes, but the extent of due diligence and level of internal controls differed among them.
As a result, MAS said there were various forms of non-compliance with its notices and guidelines on the sale and marketing of these investment products.
MAS said some of the specific failings included insufficient steps taken by some FIs to ensure that all their financial advisory representatives were properly trained before marketing and selling these products.
The regulator also noted that some FIs had assigned risk ratings to the products that were inconsistent with risk warnings stated in the prospectus and pricing statement.
According to MAS, there were also weaknesses in how some FIs ensured that their sales representatives were properly equipped with accurate and complete information about the structured notes.
As a preventive measure, the regulator said FIs must rectify all weaknesses identified in the investigations, appoint an external person identified by MAS to review action plans and report on implementation, and appoint senior management staff to oversee compliance with MAS' direction.
MAS said that until it is satisfied with the measures put in place, the FIs will not be able to distribute structured notes.
MAS also gave details about how the FIs have compensated investors who bought structured notes.
Hong Leong Finance paid S$57.6 million to 2,048 investors who bought the structured notes that it distributed. This is the highest amount of compensation paid out to retail investors.
Hong Leong Finance is also barred from selling structured products for two years.
Maybank offered S$25.3 million to 1,100 investors, while ABN Amro paid 262 investors S$14.1 million.
DBS Bank compensated 197 investors S$7.6 million.
The three banks will be banned from selling structured products for six months.
According to MAS, the total settlements for decided cases amounted to S$105 million.
The six brokerage firms, which also sold the structured notes, paid a total of
S$2.74 million to 297 investors.
UOB Kay Hian and DMG & Partners will get a six-month ban, while the others will be barred from selling structured notes for a year each.
http://www.channelnewsasia.com/stories/singaporelocalnews/view/440970/1/.html
MAS Investigation Findings
MAS Releases Investigation Findings on the Sale and Marketing of Structured Notes Linked to Lehman Brothers
100 fun and information personality quizzes
Hi Tan,
We just posted an article, “Know Thyself: 100 Fun and Informative Personality Quizzes”. I thought I'd bring it to your attention in case you think your readers would find it interesting.
Suzane Smith
We just posted an article, “Know Thyself: 100 Fun and Informative Personality Quizzes”. I thought I'd bring it to your attention in case you think your readers would find it interesting.
Suzane Smith
Simplify Internet Banking
Editor
Forum Page
Straits Times
I use internet banking to transfer money to the other people through their bank account. I find this service to be convenient, compared to sending a cheque to them.
However, I find that the actual implementation of this service by my bank to be a hassle in the following aspects:
1. The bank requires the customer to create a record for each new payee and to authenticate it through a PIN sent through the mobile phone.
2. The bank requires the customer to enter the IB Secure PIN for every payment
These layers of security measures are duplicative, as the customer already has to enter user ID, PIN and an IB secure PIN to gain access to the internet banking facility.
The real risk to the customer is by entering the wrong account code of the payee or the wrong amount. The bank is not helping the customer to mitigate this risk.
By giving hassle and distracting the customer, these duplicative tasks actually increases the risk to the customer of making mistakes in entering the wrong bank account or amount. The inconveniences are aggravated when the computer system or internet is slow.
I believe that these security features may have been mandated by the regulator. I hope that the banks and the regulator should re-look at these requirements and simplify the process for the customer, while maintaining an adequate level of security. This will allow the customer to focus on ensuring that the entries are correct.
Tan Kin Lian
Forum Page
Straits Times
I use internet banking to transfer money to the other people through their bank account. I find this service to be convenient, compared to sending a cheque to them.
However, I find that the actual implementation of this service by my bank to be a hassle in the following aspects:
1. The bank requires the customer to create a record for each new payee and to authenticate it through a PIN sent through the mobile phone.
2. The bank requires the customer to enter the IB Secure PIN for every payment
These layers of security measures are duplicative, as the customer already has to enter user ID, PIN and an IB secure PIN to gain access to the internet banking facility.
The real risk to the customer is by entering the wrong account code of the payee or the wrong amount. The bank is not helping the customer to mitigate this risk.
By giving hassle and distracting the customer, these duplicative tasks actually increases the risk to the customer of making mistakes in entering the wrong bank account or amount. The inconveniences are aggravated when the computer system or internet is slow.
I believe that these security features may have been mandated by the regulator. I hope that the banks and the regulator should re-look at these requirements and simplify the process for the customer, while maintaining an adequate level of security. This will allow the customer to focus on ensuring that the entries are correct.
Tan Kin Lian
Prevent Mis-selling of Financial Products
I wrote an article to suggest the following measures to prevent mis-selling of financial products in the future, namely:
a. Enforce the law
b. Allow contingenncy fee system
c. Set up a consumer protection agency.
Read this article.
Funds Transfer
Service Quality Manager
DBS Bank
I find the funds transfer facility provided by DBS Bank through internet banking and ATM to be very useful. I wish to pass this suggestion for your bank to improve this service.
1. Type of account
When I make a funds transfer by internet banking or ATM to a DBS or POSB account, I am asked to specify the type of account, e.g. current, saving, or other type. Usually, the payee does not tell me the type of account. They only indicate DBS or POSB
Can you change the system to avoid specifying the type of account. I believe that the account number should be sufficient for DBS to identify the actual account.
2. Reference Number
When another person transfers money to me through ATM, the transferor is not able to enter a Reference in your ATM machine. I do not have any idea about the identity of the person making the payment to me through ATM.
Can you change your ATM system to allow a Reference Number to be entered. I am aware that this has to be restricted to a Numeric number, but this is better than no reference at all.
Thank you.
Tan Kin Lian
DBS Bank
I find the funds transfer facility provided by DBS Bank through internet banking and ATM to be very useful. I wish to pass this suggestion for your bank to improve this service.
1. Type of account
When I make a funds transfer by internet banking or ATM to a DBS or POSB account, I am asked to specify the type of account, e.g. current, saving, or other type. Usually, the payee does not tell me the type of account. They only indicate DBS or POSB
Can you change the system to avoid specifying the type of account. I believe that the account number should be sufficient for DBS to identify the actual account.
2. Reference Number
When another person transfers money to me through ATM, the transferor is not able to enter a Reference in your ATM machine. I do not have any idea about the identity of the person making the payment to me through ATM.
Can you change your ATM system to allow a Reference Number to be entered. I am aware that this has to be restricted to a Numeric number, but this is better than no reference at all.
Thank you.
Tan Kin Lian
Diverse Views
I wish to post this reply to the Note of Enouragement by Cashew Nut.
1. I state my views and give my reasons.
Some people who disagree with me, use this approach:
I hope that more people can come forward to express their views honestly and positively. If one has to be anonmymous or use a pen name, it is more important that one should show respect and fairness to other people.
Tan Kin Lian
I welcome diverse views. I hold different views from other people. I observe the following principles in expressing my views:
1. I state my views and give my reasons.
2. I do not pass judgement on other people's views (i.e who am I to judge?)
3. I do not attack another person.
Some people who disagree with me, use this approach:
1. They pass judgement on my views
2. They give an extreme interpretation of my views (i.e. put words in my mouth) and attack it
3. They attack me personally on other matters
4. They carry out these actions, while remaining anonymous.
I hope that more people can come forward to express their views honestly and positively. If one has to be anonmymous or use a pen name, it is more important that one should show respect and fairness to other people.
Tan Kin Lian
A poor return on savings in life insurance
When you pay premium for a whole life or endowment policy, a portion (say $X) goes to provide the insurance cover and another portion (say $y) goes towards savings to pay your the maturity benefit or cash value in the future.
The insurance company aims to earn a return of say 5% per annum on the savings portion. However, they take away more than half of the gain to pay commission to the agent, overhead expenses and profit for shareholders, giving a net return of less than 2.5% to the policyholder.
This net return is not guaranteed, as it takes the form of a bonus that can be adjusted by the insurance company.
When the investment return is bad (as has happened every few years), the insurance company cuts the bonus and gives you a lower return. If the investment return is good, the insurance company may not increase the bonus, as it prefers to keep the excess gain as "orphan money" in the insurance fund. The policyholder is likely to lose out in the long run and get a return lower than projected.
After deducting the cost of insurance (i.e. $X) the net return may be less than 1% per annum. This is a poor return for a long term savings plan.
This very low return is possible only if the policy is maintained for more than 15 years. If it is terminated earlier, the cash value is likely to be less than the total premiums paid, giving a negative return to the policyholder. Many policyholders lose more than half of their savings on early termination.
To give a fair return to the policyholder, an insurance company should follow this approach:
a) reduce its expenses, especially commission to agents
b) distribute most of its investment gain to policyholders
Unfortunately, to my knowledge, none of the life insurance company in Singapore follow this approach.
Hence, it is best to avoid all types of life insurance policies that have high expenses. Buy term insurance for the life insurance. Invest your savings in government bonds or an exchange traded fund.
Tan Kin Lian
The insurance company aims to earn a return of say 5% per annum on the savings portion. However, they take away more than half of the gain to pay commission to the agent, overhead expenses and profit for shareholders, giving a net return of less than 2.5% to the policyholder.
This net return is not guaranteed, as it takes the form of a bonus that can be adjusted by the insurance company.
When the investment return is bad (as has happened every few years), the insurance company cuts the bonus and gives you a lower return. If the investment return is good, the insurance company may not increase the bonus, as it prefers to keep the excess gain as "orphan money" in the insurance fund. The policyholder is likely to lose out in the long run and get a return lower than projected.
After deducting the cost of insurance (i.e. $X) the net return may be less than 1% per annum. This is a poor return for a long term savings plan.
This very low return is possible only if the policy is maintained for more than 15 years. If it is terminated earlier, the cash value is likely to be less than the total premiums paid, giving a negative return to the policyholder. Many policyholders lose more than half of their savings on early termination.
To give a fair return to the policyholder, an insurance company should follow this approach:
a) reduce its expenses, especially commission to agents
b) distribute most of its investment gain to policyholders
Unfortunately, to my knowledge, none of the life insurance company in Singapore follow this approach.
Hence, it is best to avoid all types of life insurance policies that have high expenses. Buy term insurance for the life insurance. Invest your savings in government bonds or an exchange traded fund.
Tan Kin Lian
A note of encouragement
MR Tan Kin Lian
May I offer a note of encouragement to your good work.
You should not loose heart when the response to your suggestions may not be as good as you expected. People take time to respond. It takes time to manifest from inward to outward. Even "educated" people like me takes a long time to unwind the process from inside to outside.
One of the scary things we see in myself and others is the apathy of the heart and lethargy of the body to talk about half-justice and half-truth. I think to make people able to think is more important than winning the debate. Once the people is able to think, then we shall leave it to the people to decide. For example, I am a father too.
My job to to impact good value and character (to the best of our ability), teach them to think independently and pray that God will lead them in their pilgrimage of life. I cannot impose once they come of age.
I have the interest of looking at the recent China history. The Chinese people during late Qing has gone through much soul searching. Even great men like "Zheng Guo Fan" and "Li Hong Zhang", they are searching and trying very hard to institute change from within the institution. Zheng Guo Fan did not suffered humiliation as a result and was hailed as a great leader and teacher. Li Hong Zhang is being portrait as a "traitor" although he did a fair amount of good things for China. History can be enlighening and cruel. It may not apply directly to Singapore, to respect history is the beginning of humanness and humanity.
Thanks a lot and God bless.
CASHEW NUT
May I offer a note of encouragement to your good work.
You should not loose heart when the response to your suggestions may not be as good as you expected. People take time to respond. It takes time to manifest from inward to outward. Even "educated" people like me takes a long time to unwind the process from inside to outside.
One of the scary things we see in myself and others is the apathy of the heart and lethargy of the body to talk about half-justice and half-truth. I think to make people able to think is more important than winning the debate. Once the people is able to think, then we shall leave it to the people to decide. For example, I am a father too.
My job to to impact good value and character (to the best of our ability), teach them to think independently and pray that God will lead them in their pilgrimage of life. I cannot impose once they come of age.
I have the interest of looking at the recent China history. The Chinese people during late Qing has gone through much soul searching. Even great men like "Zheng Guo Fan" and "Li Hong Zhang", they are searching and trying very hard to institute change from within the institution. Zheng Guo Fan did not suffered humiliation as a result and was hailed as a great leader and teacher. Li Hong Zhang is being portrait as a "traitor" although he did a fair amount of good things for China. History can be enlighening and cruel. It may not apply directly to Singapore, to respect history is the beginning of humanness and humanity.
Thanks a lot and God bless.
CASHEW NUT
No-fault motor insurance
Hi Mr. Tan,
What are you views on the no-fault motor insurance, that is proposed by the Consumer Association?
REPLY
I sent the following views to the Straits Time. The journalist mentioned it in his report.
There are two types of third party claims and they require to be dealt with differently.
a) Injury claims
For injury claims, it is useful to have a "no fault system" to compensate the injured party, similar to worker's compensation. Here is the experience of such a system used in Sweden. It allows for the compensations to be paid more promptly and fairly, and reduces the litigation cost. See this article in my website:
b) Damage claims
For damage claims, a better solution is for the regulation to require a motorist to lodge a third party claim directly with the insurance company, prior to arranging the repair of the vehicle. The past practice was that the third party will arrange the repair the vehicle with his workshop (who can inflate the claim) and then get a lawyer to lodge the third party claim against the insruance company (hence, adding up the litigation cost as well). (Note: I am not sure if the Motor Claim Framework introduced last year has already addressed this matter).
If the third party damage claim can be put on a proper framework, there is no need to change to law to introduce a "no fault" system for damage claims.
Monday, July 06, 2009
Are we over-reacting to Influence A (H1N1)
Read this article by Dr. Ong Hean Teik. It is purported to be publised in Malaysiakini. He advised Malaysians to take a different approach from Singapore, and to follow the approach taken in the USA.
There was a mention of Dr. Ong in my blog late last year.
There was a mention of Dr. Ong in my blog late last year.
The hidden ugly side of Singapore
Does this article give a fair description of the life of the poor in Singapore, or is it an exaggeration? Give your opinion here.
Consumer Finance Protection Agency
I suggest that a consumer finance protection agency should be introduced in Singapore, similar to the approach being considered now in America under the Obama Administration.
This agency should have the duty to examine financial products and ensure that they are suitable for sale to the general public. This is similar to the role of the drug authority in approving drugs for sale to the public.
It is not possible for ordinary consumers to assess the safety and fairness of the financial products on their own, based on the information given to them and their lack of financial expertise. This role has to be done by an agency that has access to financial experts. In making the assessment, the financial experts can ask relevant information from the product issuer, including information that is not disclosed in the published materials given to the consumers.
It may be difficult for the Government to take the big step of introducing an agency that has the power to approve or reject any specific financial product. I suggest that this agency can provide a white-list of the suitable products that meet its criteria of disclosure, fairness and general suitability.
This approach allows the ordinary people to check that a particular financial product has been on the white-list. Risky products can be on the white-list, so long as it is adequately disclosed and fairly priced.
The agency can declare products as “not meeting its criteria” without having the power to reject these products.
Tan Kin Lian
This agency should have the duty to examine financial products and ensure that they are suitable for sale to the general public. This is similar to the role of the drug authority in approving drugs for sale to the public.
It is not possible for ordinary consumers to assess the safety and fairness of the financial products on their own, based on the information given to them and their lack of financial expertise. This role has to be done by an agency that has access to financial experts. In making the assessment, the financial experts can ask relevant information from the product issuer, including information that is not disclosed in the published materials given to the consumers.
It may be difficult for the Government to take the big step of introducing an agency that has the power to approve or reject any specific financial product. I suggest that this agency can provide a white-list of the suitable products that meet its criteria of disclosure, fairness and general suitability.
This approach allows the ordinary people to check that a particular financial product has been on the white-list. Risky products can be on the white-list, so long as it is adequately disclosed and fairly priced.
The agency can declare products as “not meeting its criteria” without having the power to reject these products.
Tan Kin Lian
SCMP:Lehman investments recouped
3 July 2009
A total of 329 investors who bought soured Lehman Brothers-linked minibonds from Sun Hung Kai Investment Services and KGI Asia have received their principal amounts back. Under a deal struck with the Securities and Futures Commission, the two firms voluntarily agreed to buy back the minibonds for the principal amount.
Sunday, July 05, 2009
FISCA Research: Interest Rates on Savings Accounts and Fixed Deposits
Here are the interest rates on savings accounts and fixed deposits. Courtesy of FISCA Research.
Cheyenne does the Shape Quiz (T Puzzle)
My niece Cheyenne, 6 years old, tried the Shape Quiz (T Puzzle). She has an artistic inclincation and is able to figure out how to form the shapes by looking at the picture. She did the first 3 shapes out of 100 shapes. She will try the other shapes, one at a time. Watch her on Youtube.
More about the Shape Quiz here.
More about the Shape Quiz here.
Allow lawyers to act on contingency fee
Many investors of the credit linked notes (i.e. Minibonds, High Notes, Pinnacle Notes, Jubilee Notes) had, as a last resort, sought to take a class action against the issuers and/or distributors of these financial products. However, they are daunted by the huge legal cost of a class action.
Many lawyers are not willing to take up the class action as they have existing relationships with the financial institutions and they do not wish to jeopardise their future dealings.
A few lawyers who are willing to act for the investors required a large sum of money to be collected to pay for their case preparation and for their fees and expenses to represent the investors in court. Most of these lawyers are not even prepared to write down their legal arguments and give any assessment of the chance of winning the case, prior to their formal appointment.
Many investors were reluctant to join the class action as they were not sufficiently assured about the credibility of the lawyers or the strength of their case. Some said, “We have been cheated by the banks. We do not now wish to be cheated by the lawyers. We do not want to pay large legal fees, when the chance of winning is unclear or quite remote.”
It is useful for a contingency fee system to be introduced in Singapore for such cases. The lawyers are in the best position to assess the strength of the case, and to take the commercial risk of the litigation. They cannot expect the ordinary folks to make this assessment, especially as the decision has to be taken by many investors with different financial circumstances and understanding of the law.
There are some possible abuses of a contingency fee system, but these abuses can be mitigated. This system provides the positive benefit of allowing ordinary people to seek redress against abuses by large companies.
Tan Kin Lian
Many lawyers are not willing to take up the class action as they have existing relationships with the financial institutions and they do not wish to jeopardise their future dealings.
A few lawyers who are willing to act for the investors required a large sum of money to be collected to pay for their case preparation and for their fees and expenses to represent the investors in court. Most of these lawyers are not even prepared to write down their legal arguments and give any assessment of the chance of winning the case, prior to their formal appointment.
Many investors were reluctant to join the class action as they were not sufficiently assured about the credibility of the lawyers or the strength of their case. Some said, “We have been cheated by the banks. We do not now wish to be cheated by the lawyers. We do not want to pay large legal fees, when the chance of winning is unclear or quite remote.”
It is useful for a contingency fee system to be introduced in Singapore for such cases. The lawyers are in the best position to assess the strength of the case, and to take the commercial risk of the litigation. They cannot expect the ordinary folks to make this assessment, especially as the decision has to be taken by many investors with different financial circumstances and understanding of the law.
There are some possible abuses of a contingency fee system, but these abuses can be mitigated. This system provides the positive benefit of allowing ordinary people to seek redress against abuses by large companies.
Tan Kin Lian
Gathering in Speaker's Corner in August (4)
29 people have replied to the survey mentioned in this blog. Each person indicated that they will ask a small number of people to attend. Only 1 person is willing to speak. Four are willing to share their story (with particulars removed to protect their confidentiality) for another speaker to use.
I need more speakers. If you wish to share your story, I can get someone to speak on your behalf. If you like the gathering to be organised, please give your reply here.
I need more speakers. If you wish to share your story, I can get someone to speak on your behalf. If you like the gathering to be organised, please give your reply here.
Saturday, July 04, 2009
Mis-representation on Credit Linked Notes
A senior lawyer told me that the law is to be seen in this context:
"The law works on the basis of freedom of contract and caveat emptor, so, in these cases, unless there has been misrepresentation or unless it can be shown that the banks have taken on a special duty of care because of a fiduciary relationship (which most bank documents expressly exclude) the buyer is supposed to know what he is buying and the risks thereof."
MY VIEW:
Clearly, the relationship manager did mis-represent the product that they sold to the investors, who were generally risk averse. The question is, "did the RM understand the product?" Most likely, they did not. If this were the case, surely, they must have mis-represented the product?
The strategy for the investor is to provide clear proof that there was mis-representation. This can be in a sworn statement. Better still, it should be supported by an impartial witness or written documentation.
"The law works on the basis of freedom of contract and caveat emptor, so, in these cases, unless there has been misrepresentation or unless it can be shown that the banks have taken on a special duty of care because of a fiduciary relationship (which most bank documents expressly exclude) the buyer is supposed to know what he is buying and the risks thereof."
MY VIEW:
Clearly, the relationship manager did mis-represent the product that they sold to the investors, who were generally risk averse. The question is, "did the RM understand the product?" Most likely, they did not. If this were the case, surely, they must have mis-represented the product?
The strategy for the investor is to provide clear proof that there was mis-representation. This can be in a sworn statement. Better still, it should be supported by an impartial witness or written documentation.
Can you solve these 4 shapes?
DownloAD this PDF. Cut the 4 pieces. Solve the 4 shapes. You can cut the shapes from cardboard to be more durable.
ATE (After The Event) Insurance
The ATE insurance covers the litigation cost and is now available through an insurance broker operating in Singapore.
I have written a paper to brief the insurance broker about the legal position on the credit-linked note and ask them to see if insurance is available for the investors to take legal action against the distributors.
Credit cards availabe in Singapore as at 15 May 2009
Here is a table showing the credit cards available in Singapore as at 15 May 2009.
Fixed deposit interest rate as at 15 May 2009
Here is a table showing the fixed deposit interest rate offered by banks in Singapore as at 15 may 2009. It is now being updated to show the latest available rates. Hope you find it useful.
Is this negligence?
Take this hypothetical example:
1. You are a senior manager of a bank with several branches
2. An investment bank approaches you to sell their innovative products and offers your bank an attractive commission of 3% to sell the product.
3. As the product looks attractive, you are confident of selling $50 million in your branches in one week. This will give a commission of $1,500,000. After deducting the incentive to your relationship managers (say 1%), you can make $1,000,000 for your bank.
4. You agree to distribute the product and sends your relationship managers for training by the product issuer. This is a short talk covering only the positive features of the product, i.e. "how to sell". It does not cover the prospectus and the negative features (as they do not help in the sales).
5. The product issuer advises you to get a disclaimer signed by the retail customers to waive liability for any loss on investing in the product.
The product turns out to be quite different from what you understood it to be. You realised to your horror, that it includes components such as credit default swaps and collaterialised debt obligations (that your bank or its relationship managers did not realise earlier).
As financial advisers, with responsibilties under the Financial Advisers Act), were your relationship managers negligent in not understanding the product that was sold to the retail customers? Does your bank share in this negligence?
What do you do?
a) Hide under the disclaimer clause?
b) Admit your mistake and offer to share the loss with the investors?
1. You are a senior manager of a bank with several branches
2. An investment bank approaches you to sell their innovative products and offers your bank an attractive commission of 3% to sell the product.
3. As the product looks attractive, you are confident of selling $50 million in your branches in one week. This will give a commission of $1,500,000. After deducting the incentive to your relationship managers (say 1%), you can make $1,000,000 for your bank.
4. You agree to distribute the product and sends your relationship managers for training by the product issuer. This is a short talk covering only the positive features of the product, i.e. "how to sell". It does not cover the prospectus and the negative features (as they do not help in the sales).
5. The product issuer advises you to get a disclaimer signed by the retail customers to waive liability for any loss on investing in the product.
The product turns out to be quite different from what you understood it to be. You realised to your horror, that it includes components such as credit default swaps and collaterialised debt obligations (that your bank or its relationship managers did not realise earlier).
As financial advisers, with responsibilties under the Financial Advisers Act), were your relationship managers negligent in not understanding the product that was sold to the retail customers? Does your bank share in this negligence?
What do you do?
a) Hide under the disclaimer clause?
b) Admit your mistake and offer to share the loss with the investors?
Local Transport Service
We should provide a local transport service to serve a town, such as Ang Mo Kio, Bedok or Tampines. It will create jobs and provide a useful service to other people who are already employed. More details here.
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