Warren Buffett once wrote in a Berkshire Hathaway annual report to shareholders that “Unless derivatives contracts are collateralized or guaranteed, their ultimate value depends on the creditworthiness of the counterparties.”

I guess all we can do is seat back and watch the Credit Default Swap (CDS) derivatives market unwound. The Fed’s bail-out of AIG is just an attempt to slow down this un-wounding since AIG is a major insurance provider for CDS market. Anyway, I have my doubts on the Feds is going to bail-out the entire US banking system with US$1T package when the US trade deficit is approximately US$1T too.

RH:
1. The LIEgime is, as always, to blame for screwing up BIG TIME. First, they stupidly tried to magically conjure this tiny little dot into a big finance hub so they can brag about being a ’success’. Through their own PAP-run bank, DBS, and through peer pressure, encouragement and direct orders, they forced every banker to conjure up all kinds of instruments EXACTLY like Wall St, which LIE KY thought the acme of success and genius. Thus, all caution was thrown to the wind as the LIEgime pushed hard for the creation of all kinds of fancy financial instruments.

2. Further, their pro-business and anti-worker policies reduced interest rates on savings to <1% and even FDs to ~1%. This kind of ridiculous interest rates gave a big incentive and impetus to all kinds of fancy products because — they thought — almost any idiot scheme will make more than 1%. This kind of enforced low interest rates also convinced many otherwise careful and prudent savers to ‘venture for more’ on their sweat and blood savings. Result? All gone thanks to the LIEgime Financial Hub ambitions which they enforced with deliberately low interest rates or us folks.

3. As usual, LIE KY screwed up BIG TIME.

What has become of the MAS. It is shocking to learn that they allowed banks to
mass market such sophisticated and risky instruments. The warning signs have been all over the places for at least the last two years of the impending financial
problems in American. I remembered George Soros talked about it while he was
in Singapore.

I’ve avoided these structured notes as I found their structures too complicated to understand. I was also very curious as to why these “sophisticated” products were sold to retail investors (with as little as $5K) instead of to high network private clients in recent times.

A few years ago, there were also alot of complaints against capital guaranteed funds sold to “uncles”and “aunties”. These came with locked-in periods and penalties for early surrender. I guess not too many people remembered it when the market was on a roll.

I also find that most of the warnings that come with these products are in fine-prints or otherwise worded in very legalistic terminology. As a result, this information are usually briefly explained in order to close the sale as quickly as possible.

Yes. I’m all for more disclosure and warnings about the risk must be printed in bold red. Better still, get the investors to sign that they have read it. Although it’s not fool-proof, at least more attention to the RISK involved.

we must always remember not to buy anything we do not understand. the other thing i learnt in life (and made mistakes from) is never buy things sold only through direct selling. all marketers/selling agents (earning commissions) are trained to sell ice to eskimoes

It is high-time that MAS steps forward to resolve this matter between our banks and the affected small-time investors. There is no other time better than to learn it now that investments are riskier than you thought! Don’t be complacent and believe in these so-called protected or guaranteed financial products that make life so complicated.

dear dodo
apart from the direct selling / agents – where else can we invest through? only those who are sufficiently sophisticated and know about investment and can afford to spend the time monitoring can buy through online themselves. do we buy from bank relationship managers then ???

Harry:
I agreed with you. Such products should not have been marketted to small investors like us. Even though I have been very careful, I still suffered a big loss. The adviser came to my house to persuade me to buy, saying that it is very safe, and knowing that I have no earning capacity, as I am semi-retired. Very sad…..
I think there is very little that I could do. There is a line saying that I have read and understood everythings when I signed. There are always clauses to protect the big boys, and the advisers.

It is easy to say we should not buy anythings that we do not know, but the fact is FAs or RMs are not ordinary sales person, they are professionals.
Furthermore, the banks listed are big banks. RMs and Advisers would verbally say that the products are very safe, otherwise they would not be approved for selling via SRS or distributed via big banks. In life we have to trust somebody, otherwise nothing can be done or achieved. If the professionals and / or the big banks cannot be trusted, who else can we trust ?

YM222
The FAs and the RMs are NOT professionals. They are salesmen like the insurance agents trained in selling products. For they are NOT trained in financial engineering nor investment or financial planning to understand about structured products and derivatives.
Never mind about this. What is wrong with these people is that they have not approached the clients correctly. They have not used a need based approach to find out if the products are suitable for these people. They went straight into selling the products and ignore the circumstances and needs of the customers and that is what is wrong.Some could have been seduced to buy. Some could have been cheated and misrepresented.The whole process should have been conducted with any customers and with their needs and financial circumstances in mind..
Section 27 of the FAA stipulates that if the recommendation of the product does not meet the clients’ needs and not of reasonable basis the adviser is guilty of inappropriate advice and lends himself or herself to legal action.
If this can be proven , documented in the know your client form, the aggrieved customers can seek redress through the company or Banks ,CASE, FIDREC and finally lodge a complaint with MAS.

My blog covered this issue. I’m just baffled by the structure of the DBS high notes:

1. What kind of underlying instrument was used to create the structure of the high notes that were wiped out by a credit event involving one of 8 entities?

2. I could deduce that it is some kind exotic credit default swap but who was the the other party at the other end of the contract and what is the relationship with DBS? …..

3. A note linked to 8 entities over a period of 5 years cannot be a “safe product”. It looks like a time bomb. If it is marketed as a safe product, clearly there is misrepresentation and it is a matter for the authorities to investigate.

4. This is the worst product I’ve ever seen for only 5% return. Investors are taking 8 times the risk of a normal bond but paid only 5% return losing all their liquidity for the money for 5 years. GIven the high risk, the underlying return of the instrument has to be very high, ….did DBS make a lot of money from this?…risk free money at the expense of its customers?

extremely sad abt wht is going in. For these products such as high note, mini bond etc which are marketed as “safest investment” and marketed by BIG Local Banks TO general aunties & uncles!!

let put it this way, I am not even surprise that many of these uncles and aunties don’t even know about that their so call investments are “GONE WITH THE WIND”!!

I urge those who are aggrieved by the present investment fiasco to take to task the salespeople and their masters.. There has been a lot of warning signs of failing and the saddest thing is most victims are old frail man and ladies who were easy preys for these unscrupulous sales agents. Don’t wait for MAS.
Malpractices by sales consultants and insurance agents have been a long standing problem and not much has been done to eradicate them all this time.
As consumers you have the power to take the action into your own hand.
By now you must have heard that Mr. Tan has been asked to take up the cudgel
to redress your grievances.He is gathering names for class actions. You would like to visit his blog to lend your support.
The whole thing is getting out of hand and it is time to stop this malpractice, on your own.

I was misled a couple of years ago in investing in DBS structured deposit
the so called surf account. The returns were mere pittance compared to ACU deposits (which also carries a risk on exchange – however they offered a better returns). I came to a realisation that the sales people in all local banks have been recruited (mainly young graduates) and they have been set a target and quote to meet otherwise it means they be out of a job base on the performance and sales target they have to meet. As such, job survival overwrites all other moral issues, that they would try to con and sweet talk the retirees, old uncles and aunties and the gullible who do not read the fine print into investing their hard earn money. They has also been the case with the Lehman brothers instruments that DBS marketed.
I have come to the conclusion that its best to check around before actually investing as the banks nowadays are possessing more of a mafia trait
where they give u mere pittance on yr deposit, compared to the interest they charge on the credit card, service charge, zero interest on current account.
There is basically no free lunch and all would be depositors would have to exercise caution when dealing with new instruments. Best is to avoid them are all costs if u are unsure.

BeWary:
Based on what you say, it is very very scary.
If we have stuck, anythings that we can do?
If they can’t meet the target, their careers are gone. If we stuck……. can’t imagine………….

Better to buy Aussie dollar. 6% interest guaranteed plus able to use the money for migration.

calls to mind the Raffles town saga where DBS bank heavily promoted the club with their brochures. exclusive 5000 member only. When it swelled to 19000, where was the bank’s fiduciary duties to the public. Or did the bank just say – huat ah !
They were the orgainsation collating all the payments but chose to keep quiet.

And for all the suffereings of these members (including me sigh) how has MAS or the PAP government come in to help these clueless people.

I do not see any help going to the clueless – no, not at all.
Big fish eat small fish and big fish laugh all the way to the bank.

“I am surprised that MAS allowed these products to be marketed to the retail public. I hope that MAS will now take pro-active action to help these retail investors minimize their losses.”

Caveat Emptor. Buyer Beware.

Now the people who didn’t have a clue about what they were ‘investing’ in are complaining to daddy MAS and blaming their brokers and fund managers.

Seriously – take responsibility for your own investments, and stop blaming the government. If you don’t know what you’re doing, just stick your money in an FD.

At least you won’t be exposed for the FOOL you are when the markets come crashing down.

Oh. and don’t blame MAS either. it’s this sort of “Daddy government must protect me” attitude that causes the US taxpayers to have to bear 1 trillion in junk investments.

[...] GIC, Temasek State Funds Investments – Diary of A Singaporean Mind: Lehman Minibond Saga : HKMA threatens to suspend banks’ license…MAS.. – TOC: Protecting the small investors [...]

Like many, I am also very surprised that such risky and complex products being sold over the counter to the man in the street…

Being in the fund management industry myself, I wouldn’t touch such things with a 10-feet pole and yet they are marketed as “low risk” instruments to the public…

I think something has gone awry somewhere

I wish to re\spond to #19 inspir3d

Many of the investors were happy to renew their fixed deposit. The bank officer recommended the structured products to them, telling them that it is low risk and gives a higher return. This is misleading. If they were told that there is a chance that they will lose 100% of the principal, these risk adverse investors will not bu the product.

The advisers and their banks wanted to sell these products because they can earn up to 5% of the capital sum as fees (this is just my guess). If they renew the fixed deposit, they can earn a much lower margin. So the financial institions were thinking of their profit when they get their marketeers to “push” these products to the unwary investors.

Many of these investors were too trusting. They were assured that the products are safe, with a very very small chance of default. The small chance has become 100%.

There has been mis-selling. The financial institutions should bear part of the loss. It is only fair.

Sad but true, I was one of those who invested $40,000. I’m just lost my job and now this! Goodness!

It is time MAS review the training of financial advisers (insurance agents and bank consultants); their approach to sales; and make it their responsibility for the outcome of the advice.. No more Caveat Emptor as an escape route for the advisers.Make sure consumers get responsible and competent advice.
Treat financial products similarly to pharmacuetical products with great stringency and ethics. Products must specify the markets ,gender and demographics to prevent agents and advisers from any oh how sell. Breaching this will incur heavy punishment. MAS must find a way to police and regulate the activities of the salespeople. MAS must enforce them instead of paying lip service .The environment must be regulated properly to make it a safe place for consumers. Currently consumers’ confidence is waning.
No fanciful and misleading ads to tout rubbish and untruths.
Products must undergo evaulation and examination before given a stamp pf approval. There must be guidelines to help the evaluation and with the best interest of consumers in mind and NOT the manufacturers, distributors and their salesmen. Ideally, the product must result in win-win-win and not what currently
is, company and agents win at the expense of the consumers..
Everybody in the company must be made responsible, from CEO down to the front line people.A sense of accountability to each other for the best delivery of outcome to consumers as the culture of the company. No more blame game and finger pointing and buck passing as it is now in most companies.
I hope to see a conducive environment where consumers and advisers can trust each other without the fear of sinister motive.
The ball is in your court, MAS.

“There has been mis-selling. The financial institutions should bear part of the loss. It is only fair”

Mr Tan,

90% of financial instruments are mis-sold. the vast majority of ‘financial advisors’ haven’t a clue what they are doing or selling.

even the simplest financial instruments such as long-only mutual funds are often marketed on an unethical basis.

are we then to get the state to indemnify every investors’ loss the moment the people cry foul?

Mr Tan, your call to action sets a dangerous precedent if indeed the MAS does take action against the banks and brokers on private investors’ behalf. such action should be left to the private sector and the courts.

Fundamentally, i do not see why minibond investors should be treated preferentially compared to other investors. the same rules should apply for every investment – CAVEAT EMPTOR, BUYER BEWARE.

Inspir3d(#24):

Even if it is common practise (90% mis-sold according to you), it is still illegal. Are you saying one should not cry foul when times are good and when times are bad? What you are saying is that if someone were to carry out citizen arrest and present incriminating evidence to the police, the police has the right to choose not to process the incident at all and let the criminal go.

Inspir3d (#24) :

Are you implying that it is a norm to have thieves in our neighbour, and the police department should not be held accountable for the situation ? Then why are they paid tax payers’ money if they are not doing anything to help ?

And may I ask where does MAS get their salaries from ? Why do we tax payers have to feed them if they just sit on their butts and close one eye when there are illegal activities going on ?

We are talking about misinterpretation by the banks, this is illegal and MAS being the regulator should look into this.

Look at Hong Kong MAS and what they did to help investors who were conned by the banks, what a world of difference when compared to our MAS.

inspir3d:
why HKMA is consdiering taking action against FIs?
The loss to investor is just too substantial. very sad and painful. something should be done.

It is true that the banks had over-sold these type of financial instruments.

I was persuaded, cajoled and pursued to change my FD of about 100k to such instruments.

I had looked like an ordinary aunty to the so called financial consultants from DBS. They marketed the products to me as equivalent to FDs but with higher interest. Yep … any aunty without the financial knowledge would have been tempted.

Lucky for me, I happened to have worked in the finanical industry before taking baby leave.

I was surprised at the extent our finanical market had opened up. However, from experience, I know singaporeans are the least versed in financial knowledge to be able to make good decisions. Even financial consultants had superficial knowledge.

For the average joe, it is better to stick to your FDs. Or like someone mentioned, invest in AUD!

I bought DBS High Notes 5 because the product was issued by DBS. I thought DBS being a reputable and branded name national bank of Singapore, owned by Singapore PAP government, if I cannot trust such an organisation, then what is the meaning of being a Singapore citizen? Can someone enlighten me.

Caveat emptor is all fine and dandy.

But not when the customer was not given a fair amount of information to make proper decisions. Like when almost all the “experts” deem an instrument to be safe, would the average retail customer know how conclude otherwise? Would you scoff the dentist and fix your own teeth? They are pretty clueless, that’s why they are retail investors! These products should never have made it to the market.

You might as well also apply that phrase for people selling “magic stones” to old folks and stop prosecuting them as cheats. Heck, why have consumer protection at all? Let all merchants cheat and profiteer! Caveat emptor right?

If you are able to organise a discussion session at Speakers Corner within this week or the next, I’m sure there will be a lot of people turning up to listen. People are not interested in listening to politics.. but if it’s their money.. they will listen.

Buying a financial instrument or an insurance product is unlike buying a car.
You can see, touch, feel, molest and verify yourself whatever the brochure and salesman tells you by taking it for a test drive . If you say Caveat Emtpor that is not so bad because you already have enough info and ‘experience’. if there is any damage or defects you have warranty and at the worse you suffer a little bit of inconvenience.
But with financial products you rely on the words of the salesmen and the brochure and the benefits you can have them only many years down the road and they are not guaranteed. Applying Caveat Emptor to these products is not fair. Someone must be made to responsible for the outcome. if the outcome is as what said long ago by the salesman he has done his duty and he was paid for it long time ago. If it soured you cannot tell,”well, we told you long time ago you bought it at your risk and Judgement.. ” too bad , count it as your misfortune.
We told you a few years ago that lehman was not one of the reference entities.
it is not a credit event. It is a failure of the distributor to disclose the risk of the arranger..

MAS should answer why they allowed high street banks to peddle Principal-Guaranteed Structured Deposits in local branches where bank officers swoop down on unsuspecting walk-in customers who popped-in to do a deposit or some basic banking transaction!

The Fed has failed in carrying out their duty in the US. What about MAS? If the whole shenanigan spirals out of control, is the principal still guaranteed under such products? If not, will the principal shortfall be made good from shareholders’ funds based on full disclosure to bank shareholders?

18 Inspir3d wrote “Oh. and don’t blame MAS either. it’s this sort of “Daddy government must protect me” attitude that causes the US taxpayers to have to bear 1 trillion in junk investments.”

The finacial fiasco currently unfolding in USA is due to lack of government supervision of the financial sector especially with regard to their creation of derivatives – “financial weapons of mass destructions.”
If only the Regulators listen to the people and moderated their push for free market, American and the world would not have to go through this mess.

24 Inspir3d wrote, “90% of financial instruments are mis-sold. the vast majority of ‘financial advisors’ haven’t a clue what they are doing or selling”

If what u wrote is true, then the MAS and the banks ought to be shot.
This is even worst than American banks giving mortage loans even when the buyers have no source of income.

Why is MAS so silent about this whole fiasco?

MAS’s voice has disappeared a long time ago together with the people’s money.

#30:
interesting point.
Caveat emptor can protect “magic stone sellers” if they have one? Caveat emptor seems to be a magic word for every things………
soph. investors would not buy, so sell it to ordinary people?

inspir3d (#25) said:

Mr Tan, your call to action sets a dangerous precedent if indeed the MAS does take action against the banks and brokers on private investors’ behalf. such action should be left to the private sector and the courts.

Fundamentally, i do not see why minibond investors should be treated preferentially compared to other investors. the same rules should apply for every investment – CAVEAT EMPTOR, BUYER BEWARE

It is the duty of the authority (either MAS or Attorney General) to enforce the law.

There is the possibility that the financial institutions had breached the Financial Advisers Act (section 27) in recommending unsuitable products to the investors. The product originator could have broken the law in not disclosing the relevant facts clearly and properly in the prospectus and pricing documents,

The Authoirty has the duty to see if there was wrong doing and to bring the case to be decided by the Court.

This stand was taken by the New York State Attorney in the case of the “auction rate securities”. The Hong Kong Monetary Authority also agreed to look into possible wrong doing by the financial instutitions.

In the light of so many ordinary folks and small investors losing large sums of money, including their lifetime savings, can our Singapore authority sit back and say “Caveat Emptor”.

I urge the investors to lodge a complaint to the MAS and to your Member of Parliament.

“You might as well also apply that phrase for people selling “magic stones” to old folks and stop prosecuting them as cheats. Heck, why have consumer protection at all? Let all merchants cheat and profiteer! Caveat emptor right?”

LOL PRECISELY.

Those who diligently do their homework, educate themselves on financial instruments and how to invest well don’t get FOOLED by these so-called ‘financial advisors’

Any tom dick or harry can get a CFP or become a personal banker. just talk to insiders and they will tell you how selfish, mercenary and unethical these financial salespeople are. All they care about is getting their commission.

They DON’T GIVE A SHIT ABOUT THE WELFARE OF THE PEOPLE THEY ARE SELLING TO.

The best and only real protection for your retirement savings is to arm yourself with knowledge and financial education.

The best investors have never depended on the regulator to protect their downside.

Someone still doesn’t get it.

“Caveat Emptor” does not apply to *every* kind of transaction. It is is mainly a property law. That’s like trying to apply the regulation for the sale of a condominium to the sale of toothbrushes.

But if someone’s going by the easy way to quote “Caveat Emptor” over everything, then the easiest way to counter that is “Caveat Venditor”.

Here’s an article:
http://www.time.com/time/magazine/article/0,9171,929518,00.html

always the common people (aka “ikan bilis”) suffer the pains of a failed market. the honchos and bigwigs got away. those who are suppose to help or are in charge – pretend nothing happen and look elsewhere.

in hockien we say “you die, your problem”. but they still continue to collect taxes, duties, levies and fees from you

““Caveat Emptor” does not apply to *every* kind of transaction. It is is mainly a property law. That’s like trying to apply the regulation for the sale of a condominium to the sale of toothbrushes.

But if someone’s going by the easy way to quote “Caveat Emptor” over everything, then the easiest way to counter that is “Caveat Venditor”.”

Yeah. spoken like a true lawyer. But you miss the point – nobody is exonerating the banks and the brokers from any blame.

But who are the one’s really benefiting out of all of this? THE LAWYERS

Bwahahaha.

Investors lose their money. Brokers get sued.

And LAWYERS GO LAUGHING ALL THE WAY TO THE BANK. :)

Politicians, regulators and people like Tan Kin Lian of course are smart enough to capitalise on what is going on and “come to the people’s rescue.”

TAN KIN LIAN – HERO, SAVIOUR, PROTECTOR and MESSIAH for the small investor!!

*Clap* *Clap* *Clap*

There is no need for inspir3d (#44) to be scarcastic and personal. In his postings, he has never been sympathetic to the plight of the investors who lost money. Now he engages in personal attack.

Tan Kim Lian is doing a fantastic public service for Singaporeans. He has the intelligence and experiences and above all the kind heart to help the average Singaporeans. Why run him down for such a wonderful free service ? I only wish there are more Singaporeans of Mr Tan’s calibre stepping forward to help others.

Thank you very much, Mr. tan & all the kind hearted people.
You help us for free. Really appreciate for your effort.
There are people who are well paid but sit still.

/// 30) Amused on September 24th, 2008 11.42 am
Caveat emptor is all fine and dandy.
But not when the customer was not given a fair amount of information to make proper decisions. ///

Amused – this is not amusing. The solution is simple – then DON’T buy. Period. Did the sales person put a gun to your head to buy the financial product?

Or you can do what Tan Kin Lian did. His wife bought something which she didn’t understand at all. TKL went back to them and cancel the purchase. Simple as that.

My view is that these Mini-Bonds, DBS High5 Note debacle touches on “Transparency & Accountability” issue. It also in my view touches on Business Conduct (Code of Practice).

Yes, every investment comes with risk. Granted the argument of blame in fair judgment is reasonable that it is every investor risk. So buyers beware?

If those issuance Banks floor staff are unaware that they are actually promoting and pushing those “Mini-Bonds” are some twisted derivatives…etc, that I think it is comprehensible. However, surely, the senior management people or executives are (or must be) aware of this. The question now is:

1) When did (and if ever did) those Banks’ Senior Management or Executives come to be aware that these “Bonds” products are actually twisted derivatives?

2) And presumably they became aware long before this debacle unfolded. Did they or have they made attempt to, or did instruct their subordinate to inform investors who had bought these bonds and warn them of the possible high risk?

If nothing is done when these Banks and Investment Houses had already obtained information pertaining to point 2 for the investor to make informed decision, then I think it is possible that these Banks are liable and should compensate the investors. Not only that, I think the relevant bank executives should be reprimanded and the authority should without prejudice impose stricter transparency and accountability regulations for this sort of businesses. It is not a preferential treatment per se, neither it is the fault of those affected investors. Obviously, if investors were warned way before this debacle unfolded, then we can only said it is a bad investment judgment.

Regardless, I think regulation indeed must be in place to safe guard abuse of investment instrument. To be fair, I think the MAS is moving cautiously (same here in Hong Kong) as not to upset the market sentiment. Both country after-all advocate free-market trading.

It is a sad scene for those who had invested with little or no knowledge of the hidden danger of these twisted derivatives disguised or mislead as “Bonds”.

I certainly would hope a litigation hearing be carried out by the relevant Authority to assess liabilities of these Banks for possible misconduct and hopefully, those unfortunate investors will at least recover part if not all of their invested sum.

Why other countries like taiwan, malaysia, Thailand etc. are not affected.
These products are not allowed /approved to be sold there?
Their govt more forwarding looking ?

Can’t imagine such products could be sold in singapore last time.
On the surface they look like bond (call minibond) but in fact it is not. It is misleading.

The CEOs and their senior management should be made responsible and accountable for any fiasco of the product and misconduct by their salespeople.
They cannot deny or disavow any of knowledge of misrepresentation by their staff.
MAS should review and tighten up the rules governing the insurance industry and the banks.MAS should regulate the way the salespeople conduct the sale. It seems unethical misrepresentation and mis-selling are common place now and they seem legal and is at the heart of the selling process.
I am sure daily thousands and thousands of unwary consumers are being conned at roadshows, in the streets, in the banks and in the homes.
The needs of the clients are compromised . Conflict of interest is at its worse now. Old folks’ retirement funds are robbed in broad daylight.
Products in the market are dubious and often hidden in some confusing frills.
I wonder how these products are in the market. Was there any slip up?

As the Regulator, I am sure MAS is fully awared of the Financial Institutions Practices and their Marketing Strategies and Ploys. It certainly must be a qualified regulator that have diligently done its’ duties.

patriot

I disagree that MAS is aware of the activities of the financial institutions.MAS just leave them a set of guidelines for them to guide themselves and pay them a visit,
on notice, once a while, probably just to mark attendance. Sufficient notice is given to FIs to ‘make sure the place is squeaky clean’ before the visit.
Everybody is warned to behave on that day , from senior management to counter and frontline staff.
As far as MAS there is nothing amiss with FIs.
Any complaint see the FIs first, then FIDREC, CASE, to your MP for debate in Parlaiment, to court,, if you win then MAS will consider whether there is a prima casie for further investigation and in this order.
MAS is the ‘court’ of last resort.

zhummmeng (#53):

There are so many barriers (FIs, FIDReC, CASE and MP) between the retail investors and MAS. Although I reckon to directly take FIs to court. Whether the FI win or loose the case in case, they still stand to loose in terms of reputation. Fight the FIs in an open court with public hearing. Although FIDReC exists for investment dispute resolution, its limitations favour the financial institutions (FI):

1. payout is limited to S$50,000.
2. investors must approach FIDReC on an individual basis.
3, Collective action is prohibited by FIDReC.
4. Lack of Openness

These limitations ultimately favour FIs.

Mr.. Tan Kin Lian – I hope you do not get upset by inspir3d (#43)’s rude comment, afterall inspir3d is the ultimate specimen of what we call the Ugly Singaporean, & like what our Prime Minister says, it would takes years to improve their social grace.

Keep up your good work, Mr. Tan !

I am glad that Lorna Tan the finance journalist is beginning to see light in the light of the current debacle that the way to approaching personal financial and investing needs is a need based appraoch and not product pushing and peddling which has been the cuase of the current problems.
Product selling and pushing should be banned for insurance and investment products. Therefore “product advice’ option in the ‘know your client” fact finding form should be removed and banned. The options should be multiple specific needs analysis or single specific need analysis, ie. options 1 & 2. only.
Removing the product advice option would reduce if not eliminate what is currently happening. Mis-selling or mis-leading advice or misrepresentation would be mitigated.
I urge MAS that if it is serious about overhauling the system this is the sore thumb and trouble maker. Cut it off IMMEDIATELY and not slowly or gradually and most of the problems will be reduced.
The second issue is the products.. Distinguish the products for different market segments based on demographics, gender and age.It must be specific and clear and flouting of this rule by adviser , both adviser and the company CEO or senior management must be held accountable and dealt with punitively.
Thirdly products must be checked for its financial usefulness, efficacy, riskiness and classified before approved for sale to the market.
I believe if these three areas are addressed , mis-selling ,misrepresentation, mis-leading and unethical practice can be reduced enormously.
of course lastly these rules must be enforced proactively and not for show to decorate MAS website and lying in the financial institutions store room.
MAS must assume direct regulation and not relegate it to the FIs entirely. It mustn’t trust the FIs to enforce it. They wont’ shoot their own foot.
All that is happening won’t happen if the FIs have been diligent and truthful in the implementation and enforcement of the MAS guidelines. The fact they didn’t.
Nip these problems in the bud and maybe Singapore can move up and replace
New York or London as the top financial centre in the world

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It is time MAS enforces section 27 of the Financial Advisory Act(FAA) proactively instead of paying lip service.. All the mis-selling and misrepresentation and conflcit of interest wouldn’t have happened if advisers,consultants and insurance agents have complied with this requirement. Unfortunately, they are all product pushers and they push indiscriminately resulting in old folks being victims.
It is puzzling that product selling or pushing or product advice is still allowed. Don’t you agree that there is a conflict. How would you expect the advisers to use need based approach when product advice option is still available and encouraged. It is still an option in the KYC form . Is it meant as escape route for the incompetent insurance and bank salesmen .Is Caveat Emptor meant for the banks and insurance companies to absolve and protect themselves of liabilities?
What is the matter with MAS? Is it serious about practicing what it preaches? Is it MAS’s interest to protect the investor interest? These are the questions that many are asking now in the wake of the structured product debacle. I hope that MAS will be forthcoming with a sincere answer.

zhummmeng ,
try to say something more sensible. Always scolding financial institutions and sales people. It’s like they owe you …

And… please dont say CEO and snr mgmt to take responsibilities.. You think this is China or Japan or Taiwan where they will quit over any fiasco.

Nowadays, I believe only our part of the world does that kind of thing.. Even US nowadays, the CEOs are paid compensation to leave the bank even though they left the banks in a mess.

isa,
don’t you think the fiasco is due to the irresponsible salesmen or consultant for unethical selling, for mis-selling, for misrepresentation; the company CEO and senior management for for thinking of making money only and forget about the safety of the consumers?
I don’t know whether you have bought a financial product . How did the salesman approach your needs? Did she or he even ask about your needs, I wonder? I am sure these people didn’t comply with Section 27 of the FAA.If they had then we might not have this fiasco.
The CEO and his kakis ought to be given a kick in the butt for being greedy, bottomline conscious that they don’t care what their salesmen do.
Let me share with you this. if MAS is serious and walk the talk and not NATO this won’t happen again. The next change in the ground rules will cover the salesmen, the CEOs and their henchmen and everybody in the company for whatever happens to their consumers. No more blame game, taichi , finger pointing, or ‘I don’t know, I didn’t see’ stuff by CEOs
I always scold these 2, because these 2 are the pain in the neck. If you are following the present saga, have you heard anyhting from them? They are hiding
The whole world is demonstrating and there is no word of assurance from them .
If you are a victim or your parents lost their life saving you would not be saying waht you are saying.
I recommend that you read SECTION 27 of the Financial Advisory Act (FAA) before sleeping. It will either bore you to coma or you have insomnia.

`The market does not exist to serve the interests of financial intermediaries. It exists to serve the public.” – Joseph Yam, CEO HKMA
.
“You need regulators to take a view. You need a health warning.” – Joseph Yam

No one can deny that the financial market is to serve the consumers and not to make the intermediaries rich.
This has to apply too, to the insurance and the banking industry.
The insurance companies and the banks must not design products with the aim of profiting from the losses of the consumers or without considering the interest of the consumers.
The products of insurance companies are not designed to help the insurance agents achieve MDRT, COT or TOT at the expense of the policyholders .
The structured products are not designed to create employment for RMs, personal bankers and to provide profit for the banks by making the consumers bear the risk and loss and to let the banks earn the distribution fees.
MAS should emulate their counterpart in HK and see its roles in its perspective.

Capitalism is about balacing greed and fear.

Banks have evolved to becoming casinos, except they seem incompetent at pricing risk but very good at paying management and directors.

\Who is to blame – you and I:-

1. for electing wrong people to become regulators

2. believing the lie that value can be manufacturered by debt based ‘instruments”created by “smart” financial wiz kids and sold by slick salesman thru sexy RMs to idiots like us.

3. believing your banker is honest and concerned about your retirement.

4. if a great business has a hard time returning 10% on capital pa, how can a bank return 8% without risk???

5. being lazy and not seeking the truth for oneself and looking after your own investment.

A talk show host recemtly summed the current situation best – a failed presdient presiding over a failed legistature regulating a failed financial system – c’est la vive

If you think this is the EOW, try the CDS(credit default swaps) and credit cards next……..

a 15 trillion economy supporting a 50trillion CDS on a sustained basis? Dream on……the nightmare is becoming reality.

we live in interesting times………nobody will be spared, everybody will loose something. question is what do you value.

i think all the advisers should go through every page of the investment contract word by word with the consumers. if the government has done their part by enforcing this rules strictly, let say by 70% will do, then a lot of consumers will not invest and they will surely invest in cpf only rather than those high 5 bonds. then the quote will be singaporean should learn to take more risk rather than always rely on government. so the chinese character for an offical, guan, has two mouth they can say anything.

the thing is if any government has not done their duty well to protect the citizen then next election we should surely not vote for them. but the thing is now it still not very close to election, i wonder if suitation will be different if it is near election with so many angry investors who are misled. but i still guess if it is the election time i might still do not have a chance to vote again, or will i ever have a chance to vote in my life time even if i live till 80 years old with all the GRCs. i think the MP which i vote for if i really have a chance, (currently i really feel i have little chance to vote in an election at my place bukit batok now or future), will speak out against those bad advisers or banks or insurances companies. MP in parliment please say something, do not keep so quiet when your voters needs you.

i read on newspapers that an old lawyer is going to fight a case to let bukit batok to have an re-election. he is so old and he never give up to help people. so many MPs are so young and rich yet they cannot stand up for their voters this is very very sad. in the end i can say lucky and unlucky. unlucky because i never get to vote for my bukit batok MP so i cannot say anthing. those citizen who has vote should voice out loud and clear. lucky is i learn that i must force all my advisers to go through all the contracts word by word with me and lucky i do not have an MP who i have ever voted into the parliment. if you have one and the MP never help you sad for you.

there is one thing i am very curious about mr tan kin lian. you are the ceo of insurance company for many years and yet now you warn people about bad insurance. it really something special or different. will those people in insurance hate you very much. because it is something like last time you are on same boat with them now you are against them. something like betrayal.
i guess usually no one who work before for example, big organisation or civil service, will tell all the dirty linen. And are you afraid of revenge by people who might hate you? but i hope that you are safe because i personally think you are doing good deeds. but what your motive or ideal or goal?
i am just curious and if i have mentioned anything not right please correct me and i am sorry. thank you.

Hi question (#65)

There are good insurance products and bad insurance products.

A good insurance product offers protection at a fair premium. There is a fair margin to pay the sales person and to cover the expenses of the insurance company and give a fair profit margin.

There are bad insurance products that over-charge the customer and pay exessive commisison to the sales person and make excessive profit for the insurance company.

I want to encourage insurance companies to sell good products that are fair to customers.

I also want to encourage the banks to sell good financial products. The structured products are bad products because they give poor value to the customers in relation to the risk. The product creators and sales people take away too much in charges, and leave the investors to take big risks (like the minibonds, high notes, etc). These products are like high cost insurance policies, but many times worse.

I hope that more people will come forward and speak about business ethics. Do not go out and cheat customers. Give fair value to customers.

More people should also tell the regulator and the Government – look after the interest of ordinary people, the retirees, uncles and aunties and also the young people. Do not allow these ordinary people to be cheated out of their hard earned savings.

the old lawyer has pass away, he fight till his last days. he is a hero equal or if not very close to lee kuan yew in terms of ability. i wonder will another lawyer will continue his foot step to go to court with regards to re-election at my place bukit batok. rest in peace hero hope you will bless singaporean in heaven.

When there are crooks, cheats, mobsters and other undesirables, these people deserve to be blamed for misbehaviours. But, if there are widespread nonsense around, it can be said that enforcement and enforcer are negligent and it is fair to say so.

patriot

“More people should also tell the regulator and the Government – look after the interest of ordinary people, the retirees, uncles and aunties and also the young people. Do not allow these ordinary people to be cheated out of their hard earned savings.’

It is a dream that these animals called RMs, financial consultants, insurance agents will ever have the interest of the ordinary people at heart. At the heart of these animals is only commission. These animals cannot distinguish the old from the young , the male from the females , the rich from the poor. They only see commission and money. They only see MDRT, COT or TOT. They only see their own retirement.
At the funeral wakes these animals shed crocodile tears because these buayas
only have a chegue with amount enough to settle the funeral expenses.When they see the deceased’s widow and children they are happy because they see more whole life insurance polices to sell. The cheque is only enough to settle the funeral bill. What a noble profession with a noble cheque enough to help the widow settle the last expense which otherwise would have to come from widow’s life saving. What noble gesture these animals have shown at the funeral wake. The widow is so touched that she need not think of the funeral expenses because her late husband bought a Whole life policy of of $25k costing $150. What a leverage WL insurance is. It is just a piece of paper and ink and yet so much powderful. Phew!!! It is one load off her mind.
We need animal tamers and trainers and not regulators

at least the US Senate knows the decency of looking after small investors/retirees by protecting their savings at the banks. what is mas going to do ? increase the protection from $20k to $21 per account. or better, don’t do anything ?

Hi Dodo,

Sorry to disappoint you about decency………

Alot of Congress members and Senators have to face their “bosses” (public) for their jobs in 40days time – it is called an election and they understand who and what their bosses need – these are the working guys in main street far away from Wall St.

Nothing to do with decency but everything to do with contigency of being re-elected!

Just a thought :

If drugs-pusher who sell drugs get death sentence because it ruin someone else life, should not the junk-security-seller also deserve some sort of punishment for ruining someone else’s life ?

Well, if we follow the principle of “Caveat emptor”, then there isn’t a need to enforce this law. Everyone knows the danger of illegal drugs, but without the law who is there to protect those who can’t resist from the “temptation” of those pusher who has no qualms in selling to anyone as long as they get $$.

The financial consultants from the banks and insurance companies have no qualms at all so long they get their commissions. Die is their the consumers’ problem. At the banks the RMs fleece the old folks and the frail. At the roadshows the insurance agents prey on the weak , the aunties and uncles, the illilterate and the gullible bullshitting them about revosave can be used as annuity and revosave to pay for vivolife for free.This is clear misrepresentaion and unethical . MAS is not bothered. They should send mystery shoppers to nap them in the act.
Before another debacle happens these people and the companies and the banks
should be stopped and prosecuted for breaches of the FAA

SUppose I am a dairy-product manufacturer (from China of course)

Suppose the dairy-product called CDS (CanDoSuperly) contain certain amount of MELAMIN-X

Suppose in the label of the CDS it contained these statement in small print “MELAMIN-X is protein that enhances your mojo, but may constitute health risk if consumed in excess quantity.”

SUppose a salesman in the store approaches you and recommendeded you to buy this product, claiming that the risk of developing health risk is 1 in a billion.

Suppose you being a financial wizard (who sold similar CDS security product) thought that MELAMIN-X is a kind of supplement and trusted the store to sell only safe product, made some mental calculation (base on statistic) on the benefit versus risk and believed that the benefit outweight the risk; and with the persuasiveness of the salesman (equal your own) you decided to buy a carton of the product.

SUppose after consuming for a few months, news broke out that MELAMIN-X will cause Kidney stones and that being careful went for a checkup. Lo and behold, indeed your kidney is full of stones!

Suppose you wanted to undergo immediate operation to remove the stones, but doctor tells you that it is too late (you need a KDS – Kidney DEFECT SWAP). You complain to the health insurance company to get compensation for the operation, but the insurance company said too bad, it’s your own fault! You did not read the small print!

Questions :

1. DOes putting a warning in small print reduce the liability of the manufacturer and make it more acceptable to be sold ?

2. Is it morally right for the me to sell you the product knowing that it contain health risk – however small it is ?

3. You being a layman (even though a financial wizard no less) knows nuts about these health-related jargon but trust the store and salesman to know enough to warn you about the risks, should you take the blame alone ?

4. What recourses do you have ? Is the authority suppose to protect me from these fraud ?

The unfortunate outcome of this story is :

Manufacturer – Closed down, owner bankrupted, but plan to start over again, with CDS version two

The store and salesman – Get to keep their commissions and sales revenue, got a minor slap from the authority

The AUthority – Sit tight and wait for the whole saga to blow over.

You – Getting a KDS (Kidney Defect Swap) because you had too much CDS. If lucky enough maybe discharged from the hospital in a month’s time – with your pocket lighter but at least you get to keep your life.
(Hey, you are a financial wizard, you already know how this works)
Someone else may not have the luxury as you do.

Alll financial products should be marketed like drugs and medicine with details of of the components, the side effects, the indication and contras and warnings, dosages for chilldren and adults and so forth. In the first place they must undergo clinical test before putting out for sale in the markets.
If financial products have such stringent requirement, approval from FDA, then the products will be safe. Next is the seller ,the pushers, and if we can have some rules how these product are to be dispensed and recommended. The ‘doctors or pharmacist’ (RMs and the insurance agents) must bear some responsiblity and have reasonable basis to recommend the products or solutions to the patients.
The watch dog must show its teeth and have a presence to deter malpractices.
The consumers are no wizard.. The advisers , the RMs, the insurance agents are the wizards.

Poster Zhummmeng has been tirelessly reminding the readers here of the dangers, both hiddened(some intended) and latent risks of financial products and what regulators ought to have been awared of, in their duties in policing the financial industries. Remember I wrote that MAS is fully qualified and awared of its’ duty?

It is very unfortunate that much of todays’ commerce are in the hands of less scrupulous businessmen who employ crafty, unethical, underhanded tactics and sophisticated complex techniques to make their money.

If I may used the behaviours of cat and dog to relate to businessman and the regulator, some might find it farfetch. But, if one is familiar with them, one will find that, yes man(kind) does behave same same.

Dog, when well fed, tends to be clumsy and lazy, as for cat, when fed well, not only becomes fat and lazy, it becomes friendly with mice and rats. Oh, not exactly friendly but can live with them peacefully. They can gather together, look at each other at close distance, even side by side. This phenomenon is quite common at most rat infected HDB Estates. Tell me if it happens at your places.

Unethical businesses malpractices have been endemic in commerce and it had overflowed into governing and enforcement authorities since time immemorial.

People, by and large, want propriety, love and happiness, but the need for regulators and enforcers show that ideals are more farfetched and evasive than a sinful man struck down by lightning.

Nevertheless Zhummmeng; You deserves my highest respect for the ideals You promulgate.

Yours respectfully: patriot

Just like to share this piece of news hot from the stove (HK). With the help of HKMA mediating, those who had invested in the Lehman affected mini-bonds, there is a possibility that they might be able to get back 60~70% of their investment. Hope they do though as there are over 12 billion HKDs invested from the small investors. Here is the link (albeit in Mandarin) http://hk.news.yahoo.com/article/081006/3/8kyt.html

Wonder if that would shed a light for MAS or the Singapore Authority to follow suit.

Every other financial regulator in the world has banned short-selling, with exception to MAS of course. This makes you wonder if MAS is in cahoots with financial institutions.

Big Fish wallop small fishes. Big Fish’s mouth is Bigger. Once the mouth of Big Fish opens, all small fishes swim into the stomach by suction force and semua mati!!! This was what actually happened.
The watch out word is “greed”. The Big Fish is also greedy. An instrument called “Structural Deposit”, “Notes”.”Mini Bonds” was planned to lure small fishes into the mouth. Provided the mouth is open all the time, the small fishes can excercise “freedom of choice” swimming in and out happily. Once the mouth close, what happens?

Oscar (#78):

You completely missed the point here. I am only want MAS to investigate. MAS says they will investigate if there is evidence of mis-representation and mis-selling. However, MAS should be suing the banks if there is evidence of mis-representation and mis-selling instead. This is only fair because personal bankers have privelleged access to information with regards to valuation and risk of these structured products while retail investors have neither the sophisitication nor background. Go look up Section 27 of the Financial Advisor Act in your free time.

“78) Oscar Choy on October 7th, 2008 6.24 pm

An instrument called “Structural Deposit”, “Notes”.”Mini Bonds” was planned to lure small fishes into the mouth.”

Hey, your said the word ‘lure’ yourself. So any culpability on those people who may be exercising the act of luring, if any. Probably not for you. Because “small fishes can excercise “freedom of choice” swimming in and out happily”.

What happened if the small fishes are decent aunties & uncles and the people doing the ‘luring’ have this picture of an angel (trusted institutional name) pasted on their foreheads.

80) To lim on October 7th, 2008 6.35 pm

Should be to Oscar Choy

“77) Donaldson Tan on October 7th, 2008 5.21 pm Every other financial regulator in the world has banned short-selling, with exception to MAS of course. This makes you wonder if MAS is in cahoots with financial institutions.”

My friend, Donaldson. Singapore is unique lah. The is what you will get if you are not politically and financially aware from the lack of openess / discussion on the “dirty & messy but important stuff” due to a very controlled msm. At least, you are trained to size up on all these matters.

And here, we still have some other people trying to perpetuate the very kind of approach that should not be there in the first place. Who are they trying to protect.

Donaldson Tan,
applying section 27 of the FAA will be considered ‘over regulation’. This section is meant for FIs to hang it in their pantry or to decorate the customers service area.
Miss-selling and misrepresentation is between the consumers and the FIs to sort it out..We don’t want to ‘chap’ otherwise we will be seen as busybody and over regulating…’”we can’t force the banks to compensate the consumers. This is father and son affair.”

zhummmeng (#84):

So the ¨father and son¨ are in cahoots.

We must keep up the pressure on MAS to enforce section 27 of the FAA so that consumers can get responsible and competent advice from the real advisers.
Salesmen can’t. The problem is the consumers are bewildered by the many titles these salesmen used to disguise themselves .
Dunno which one is the right one. Every salesman claims he or she is an adviser.
Maybe we should ask, Excuse me, can the real adviser stand up. i bet every one of them will stand up…..susah lah

zhummmeng (#85):

The personal bankers, relationship manager, etc at our local retail banks are financial advisors. They fall under the category of the Exempt Financial Advisor as they derived their license by being a representative of the bank they work for. Hence, these sales people still falls under the jurisdiction of the Financial Advisor Act and are liable for their recommendations, as described by Section 27 in the same act.

How the markets really work (from 2007)

How did these comedians see it coming
when financial reporters did not?

http://www.brasschecktv.com/page/187.html

Why $700 billion bailout of banks is far short of the amount needed and why many banks will fail anyway.
(Whatever you call it, $700B Bail out, Buy in or Rescue Package, it’s the same thing.)

http://www.moneyandmarkets.com/files/documents/Final-Bailout-White-Paper.pdf

Look at this article…
http://biz.yahoo.com/ap/081008/bank_of_america_settlement.html?.v=11

WASHINGTON (AP) — Bank of America Corp. has agreed to buy back up to $4.7 billion in auction-rate securities to settle charges it misled thousands of customers about the risky investments, federal and state regulators said Wednesday.
Full detail…

Finally, SEC in US in doing something right. The regulator in US did not say CAVEAT EMPTOR, BUYER BEWARE. They responded and there is compensation action by the accused bank. I hope it will be the same for Singapore. If a wrong is not corrected / punished, then our social moral has taken a big step back.

Let look at this from another point of view. If big institutions can misled you and they have CAVEAT EMPTOR as the ultimate weapon, then the society has failed.

It is as good as saying:
1. I can misled you. If you do not believe, then I have done nothing wrong since you have not taken the bait.
2. I can misled you. If you believe, then I have done nothing wrong since you accept my misleading by signing.

Can we accept this kind of misleading?

Caveat Emtpor cannot be applied to financial products just as it cannot be be applied to medicine or drugs especially prescribed medicine.
Financial products must be prescribed too and by a financial doctor and NOT by a salesman.
The financial doctor or adviser is responsible for any out come of the prescriptions or recommendations and if it is found that the dispensing or prescription breaches Section 27 of the FAA and the prescription is NOT ON REASONABLE BASIS the adviser is liable for professional misconduct and should be punished. The aggrieved consumers shall be entitled to full compensation plus any loss of opportunities by the adviser or the adviser’s employer or both.

Whatever you call it, $700B Bail out, Buy in or Rescue Package, it’s the same thing. – Mozi (#88)

What about progress package? it is pork barrel too.

Ultimately, it is the banks’ responsibility to ensure that the products they sell to their customers are explained throughly and the risks involved are made known.

But how many of these Realtionship Managers actually know what thet are selling? Those who encounter these people at DBS may know.

RM is just another name for a salesman. What they are concerned about is not the customer’s welfare but meeting their sales target. As long as they do, anything that happens after you sign on that dotted line is not their problem.

How can an everyday person be expected to know the risks when the ones pushing them don’t?

What are the qualifications required to be a RM? Looking at the job site of DBS, not much.

These people should also be held responsible for misrepresentation.

The RMs, the financial consultants, the insurance agents go through the same exams. The exams are so low that they make a mockery of the word finance. If you let the monkeys take these tikam tikam exams I am not surprised they too can pass and can be licensed as financial consultants or RMs or personal bankers.
Yes they are all salesmen. To decieve the public they now have fanciful names like RMs, personal bankers in the banks and in the insurance companies they have names like senior financial consultants or exeecutive financial consultants .. In my opinion they are at best a direct snake oil salesmen and at worst consalesmen or financial exeecuthieves.
Their roadshows are like the waterloo pasar malam street stalls selling koyok.

I agree. All these Financial Advisors like to showcase this cert or that diploma in insurance but what do they know? These people are only savvy at making themselves ’sound credible’ or sound ‘honest’.

Anyway, a lot of these 20 something, 30 something salesmen just talk shop. At the end of the day, no matter how honest they make themselves to be, they are just people who are after your money. Come on lar, you think they really have your interest at heart? I spoke to one who used all the nice words, “I understand your situation”, “I also go through it myself”, “Unlike the rest, I sell only the cheap policies to you cos I have your welfare at heart”, “I also have all these policies”, etc, etc… I’m sure many of you out there have heard of such things before and been conned.

So, please, really take care of your hard earned money. Don’t think that financial advisors are always on your side even if they claim to be. A lot of them will be getting you to invest and buy policies from them now, they’ll tell you that it’s a good time, think through very carefully, dun fall into traps or else, you’ll be like poor Mrs Lim on the news. Lose all your hard earn money.

What about investors of Pinnacle notes, what is the status now, all this talk about mini bonds and DBS high notes only.

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