Tan Kin Lian / Columnist
Lehman Brothers filed for bankruptcy on 15 September 2008. Together with the problems faced by Merill Lynch and AIG, this event caused a sharp drop and turmoil in the global stock markets.
Many conservative investors in Singapore thought that this was a problem only for equity investors. They were in for a bigger shock.
Credit linked securities
These investors had been convinced by their bank relationship managers to invest their hard earned savings in credit-linked securities, such as the well advertised Mini-bonds, Pinnacle notes and High Notes. These securities offered a higher rate of return, compared to the 1% interest on fixed deposit.
The relationship managers told the investors that these securities have relatively low risk, as they are linked to several strong financial institutions.
The relationship managers did not explain the working of the credit linked securities. They probably did not understand anyway. These structured products were so complex to be incomprehensible, even to the experts.
The structure was described in unclear terms in a prospectus and supporting documents, comprising of more than 100 pages. Many of the key explanations were presented in small print.
Several hundreds of millions of dollars were invested by these conservative investors in the credit linked securities.
Unwinding the structure
When Lehman Brothers went bankrupt, the credit linked securities managed by them had to be unwound, according to the terms of the structure.
The investors were told that several of the credit linked securities had no value. The investors had lost nearly all of the capital that they had invested.
Investors in credit linked securities managed by other investment banks wanted to get out now, before they face the same fate as the Mini-bonds.
They were not that lucky. The Pinnacle Notes managed by Morgan Stanley now have a market value of only 35%. 65% of the principal has disappeared.
Bewildering
Many of the investors were dumbfounded and bewildered. They thought that they had invested in safe securities. They were assured by the relationship managers that these securities were very safe.
What happened? Even the risky stock market fell by only 40% during the past year. Why should these safe investments lose all of their capital? Where did their money disappear to?
If their losses exceeded those of the underlying assets, who profited from their misery? Are there any winners in this episode – people who made gains on the losses of the hard earned savings?
Protecting the small investor
Two months ago, the New York State Attorney took action against several financial institutions for marketing the “auction rate securities” to retail investors on the representation that they are liquid investments and can be redeemed at any time.
During the liquidity crisis, these securities could not be redeemed. The financial institutions had to buy back these securities at no loss to the investors.
I hope that the Monetary Authority of Singapore or the Attorney General can take similar action on behalf of retail investors in Singapore, who had been misled into investing in the Mini-Bonds and similar structured products. These investors were clearly misled by the relationship managers into investing in these products on the advice that these investments were safe.
It is time to hold the financial institutions accountable for their mis-selling activities and for our regulators to be pro-active.
Views of the Public
I posted my call to MAS in my blog www.tankinlian.blogspot.com. I received many views from my readers. Here are some of these views.
David said…
I bet MAS won’t do that. Singapore laws are and will be pro-business, pro-rich, pro-foreign talent and not pro-ordinary local folks. That’s why “talent”, capital and investment flows readily here and with high economic growth and as a financial hub. Never mind the wide income gap or even suffering for ordinary folks.
Melvin said…
I am not a risk taker. Recently I was convinced by fund manager to put my money in mini bond series 9.
I invested $150,000 and I do not know how Lehman Brothers involved in this series 9. I was told by her it only based on 6 baskets which I found to be okay. Will I be getting some money back or nothing?
ym said…
These Mini-bonds are effectively hidden credit-default-swaps – the instrument that brought AIG to their knees. Even AIG, as a sophisticated insurer misjudged the risk. How about the general public?
Ordinary citizens were sold on the premise it was a safe bond, but its not. Effectively, the investor has become an insurer of the credit of the reference companies in return for 2% more interest. The public should never sell these products because they cannot evaluate the risks, and they evidently cannot rely on the marketing banks or credit-rating agencies to do it for them.
mx said… I feel that consumers have too an onus to find out for themselves what products they are getting instead of placing total blame on the financial institutions who sold them the product.
I am very sure that the prospectus or factsheet would have mentioned that there is a chance that the instrument may have risk of becoming worthless. It is $10,000 or $100,000 that they are investing here.
Won’t be it very silly to listen to some relationship manager about where to put their money without reading or finding out the risks themselves? You are responsible for your own money, and should not go about blaming others when you lost the money.
Conclusion
Over the past year, I have posted many warnings in my blog about the risks of these credit linked securities. In my view, the return on the product does not commensurate with the risk. I feel that consumers are given a raw deal.
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.
Tan Kin Lian also blogs here.
Picture from Reuters.
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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.
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