Good summary of what we are trying to say. Instead of focusing on the issues that we had brought up (as explained by Mr Tanl), he had decided to give us a list of things that MAS done. It is obvious now that what they had done are insufficient to protect investors.

For a start, MAS should look at the advertisements and brochures, sales materials to see if they are misleading. To do this, they need not wait for any complaint of mis-selling.

By disclosing , would FI’s competitors be able to ANTICIPATE THEIR NEXT MOVES ? what if FIs lose to competitors and close shop? more will lose jobs?

While investors must be partly held responsible for their decisions, more could have been done to weed out rogue deals and misinformation. Certainly there are areas that the authorities should tighten to avoid faltering funds in future. The problems are accentuated by the economic downturn and global financial meltdown.

Actually, for all that we are saying here, does our Mr Lim Hng Kiang actually sees/reads what we are writing??
If not, its quite pointless….

Kevin

now we have the great divide of a “first world” society – the have and the have-not, the rich and the poor, the big boy and the small boy, the powerful and the powerless, the shark and the ikan bilis, etc – how sad that we have to end up in this way . . .

while i fully agree that the response of MAS and the government to this has been tepid (at best) and shows a flagant disregard for the people whom they should be protecting, I’d like to point out that the prospectuses are available on the MAS website under the debentures (not collective investment schemes) section

Why in Malaysia there is not a single investor who lost $$ in this minibond, or Lemon Sister ? Is it the MAS in Malaysia is better than Spore MAS ? Any body knows, looks like the ministers in Malaysia is smarter than Goh CT or Lee HL

In other countries, the gahment protect both the consumers and the investors.
Here, the gahment only need to protect investors because they are not scared that we will vote them out. What arrogance!

People have short memories – Clob – clobbering the neighbour.

They always win through the letter of the law. Please do not mention spirit of the law.

file or cut out relevant sections in the web/newspaper, especially during the past few months (including all the price hikes since the last election, the ministers pay increases, the no-choice price hikes in cabs, in electricity etc) and take these out nearer to election times to remind ourselves of the pain and the arrogance and care-less attitude of those in charge …. and vote wisely and decisively – do not rely on the Straits Times that report one-sided news – if we don’t, we deserve the same bunch of AHs again ….

Gahman protects investors, employers, FTs, maids. We always at the losing end!

I think the reason why our govt does not immediate guarantee all deposits is because if they do so and problem really arises, govt may be forced to spend unnecessary $$$ which they don’t want. Instead, they chose to “provide later alternatives”, akin to saving $$$ for another rainy day.

I think our govt is really a weird govt. Spending $$$ only on those which can further generate more revenue but not spending $$$ to really help the needy.

it’s quite clear from the Govt’s responses that the authorities have done their due diligence. That’s leaves the investors in the equation. Nice try but the gaps are still big enough for Mas Selamat to escape.

I would suggest MAS listen to the investors rather than pass judgments, albeit indirectly. Know who these investors are and find out under what circumstances they were sold these products, before pinning the blame on them for not reading or understanding the fine print. Ask the reasonable man what he understands by “capital protected”. Ask yourselves if the brochures are designed to conceal the significant risks using misleading terms like the above and “bonds”.

Finally, I would ask, “would MAS, CPF or our Govt investment duo have invested in these products?” If no, why allow them?

The small print in the advertisement did warn the investors that in a credit event, the investor could lose a substantial part or all of the invested sum. However, it did not show the extent of this risk. The unsavvy investor were told by the sales representative that the risk is very small, very remote. But, I think that there is no reasonable basis for the sales representative to make such a statement.

In fact, I am surprised that the product could be approved for sale to the retail investors without a proper statement on the analysis of the risk.

If there is a credit default swap on each entity and the risk of failure is 1 in a 100 years, the risk for 6 entitles is 6% and over a 5 year period, it is 30%. This is rather high.

If the risk of failure is 1 in 200 years (or 0.5%), the cumulative risk over 5 years is 15%, which is still quite high.

There is the additonal risk of default of the underlying assts, which are CDOs or other low quality assets. The CDO of A rating is much lower than a bond of A rating.

So, the total risk could be quite high. I feel that this risk is known to the product arranger ,and they have a duty to disclose it. They will know the actual extent of the risk from the premium that they receive on the CDS.

The above figures are just assumptions. If MAS carries out an investigation and look at the cash flows of the structured product, they will be able to get the actual figures and see if the risk of failure is negligle (as made out by the sales representatives) or quite substantial (as estimted by me).

Look at the facts.

Thank you, Mr Tan, for your reply. That’s why I ask if the authorities themselves would buy such products. If the risk is significant, it ought to have been treated like controlled drugs which are available by prescription only. Instead, these were sold, and even actively pushed over the counter as though they are some kind of wonder health supplement. If we are concerned enough to control drugs, and to rate movies and computer games based on their content, could MAS have genuinely believed that this is the best they could have done as a regulatory body?

What is “low” risk, what is “high” risk?

Anything that we don’t clearly understand should not be considered “low” risk, I think.

few months back, I believe in general people would think investing in Lehman Brothers’ securiteis was “low” risk, or at least not “high” risk.

In general, we can agree that investing in bonds can be considered as “moderate” risk…

So, I think to many Financial Advisers at that time (months ago) Lehman Brothers securities could appear to be relatively “low” risk…

I’m not sure if it’s fair to accuse FAs to have mislead investors….I think we should be neutral till something is proven.

Trust singapore lah.
Its very Trustable and Accountable wan.
MSK case proved it is Accountable where accountability is required.

DBS minibondo , no problemo.
Trust them. they are accountable.

Don’t believe me?

side track a little. I like to whine that newspaper was just hiked to 1 Sing $ a piece. Anyone seen any announcement on news before the hike effected? Why ?

the People are the most Shockingly Incredibly impressive people on this planet because they ACCEPTED all HIKES based on last 43 years historical evidence. Correct me if I wrong. I think only. What do you think ?

Huat AH!
More good years is what you hope for!

Why were these notes not approved for CPFIS? They must be riskier than the riskiest of the approved products, right? Why was it not highlighted to investors?
This might have given some idea of risk or riskiness to the investors.

I saw some prospectus under the Debenture Offers, not sure whether you refer to these.

http://masnet.mas.gov.sg/opera/sdrprosp.nsf/vewPublicLatestDebuntures

the government has so many scholars and bright civil servants. why are they now taking so long to decide on what to deal with the mess now?

if now all the facts are on the table, why should victims wait for the judge to decide their fate?

if mas is at fault please admit it and compensate the victims, if the banks is at fault please admit it and compensate the vicitms also.

why make things difficult for common folks when some rich and powerful people are enjoying life, and did not even help or care and want more and more money and power.

high risk is some financial mumbo jumbo that even Warren Buffett has a hard time understanding.
low risk is financial simplicity that does not claim to guarantee high profits and generally does not involve hard selling.
it is crucial to have check and balance when it involves big sums of money.
a watchdog that is put in place to do the checking will just wag its tail if it is suppose to check on its owner.
govt runs MAS, govt owns DBS, MAS suppose to check on DBS.

notice this govt said it should not overregulate the financial system but perfectly ok to overregulate when it concerns politics.

Think another bombshell in the pileline waiting to explode besides Lehman Minibond Programme, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner is GE Greatlink Choice series.

These are basically ILP associated with CDO-investment with a basket of reference entities. Similiar to the above products, these were marketed as very safe “100% capital protected upon maturity product” invested in at least AA- grade bonds with a fixed yearly income stream ranging from 3.5% to 4.9% (dependinging on whichever series). And to further reinforce the impression of being very safe, investors were told the products were awaiting approval under CFP-approved investment scheme.

I suspect the reason why not many people are complaining is simply bec. most are not even aware they had bought into a derivative-based ILP whose value has fallen to ~20% of their original investment amount. Most who bought the single premium ILP probably kept them locked away and forgot about it, in the mistaken belief that come what may, they are protected by the “100% capital protected upon maturity” promise. Only when the policies matured in a few years time, then will they discover with a rude shock they may have lost everyhing.

(ps – from GE website, there were total of 5 series of Greatlink Choice issued over the years. Think each series was ~S$100million. Meaning the total amount involved is probably ~S$500million in total. Not exactly small change !)

“the People are the most Shockingly Incredibly impressive people on this planet because they ACCEPTED all HIKES based on last 43 years historical evidence. Correct me if I wrong. I think only. What do you think ?”

That is why Singaporeans are extraordinary species but our gahmen with some originated from other countries never learn to appreciate them but rather exploit them continuously and shamelessly. It is time Singaporeans become ordinary rather than extraordinary.

Several people had asked them again and again to look at the brochure and sales materials given to investors, but no mentioned about how they interpret it. If you just want to settle the “vulnerable” and thought case close, I don’t think most s’porean will agree.
Minister if you still don’t believe, why not organized a open dialogue session (like the foreign worker hostel issue), chair by Tan Kin Lian and let all the investors, one by one show you the evidences right in front of you? May be like that then you can understand why 1,000 people complain to the government on unfair dealing and been misled, mis-sold or whatever. It’s not a conincident. And it’s time the government do something before something happen. Even those who did not buy also cannot agree with what you are saying. Come on…..

MINISTER Mentor Lee Kuan Yew called for a sense of proportion yesterday, pointing out that the annual wage bill for ministers and all office holders is $46 million – or just 0.022 per cent of Singapore’s total economic output.

It was an ‘absurdity’, he said, for Singaporeans to quarrel over whether ministers collectively should be paid $10 million or $20 million more, when an economy worth $210 billion was at stake

‘The cure to all this talk is really a good dose of incompetent government,’ he said in his first comments on impending salary increases for ministers and top civil servants. ‘You get that alternative and you’ll never put Singapore together again.’

Singaporeans’ asset values would also disappear, he warned, adding that ‘your apartment will be worth a fraction of what it is, your jobs will be in peril, your security will be at risk and our women will become maids in other people’s countries’.

He said the present system of benchmarking ministers’ pay to top private sector salaries was ‘completely above board’ and allowed the Government to recruit ’some of the very best’ to lead the country

When it was put to him that people hoped for leaders who were willing to make sacrifices and who were not there for the money, he replied that these were ‘admirable sentiments’. But he added that ‘we live in the real world’.

His bottom line: if the Government could not pay competitive salaries, Singapore would not be able to compete and ‘we’re not going to live well’.

If I understand Mr. Tan’s article correct, it is addressing “mis-selling” across the board, not just specifically for Lehman’s products. And we do not have to wait until someone loses entire investment to determine that whether something was “mis-sold” right? Mis-selling can also occur for guaranteed products right?

So can someone claim that he was “mis-sold” for a structured product that he bought in the last two years and seek early redemption at full refund value? After all, he always can “claim” that he don’t understand the terms and sign because the bank’s staff told him to sign at the dotted line and inform him it was suited to his “risk profile”… If that don’t work, kick up a fuss, you can say that want to complain to the bank’s CEO, MPs and the papers, etc. Deny everything, by saying you only know chinese/hindi/malay, don’t know the technical terms and depend on the RMs, and banks never say will lose money and “works like a fixed deposit” or you were pressured to sign because you need to rush back for lunch or you did not know that principle not guaranteed unless hold to maturity.

I guess some experienced and savvy investors are rubbing their hands in glee because now they can exploit the current emotional situation and ride on the coat-tails of the publicity that the minibond has generated and get early redemption without any penalty, even though these group of people are very clear on the risk of their investment products.

Every single structured product in the market carries risk. Now, my risk tolerence has now changed, therefore suddenly I was “mis-sold”. Very convenient.

I would like to see how this develops. I also have some 5-6 years structured deposits bought 2 years ago, but they are not in danger or what not from this financial crisis and they are principle-guaranteed products. But I need cash to buy into the stock market now and no time to wait for my structured product to mature in 4 years time (probably equities too expensive to buy) or earn that meagre 3.5% p.a. interest. Now I think at that time, the RM did not tell me anything about “trigger” or tell me early surrender got penalty, in fact the RM did not tell me anything, I only understand normal english, not the technical financial terms, RM just tell me to sign and get free gift – so I think I was mis-sold. I can swear the RM did not tell me EVERYTHING about the product in the one hour we sat down.

Thanks to all the public, I suddenly find the means to get my locked cash out. Cheers!

I read the reply from Mr Iswaran on electricity charges.
From what I gather 80% of electricity is from natural gas.
Since 2004 they have been overcharging consumers with a 3 month forward fuel price, while the cost price was a much lower natural gas price.
All the time consumer was enriching the Govt owned Singapore Power / PUB.
With the price increase in fuel, Govt feels it is not right to change the pricing scheme to enrich the consumers, as it would discourage Singapore powers (wholly owned by Govt) from investing in future infrastructure.

And it will probably spoil its plans to privatise Singapore powers if the cost structure is amended as no one would buy the privatised gas company if it charges a lower natural gas rate and profits go below $1bil.

And this future privatised gas is supposed to be good for consumers.

Yah, right. And all 84 MPs are supposed to agree quietly with this logic.

We pay the ministers millions so they can overcharge its citizens on basic utility like electricity. Whatever smart ideas these minister get, it is not to enrich the citizens, but to enrich Singapore powers by billions in profit.

Imagine, if our R and D comes out with power generated by solar or wind power, will our electricty price go down?

Unlikely, it will continue to be artificially propped high at oil fuel prices, to discourage wanton usage – forget about enriching our citizens on a monthly basis – give them only at election time.

Yesterday was a bad day, and we have many MPs asking how we can continue to fatten the goose, while its citizens face possible retrenchments – sure insensitivity.

Our reserves is for our future children? Please, my parents builtup the reserves, and it is not for us – it is for GIC and Temasek to punt the market. Meanwhile, they are not allowed to withdraw at 55 cos Minister says my dad will have a fling here, a fling there in Bintan, so they have to continue working even when they have CPF as GIC needs the money.

While Mr Tony Tan was smug enough to say Temasek and GIC would not indulge in sub prime assets since long ago, MAS (probably under PM Lee’s watch) has allowed DBS to indulge wantonly in sub prime assets, and MAS allow DBS to resell to retailers, and now all 10000 individuals have to make 10000 individual complains, so as to protect DBS’ interest.

I will remember this day for a long long time. Sure, continue to raise prices – a sure way to fatten the proverbial goose and pluck our shells.

Somone said that the details of the structured products can be found in the MAS website, under the classification of “debentures”

http://masnet.mas.gov.sg/opera/sdrprosp.nsf/LeftFrame?OpenFrameset&LayerVal=S&Frame=RightPane&SRC=/opera/sdrprosp.nsf/vewPublicLatestShares?OpenView

I searched for the specific series of the various structured products and cannot find it.

It seems to be so difficult to assess the relevant prospectus and pricing documents.

It is also quite complex to search for information on these products!

Mr Tan,
I have made a search and found only the latest Series 9 & 10 on MAS web available for reading.

The older ones (206 and 2007) are stated to have been lodged/ registered but are no longer available for reading:

http://masnet.mas.gov.sg/opera/sdrprosp.nsf/0/3d85b238eb729c71482571b200154175?OpenDocument

Perhaps we can request MAS to make them available?

Dear Mr. Tan Kin Lian,

You said

“If there is a credit default swap on each entity and the risk of failure is 1 in a 100 years, the risk for 6 entitles is 6% and over a 5 year period, it is 30%. This is rather high.”

I don’t quite understand. the 6% is over 100 years. How can it become 30% in 5 years? Does not make sense to me. Could you please clarify?

Words like ‘Principal Guaranteed’ and ‘Principal Protected’ are misleading in this context of mis-selling in my opinion. How can a default of one of the ‘reference’ entitites which triggers a loss of the principal allow/qualify the product to be called the above with the latter not offering some Optionality (a financial market term to mean an Option has been bought to protect a price move) to ‘protect’ the ‘principal’. From the word go, it seems the product names/classification (by who? – the banks?) is already a misrepresentation.
Coupled with the tactic of banks of targetting depositors in general to convert into these products because of higher yields for the banks makes them culpable.
Not even mentioning that the so called ‘Financial Consultants’ that sold these products had no clue as to how these products work. How can anyone think they could explain these derivative structures to a non-English-speaking retiree/old folk when even 95% ( I estimate) of bank workers don’t even understand? Do a survey amongst bank workers and you will see the they can’t even figure out the structures as these are highly specialised products.

26) PAY ME OR I BE CORRUPT on October 22nd, 2008 2.10 am
When it was put to him that people hoped for leaders who were willing to make sacrifices and who were not there for the money, he replied that these were ‘admirable sentiments’. But he added that ‘we live in the real world’.

‘we live in the real world’
so all singaporean, do you see the real meaning behind, its all there, so stop dreaming and wake up to the real world infront of you.

Quote… :”CPF money is protected… and also guaranteed” by Lim Swee Say. But, ultimately when you deem right, you can say what you want, whether Principal Protected, Principal Guaranteed or Capital Protected of Capital Guaranteed. Then before you fully understand these terminologies, your money is gone into their pockets: to provide them a high-profile lifestyle of wasteful spendings of your hard-earned life savings.

Don’t be too trusting by their sweet-coated words. Learn from this painful lessons because you have already paid an exorbitant price for it.

We know where the problem lies. Without admitting of wrongdoings by the wrong doers, there won’t be a satisfactory answer to this debacle. The ordinary citizens have to bear and suffer for they are too trusting in our systems that are so-called incorruptible.

Hi Pepperkamp (#31)

If the risk is 1 in 100 years, it is 1%. For 6 entities, it is 6%. For 5 years, it is 30%.

An expert told me that, prior to the financial crisis, the risk is about 0.5% X 6 entities = 3% and that after removing the effect of co-relation, the premium paid by the swap counterparty is likely to be 2% (i.e. 60% of 3%). This is likely to be lower than 6% per year.

Whatever is the actual number, it is useful for the regulator to carry out an investigation.

anyway, no matter what is the outcome of the event, DBS has definitely lost the trust of many.

I’ve talked to some of my friends about this issue, many who were not updated on news had little comments, but those who know said that they would not consider investment products from DBS anymore, some would even advise friends and relatives not to buy such products from them. A handful would not even open an account with them, if they not already have one.

Blaming the govt. for the minibond collaspe is secondary! Primarily invetsors who invested boldly in these minibonds for higher payouts ought to get their fingers burnt! Although regreattable is the number of aged investors! Everyone one wants the govt. to open up, more freedom, more say, more play….and when the financial sector is opened up for wider investment prospects with higher returns….these people come running back when they burn their fingers in their investment. As boldly as they invested, cheap enough not to get professional or pay for professional advice, then it should be their pigeon- make or loose!!!
If the govt. tightens financial investments henceforth, these are the people who is going to raise hell!!! Funny lot of people!
We are not ready to trend internationally, in this instance, as individual investors or for the matter lack educational knowledge of investments!

V S RAAJ (#37):

agreed. instead of blaming the govt, we should look at individual policies made and feedback if there’s anythings that we disagree with. most of the policies made by the govt indeed have our citizens in mind (though at times there’re some political agenda involved, which i shall not talk about here). no one and no plan is perfect, our govt might be wrong at too. instead of doing things its way, our govt should listen more to our people.

in the above case, DBS, issuer of the minibonds, operate under MAS strict regulation. In this saga, there is a need for MAS, a stat board to step in and act. The govt should be pro-active too, as this involve its people, many of whom are old people who have lost their life saving. This is the time when our govt shows it cares for its people. Put fro some MPs to speak to the victims and understand their situation, my dear govt.

/// False or misleading information

With the benefit of hindsight, I suggest that MAS should now go through the advertisements, sales brochures and prospectus, to see if the information provided are false or misleading, which is an offence under the Securities and Futures Act.

If the information is provided clearly and fairly, why are several thousand investors, including the educated professionals and the financially-savvy persons, misled into believing that they are investing in “low risk” bonds? Are these people so careless and irresponsible with their money? ///

Kin Lian, problem is the educated professionals and financially savvy persons do not bother to read the prospectus. (See Lehman’s Minibond prospectus)

Stated in NORMAL print (and not small print) and in BOLD on the FRONT page in the second last paragraph in SIMPLE, PLAIN English is the following:

The purchase of any Notes to be issued under the Programme involves certain risks. You should ensure that you understand the nature of the Notes, in particular, the section headed “Risk Factors”, and should carefully study the matters set out in the relevant Pricing Statement, before you invest in the Notes. There will be no guarantee from any entity to you that you will recover any amount payable under the Notes and you could lose all or a substantial part of your investment in the Notes.

“37) V S RAAJ on October 22nd, 2008 12.28 pm
Everyone one wants the govt. to open up, more freedom, more say, more play….and when the financial sector is opened up for wider investment prospects with higher returns….these people come running back when they burn their fingers in their investment.”

Sure or not ? Opening up of financial sector must also be matched with the right level of open education to the normal men (and women) in the street as regards the nature / danger of such new products available (however speculative the education could result in) so that potential investors are more cautious – and preferably this should be done in the MSM for the wider benefit of the general population and at the ‘right & simple language’ that they understand.

Have we really done that ? Well, I am not too sure. Opening up must not be such that it is skewed to the advantage of the selling party who can capitalize on the education gap between them and the investing public, especially those illiterate in language or financial understanding.

In Singapore, a lot of us are old enough to know how roti pratas are being flipped here – we have seen enough to internalise the modus operandi of the way a roti prata man would go about doing his job. So spare us your lecture on why certain reasonably ‘educated’ but reckless investors should not expect any help. If is it is this group of people, no one would want to waste too much time, if you know what I mean.

“Everyone one wants the govt. to open up, more freedom, more say, more play….and when the financial sector is opened up for wider investment prospects with higher returns….these people come running back when they burn their fingers in their investment”

Let’s not confuse the issue. Opening the market and making it less regulated don’t mean mis-selling and representation. There are still regulations to obey and MAS to act as watchdog.

Hello, V S RAAJ. Doing fire fighting again ? on October 22nd, 2008 5.35 pm

Agree.

Look at the IRs. Way before these are launched, we have campaigns to educate Singaporeans about the evils of gambling, ran Ads on TV and papers, and even set up an council to address gambling addiction. Topping it off is of course the entry requirements for IR visitors, which further serve to protect the citizen, if the Govt is to be believed. The Govt acted like gambling is being introduced into Singapore for the very first time. This is the perspective that they adopted, and the balance between “open” and “regulated” that they thought was necessary, however skewed it seemed.

Now, look at the mini-bonds (CDS products). For products that are pushed over the counter to ordinary citizens queuing up to do their banking, people who may not have actively solicited for investment opportunities, are we saying that enough has been done? What kind of a balance is this? We might as well encourage health supplements companies to send representatives to all polyclinics & hospitals, and start pushing their products to patients as they wait to collect their prescriptions.

Before passing any further insensitive remarks about how investors deserved to get burnt, think again.

Haven’t you guys heard the familiar saying “NEVER TOUCH WHAT YOU CANNOT UNDERSTAND”. ” That is why Warren Buffet always says he doesn’t invest in businesses he cannot understand.

It amuses me to observe how many investors so willingly plonk their monies into stocks, bonds, structured products etc without bothering to do research and are too lazy to analyse financial statements of companies. They think the RMs will point them a path of weath – and make plenty of money for them, so they do not have to use their brains.

Investing is an art and science, no one can be good at it without going through the process of trial and error, learning from mistakes and striving to do better with more knowledge.

Dear Mr. Tan,

Following your math :

“If the risk is 1 in 100 years, it is 1%. For 6 entities, it is 6%. For 5 years, it is 30%”

then
For 100 years it will be = 100 x 6% = 600%.

But,

we know that in 100 years it is only 6%. (for 6 entities)

So I concluded that you might have done a wrong math.

But I might be wrong, as I know you were an actuarial by profession. Hope you clarify.

“Haven’t you guys heard the familiar saying “NEVER TOUCH WHAT YOU CANNOT UNDERSTAND”. ”

Do you really understand how microwave works ? Do you really understand how car works ? Are you sure your car is safe ? Why people are buying these products even the wisdom says NEVER TOUCH WHAT YOU CANNOT UNDERSTAND”. ?

I wonder how many times I have repeat this. Likewise, Aunt, Uncle etc buys the financial product because they have total trust on the bank and believe that bank especially one that is from government cannot cheat them, and that is what brand is. These RM is representative of the a reputed bank, they represent the bank just like some foreign table tennis player from China represent Singapore in the Olympics ! Are you telling me if that player is only represent if he win not when he lose ?

You buy microwave, and cars from reliable source and brand and expect them to work. If these things you buy don’t work , can I tell you “NEVER TOUCH WHAT YOU CANNOT UNDERSTAND” ?

Of course, you will say financial products are different and more risky. Sure, it is risky, but it make even make worse by mis-selling and misrepresentation !

Daniel,

With a car, I may not know how an internal combustion engine work, but I do know where to put my foot on the accelerator. More importantly, I know where the brakes are – so that I am in CONTROL. When I buy a car, I always go for a TEST drive. I actually know how it feels and handles before I decide to buy it. I would think the salesman is pulling a fast one if you tells me that the car he is selling does 100 km/litre on petrol (not hybrid). I will think he is selling snakeoil if he tells me that the car can also run on water.

Now, everyone (I hope you do) knows there is no free lunch. High risk high return. So, if the financial salesman tell me that this new thing called MiniBond, High-Jink Note or Mini-skirt-the-issue is low risk or o risk, and still pay much higher interest than fixed deposits, then I would also give him that dirty look.

Uncles and Aunties lose their life-savings because we allow the use of “Bank English (Bad English) and Lament English (Lehmen English) to be legally used and deceptivley twisted in the investment products brochures and contracts. How can anyone understand words like “first default or credit events” ?? Even famous economics gurus and professors pretend to understand but when they reach home they scratch their heads trying to understand.

We must outlaw these deliberately & deceptively twisted English words and terms used in selling equally bad & wicked investment products – we should outlaw and label them as Bank English ( I mean Bad English ) and Lament English (I mean Lehmen English). These deliberately misleading English words belong to “Cheat_glish” because they are designed to cheat our uncles and aunties of their money. Sounds more and more like pre-meditated murders and robberies??

We should go back to good, simple, honest, Englsh that everyone can understand – no jargons, no technical or legal bullshits, no sophisticated voodoos, in investment product brochures, prospectus, or contracts. Make this law now & do the Right Thing !! And all these future investment documents must be designed to pass one very simple test : Let 10 “O” level students read them and if they ( all 10 ) fully understand the documents then MAS will allow the documents and prospectus to be marketed with the Investment products. Do the Right Thing – is not so difficult, right ??

To: T (3.29 pm)

So after test driving you feel satisfied with the car and you buy the car. Two months later you discovered that it has a steering defect. Do you blame yourself for not detecting the steering defect ? After all, you took it for a test drive and you did try out the steering wheel!

I agree with your point however about high return = high risk. In this case, the minibond series 1 was paying only 4%. If I had wanted high returns I would have gone for equities where the upside is unlimited.

To: Pepperkamp.

In the simple math given by Mr. Tan, people like him (who supposedly should be good at math) can make such a mistake, that shows that Financial Advisers themselves might not be able to understand fully the actual risks invovled when selling those mini bonds.

“T
Now, everyone (I hope you do) knows there is no free lunch. High risk high return. So, if the financial salesman tell me that this new thing called MiniBond, High-Jink Note or Mini-skirt-the-issue is low risk or o risk, and still pay much higher interest than fixed deposits, then I would also give him that dirty look.”

You are probably one who has come to appreciate the nuances of the hidden dangers that these so called “High risk high return” – even though I do not find the range of 4% to 6% is something to dance about.

How about old aunties and uncles whom you can easily know that they have no risk-taking appetite at all just by asking them some simple questions,

If nothing goes wrong, you will take anything from 16yrs to 25yrs to recover your principal sum. And that is principal alone. The minimum tenure of FD can be as short as 1 month and the sum can be as low as S$10,000/-.

Could anyone tell me the minimum sum and tenure of Minibond to be locked in.

/// I agree with your point however about high return = high risk. In this case, the minibond series 1 was paying only 4%. If I had wanted high returns I would have gone for equities where the upside is unlimited. ///

Yes, equities will probably give you a better return. But did it??? Just this year alone, most stock markets and most stocks are down by 50% to 60%, some even more. As I mentioned earlier, no one in the right mind 2 or 3 years ago would have or could have foreseen that such a blue-chip stock such as UBS, Goldman Sachs, Citi, AIG, Lehman and Merrill Lynch could have come to such grief. Be honest with ourselves and cast your minds back to 2 to 3 years back – don’t you think Lehman’s Minibond was perceived to be much less risky than equities?

This financial crisis is very severe. Will you be happy if you had invested in say DBS at $24.90 and it is now around $10?

Hi H.Pepperkamp (#46) (aka L Haversack)

If there event is 1 in 100 years and there are 6 entities, the probablility is 600% in 100 years (and not 6%). It is certain to happen, many times.

Whatsoever (#49) believe you. So, you have started a school in wrong maths calculation already.

It is difficult to find the prospectus.

Take a look at the MAS Opera website, under the column Debenture.

You will find a lot of propsectus publised there. But you cannot find the High Notes or Pinnacle Notes. You can find some propectus posted by DBS and Morgan Stanley, but they do not tell you if these are the prospectus for the High Notes or Pinnacle Notes.

There is a prospectus posted by a company that has the Minibond name. But, you do not know if it is for series 1, 2 or whatever.

Try reading the prospectus. The ordinay layman (includign me) cannot understand what is written there.

Mininster Lim Hng Kiang should try to read the prospectus and see if the has “all information that an investor would reasonably need to make a proper assessment of the securities being offered.” If he does not, why does MAS allow the securities to be sold to the public with this type of information?”

/// The purchase of any Notes to be issued under the Programme involves certain risks. You should ensure that you understand the nature of the Notes, in particular, the section headed “Risk Factors”, and should carefully study the matters set out in the relevant Pricing Statement, before you invest in the Notes. There will be no guarantee from any entity to you that you will recover any amount payable under the Notes and you could lose all or a substantial part of your investment in the Notes. ///

Kin Lian – see 39) above. What don’t you understand? I thought the above paragraph written in bold on the front page of the Lehman Minibond prospectus is in clear simple English. THERE WILL BE NO GUARANTEE FROM ANY ENTITY TO YOU THAT YOU WILL RECOVER ANY AMOUNT PAYABLE UNDER THE NOTES AND YOU COULD LOSE ALL OR A SUBSTANTIAL PART OF YOUR INVESTMENT IN THE NOTES.

Which word you cannot understand?

Mr Tan, we need more people like you , who display a great level of moral authority not typically seen elite leaders. You have the interest of the common man at heart and have repeatly stood up for them. Well most of us know how effective the leadership is in fixing, so please trend carefully for the sake of the common man who needs you.

To T 9.31 pm

“This financial crisis is very severe. Will you be happy if you had invested in say DBS at $24.90 and it is now around $10?”

You seem to have missed my point. If I went into equities I would know exactly what risks I am in for. If I had made a loss in the stock market, I have no one to blame but myself. But it is done with money ear-marked for equities.

The risk for this product was understated. In 2006, Mr Ian Croft in a newspaper article was quoted as saying, “Mini-bonds are designed for the defensive investors seeking exposure to high grade assets that provide steady and enhanced yields…. Investors are at risk if one of the above six underlying entities experiences a default on its debt obligations or files for bankruptcy. In such an event, investors will only get back an assessed value of the company that has defaulted…If company X defaults and it is worth only 50 cents on the dollar, the investor will only get 50 per cent of his invested amount in the bond”.

I think this is the usual sales pitch which may not exactly represent a true and complete picture of the product. The impression given by the sales people is that there will be a residual amount to be distributed in the event of a credit event.

Let’s take a look at the warning on the front page of the prospectus. THERE WILL BE NO GUARANTEE FROM ANY ENTITY TO YOU THAT YOU WILL RECOVER ANY AMOUNT PAYABLE UNDER THE NOTES AND YOU COULD LOSE ALL OR A SUBSTANTIAL PART OF YOUR INVESTMENT IN THE NOTES.
The average investor will interprete the warning that they may lose all or substantial part of their investments as referring to a situation where a Reference Entity fails not where in this case, there has been no credit event.

Please note that the warning on another page states: “The Notes will be redeemed early and the Credit Event Redemption Amount … will be likely be less, and could be significantly less, than the principal invested.” There is no mention that the investor can lose all the monies invested. Is this a deliberate attempt to mislead?

/// The average investor will interprete the warning that they may lose all or substantial part of their investments as referring to a situation where a Reference Entity fails not where in this case, there has been no credit event. ///

Tiang – I think that is just assumption and speculation on your part. The key words are ANY ENTITY, not Reference Entity.
NO GUARANTEE
LOSE ALL OR A SUBSTANTIAL PART

Without this once in a 100 year financial tsunami, the Notes will be a lower risk than equities.

Tiang – put your hand on your heart and answer this truthfully – two years ago, would you have foreseen AIG, Merrill, UBS and Lehman getting into this mess?
Would you think they were risky entities?

“I thought the above paragraph written in bold on the front page of the Lehman Minibond prospectus is in clear simple English. THERE WILL BE NO GUARANTEE FROM ANY ENTITY TO YOU THAT YOU WILL RECOVER ANY AMOUNT PAYABLE UNDER THE NOTES AND YOU COULD LOSE ALL OR A SUBSTANTIAL PART OF YOUR INVESTMENT IN THE NOTES.”

Does the word “ensure” cover communication, representation and positive remarks by the issuers’ representatives.

Is this simple clause (e.g all inclusive clause) enough. If it is so important a matter, why was THIS NOT THE FIRST AND FOREMOST THING TO BE HIGHLIGHTED MORE THAN ANYTHING ELSE. Is this simple enough English to you.

“two years ago, would you have foreseen AIG, Merrill, UBS and Lehman getting into this mess?”

You are right on this point but again why most of us would not have foreseen this. Simply because we never really have a public platform / culture for such things to be readily and openly discussed and drive the education in a more detailed manner across to those general public.

Unfortunately, a lot of us out of a sudden will have this free foresight, albeit at a high costs for some.

You will find a lot of propsectus publised there. But you cannot find the High Notes or Pinnacle Notes. You can find some propectus posted by DBS and Morgan Stanley, but they do not tell you if these are the prospectus for the High Notes or Pinnacle Notes. – Tan Kin Lian

What was provided is only the base prospectus, which is supplemented by the pricing statement. The pricing statement is actually a brochure that states for each series of debenture, what the reference entities are and the interest rate one can expect from purchasing the investment product. Unfortunately, the base prospectus and the pricing statement are supplied individually.

/// Does the word “ensure” cover communication, representation and positive remarks by the issuers’ representatives. ///

No, it doesn’t. Read the prospectus again. The onus is on you, the buyer, to “ensure”. The exact wordings are: “You should ensure that you understand the nature of the Notes, …”

You should ensure. The issuers’ reps do not have to ensure…

57) T on October 24th, 2008 1.37 pm

“put your hand on your heart and answer this truthfully – two years ago, would you have foreseen AIG, Merrill, UBS and Lehman getting into this mess?
Would you think they were risky entities?”

I guess a lot of those affected people have put their hand on their hearts and probably at the same time their middle finger from the other hand into the air, and rightfully realised that after two full years from two years ago that all along they have been so scre*ed and quite perturbed that there are people like you giving the impression that it is quite alright to get scre*ed.

They may also be equally puzzled by kaypoh people like you who will virtually not lose a single cent if they do get some form of compensation. Unless again, you are some errand boy hired to do the dirty PR work.

I guess if you & so much of your own money have been scre*ed so nicely, the emotion shown should be rather truthful & real and the last thing they will need is people who are probably overnight-expert in prospectus like you.

“60) T on October 24th, 2008 5.32 pm
No, it doesn’t. Read the prospectus again. The onus is on you, the buyer, to “ensure”. The exact wordings are: “You should ensure that you understand the nature of the Notes, …”

You should ensure. The issuers’ reps do not have to ensure…”

You still do not get it.

The onus is on the investor to ensure and this I agree. Don’t you think the word “ensure” also cover seeking clarification from issuers’ reps with verbal “communication, representation and positive remarks” as part and parcel of the whole buying / selling process which unfortunately not everything is always evidenced in writing.

So it is no-brainer for “extremely smart” people (let alone lawyers) like you feeling smugly triumphant to pick up after the fact this “THERE WILL BE NO GUARANTEE FROM ANY ENTITY TO YOU THAT YOU WILL RECOVER ANY AMOUNT PAYABLE UNDER THE NOTES AND YOU COULD LOSE ALL OR A SUBSTANTIAL PART OF YOUR INVESTMENT IN THE NOTES.”

The onus is on the investor to ensure and this I agree. Don’t you think the word “ensure” also cover seeking clarification from issuers’ reps with verbal “communication, representation and positive remarks” as part and parcel of the whole buying / selling process which unfortunately not everything is always evidenced in writing

In another words, the prospectus is written to protect the issuer, the arranger and the distributor. This is where MAS should stand in ensuring the prospectus should be written for the retail investors in mind too.

63) Donaldson Tan on October 24th, 2008 6.36 pm

Don’t you find it surprising (perhaps it is to be expected here on this site) that when innocent people are already losing good money, there are still meddlesome croachroaches like T, U, V, W, X, Y & Z around aggravating the already stressful environment.

Look here, I take no pleasure in your suffering. i am just pointing out the facts here. As Donaldson said, the prospectus are drawn up by the issuer and it is biased towards the issuer. They literally cover all aspects of their arse. These are drawn up by lawyers over the year.

I started to respond to Tan Kin Lian. First, he said he does not understand. I just pointed out it is in simple English. Which word don’t you or he understand?

I am not from the issuers, and I sympathise with those who lost money. All I am saying is, legally, the investors have no case. But ethically, some (not all) have good grounds of misrepresentation or mis-selling. Of course, there will be some who perfectly know what they were getting into, but can now claim they don’t understand no Engerrish.

Please follow my responses carefully.

Kin Lian,

As what ” T” had pointed out correctly in the context of the prospectus (particularly the first sentence in the front page as you have attached the link in other article), I bet any poster here would have understood it without a single doubt what it really meant. This is altogether a separate issue from ascertaining whether RM or FInancial Advisors had mis-lead investors and being empathetic towards affected investors.

However laudable and much you have done a good effort in helping the poor souls on this minbonds saga, I find your calim beyond believe and think you have execerated to a great extend when you said: “Try reading the prospectus. The ordinay layman (includign me) cannot understand what is written there. ” when you as a former CEO of NTUC, a person who provide financial advise in insurance and a guest writer of this site. Please be fair with your judgment and do not let emotion rule over your head. Likewise to those posters And frankly, for those who think posters like “T”, Blade…etc who differ from your views are unsympathetic and detached because they are not affected.

Sorry I meant “exaggerated” instead of execerated. Apology for the misspelling..

T,
where does the issue of misrepresentation and mis-selling arise? from prosepectus or the RMs? What do you mean legally investors have no case and ethically they have? Have you got yourself into knot or not?
To Observer(SG-HK)
You could understand or could read the prospectus?

68) zhummmeng on October 25th, 2008 12.00 am

Are you challenging me?

Read what I have commented again. I am referring to the first statement of the prospectus. Printed and Bolded like what “T” pointed out in response to Kin Lian’s claim.

68) zhummmeng on October 25th, 2008 12.00 am

Are you challeging me?

Please read my comment again. I am referring to the first statement of the prospectus printed and bolded just as “T” pointed out in response to Kin Lian’s claim.

Oops. mistake. Challenging instead.

68) zhummmeng on October 25th, 2008 12.00 am

In case you are puzzled what I meant. My comment is in reference to this bolded statement in the prospectus.

“The purchase of any Notes to be issued under the Programme involves certain risks. You should ensure that you
understand the nature of the Notes, in particular, the section headed “Risk Factors”, and should carefully study the
matters set out in the relevant Pricing Statement, before you invest in the Notes. There will be no guarantee from any
entity to you that you will recover any amount payable under the Notes and you could lose all or a substantial part
of your investment in the Notes.”

Granted, I understand emotions are high for those affected investors. I cannot agree more that Kin Lian had put in a great effort to help these people. That I applaud his effort but not when he exaggerated his claim in referring to the statement above as what “T” pointed out.

And for your information regarding your challenge to my understanding of the prospectus. I have ceased investing since 1982. If I ever do invest these days, I certainly will consult my attorney for this kind of investments.

T,
“THERE WILL BE NO GUARANTEE FROM ANY ENTITY TO YOU THAT YOU WILL RECOVER ANY AMOUNT PAYABLE UNDER THE NOTES AND YOU COULD LOSE ALL OR A SUBSTANTIAL PART OF YOUR INVESTMENT IN THE NOTES.”

It makes me wonder whether you are making of fool of Tan Kin Lian, Donaldson, Observer ?

Such “bombardistic” statement cannot be qualified as a excuse to get away from consequences of mis-selling or representation. Why are you insisting that it hold water ? Are you showing that just this statement alone will protect the bank from blame and compensation ? Let me ask one question. Which insurance product, financial product doesn’t have such statement to protect themselves ? Call it Kiasu, kiasi but these statements exists in all these financial contract in one way or another in a very creative way (remember credit event ?). So does that mean that the statement is above everything else ?

Do you think the banks will use this statement to protect themselves from compensation ?
“THERE WILL BE NO GUARANTEE FROM ANY ENTITY TO YOU THAT YOU WILL RECOVER ANY AMOUNT PAYABLE UNDER THE NOTES AND YOU COULD LOSE ALL OR A SUBSTANTIAL PART OF YOUR INVESTMENT IN THE NOTES.””

The answer is NO and no sensible bank guilty of mis-selling and representation will use this statement unless it is the last resort and on verge of bankrupty. For banks to use such a statement if they found guilty will severely destroy their reputation and credibility, and they can stop talking about expanding oversea because no country will ever entertain such a irresponsible bank.

Here is my reply to T(#54)

First, can you identify yourself and state whether you are an investor, a non-investor or representing the MAS or financial institution.

I confirm that I understand the words in BOLD, i.e. the warning that the investor can lose substantially or all of the entire investment on the occurence of a credit event. I remember that these words were also mentioned in the advertisement, but in small print.

Most people were misled into thinking that this risk is remote. They were told (wronlyt) that all the reference entities had to fail, before they lose all their money. If some reference entity fails, they will lose their money proportionately.

Many were misled into thinking that their money was invested in the bonds of these reference entities. In some cases, they received in writing the assuarnce of the sales representatives (i.e. the so called “relationship manager” of the financial institution). If the sale representatives had this belief, you can be sure that they tell it to all the people that they sold to.

Can you now read the proposectus and see if it meets this test specified by the Minister Lim Hng Khaing, i.e. “The issuer must include in the prospectus all information that an investor would reasonably need to make a proper assessment of the securities being offered. ”

Did the prospects explain clearly, the product as it actually is (which we now now what it actually is?)

Should the product state clearly that the structured product is:

a) provides insurance that if any one of the six (or whatever number of) reference entities faces a “credit event”, the investor will lose all of his money

b) that the money is actually invested in a portfolio of other assets (and not in the reference entities) and if a cerftain number fails, all of the invested money will be gone?

The chance of a total loss of the investment is xx% a year or xx% over the term of the structured product? (The issurer is able to compute this figure, based on the premium that they receive from covering the risk.

If this is explained clearly, most investors would have avoided the investment, as they are risk averse. The other investors, who are willing to take the risk, cannot claim to be misled.

Clearly, this is a case that thousands of people have been misled into investing in the product, due to its complex nature, and the manner in which it is described in the prospectus.

In many cases, the propsectus were given to the investor only after they invested in the structured product. Even now, many investors could not find the prospectus. I cannot find it in the MAS website.

Under the Financial Advisers Act, the representative (acting for his employer, the financial institution) has the responsibllity to ensure that the “recommended product” suits the consumer that is being sold to. These products are being sold as an alternative to fixed deposits. It is the duty of the financial adviser to prove that they are suitable.

But,

So I concluded that you might have done a wrong math.
– H.Pepperkamp (#44)

Your math is wrong. Let me rephrase Mr Tan Kin Lianś example.

If the risk is 1 in 100 years, it is 1% per annum.

For 6 entities, it is 6% per annum.

For a period of 5 years, the risk for 6 entities is 30%.

For a period of 16 years, the the risk for 6 entities is 96%.

For a period 100 years, the risk for 6 entities is 600%.

Clearly, it is bad idea to hold the mini-bond for 16 years, since a credit event is surely to happen. However, even 30% risk is too much for an investment product to be considered as an alternative to fixed deposit.

The fixed deposit scheme guarantees up to S$20,000 should the bank that holds the deposit collapses, but in this case, the mini-bond product only guarantees that you can get back 100% of the liquidated value of the mini-bond at maturity/termination, which is not necessary more than the capital invested.

I can´t even carry out simple valuation of the investment product on my own since all the important information for required for risk evaluation cannot be found alone in pricing statement and the base prospectus alone.

What I find it shocking is the weightage of the individual financial instruments and information regarding cash flow is not included. Also, other important information is lacking, such as the business models of the entities, so that one can evaluate the risk objectively by assuming bad, moderate and optimistic conditions to evaluate the upside and downside.

Can omitting essential information out of the prospectus be considered as mis-representation since there is possibility of proving the prospectus as half-truth?

Kin Lian,

Thank you for clarifying your stand. Appreciate it. I hope you understand where I am coming from. We want to be seen as people with fair judgment in our call. This is a differentiator from the MSM.

As far as understanding the entire prospectus, even lawyers will have a hard time figuring it our without the help of Senior FInancial Advisors to work out the Math contained within to advise serious investors. Most prospectus in general (including Insurance Policies underwriting) are in favor of the issuer in case of dispute (such as the minibond debacle). It can generally be said that the rest of the world (people who invested and including institutions) had been taken a ride by the US who instrumented these strutured products.

The US congressional inquiry is going on and you even heard the former Fed Chairman admitting that the lack of regulation on these derivatives (CDS) which these MiniBonds are related.

Anyway, here’s my apology if I sounded insulting in my comments to you. I hope you continue to upkeep the good work you and your colleagues are doing.

Hi Donalson Tan (#75)

It is important that relevant information should be disclosed. The risk of default is most relevant. I think that the issuer has some idea about the risk (as it is determined by the premium that they received from the swap counterparty). But they did not disclose this risk. So, the issuer can be faulted under section 200 of the Securities and Futures Act for “withholding relevant information”.

MAS should have disapproved the issuing of this product, as it lacke the relevant information. MAS cannot expect the retail investors to figure it out for themselves.

Note: My estimate of a 30% risk of failure of the referene entities over 5 years could be over-stated. At that time, the actual risk could only be 15%. Even so, it is still high. There is the additional risk of failure of the underlying assets and failure of the swap counterparty (i.e. Lehman Brothers).

If one considers that there are so much uncertainty, the product certainly cannot be sold to the ordinary public. It is not sufficient to have a statement “you may lose substanitally or all of your investments in the event of a credit default”.

Hi Observer (SG-HK) (#76)

At an appropriate time, we should take up the issue of all types of prospectus that are written in complex language that the retail investor is not able to understand.

If the securities (minibonds or shares or unit trust or whatever) are to be sold to the public, it must pass the test of being comprehensible to the public. If it is not understandable to the public, it CANNOT BE APPROVED FOR SALE. (This is the duty of MAS).

I like to quote an example from the medical field. Suppose a manufacturer introduces a new medication that is potentially risky and is asked to put this disclaimer: IF YOU CONSUME THIS MEDICATION, YOU FACE THE RISK OF DYING FROM THE SIDE EFFECTS.

Should this medication be approved for sale with the disclaimer? There is a high risk that the consumer may not be aware about this warning, or the pharmacy store salesperson may say, “Don’t worry. It has been approved by the Health Science Authority. You can ignore this warning”.

Kin Lian,

Without a doubt I agree with you that at an appropriate time we should take up the issues of all the prospectus that contained dubious statement. The crux is whether the authority will heed the advice and spear head the effort is altogether another matter.

I am not a strong advocate of over regulation in open capitalist market (even I have ceased making any stocks or bonds investment) but clearly, more regulations are needed now to safeguard the investments of ordinary unwary folks who otherwise find their hard earned money depreciating in just ordinary bank savings.

I think the current regulatory body seemed to me are unperturbed by these events happening. They need to come out of the dark and restore public confidence before the market collapse further which is of no benefit to all even those who are bystanders will be dragged into this. Any sort of positive moves seen by the public is a wlecome sign. At least more stringent rules to regulate profiteering by unethical business conduct of those listed companies.

Hi Observer (SG-HK)

Can you contact me at kinlian@gmail.com. We can continue our discussion off-line.

Mr Tan, can you also review and look into the current sales processes whereby the products are sold without presenting the prospectus to the retail investors. The sales is based on the impressive brochures and sales pitch by the RMs.

Hi Cancer (#81)

The root of the problem is the freedom for the product creator to create the product and to add on an undisclosed amount for profit and marketing. This allows the sales representative to push the product that pays the highest commission. The high cost usually means poor value for the customers.

Many products fit into this category:

> land banking
> time share
> life insurance
> structured products

The regulator must set limits on the amount of charges, or require them to be disclosed clearly.

oops! maybe this T guy is TKL’s ex.colleague or what, why get so worked up on just words that don’t sounds good to the other.

If a prospectus is purposely designed to confuse, then very few people, no matter how professional they are will understand. Those who claim to understand are the real liars. Those who insisted that others must understand have hidden agenda.

I support better observance of fair play in the market, both to the (consumer) investors and the (product) providers. There needs to be as much INDIVIDUAL RESPONSIBILITY as BUSINESS ETHICS.

And, of course, I believe achieving such balance is a very difficult task. Even the smartest brains and sophisticated political system in the US can allow the mortgage crisis to surface.

There are certainly both unethical distributors and greedy investors. Although I don’t know specifics in the Lehman bond case well enough, I suspect it is unlikely that the provider will compensate all consumers without strings attached. Any move by the government bowing under political pressure to please everyone (by buying back the bonds), although emotionally satisfying, is still unfair in principle.

Lesson learn: it’s easy and too late to get angry with 20/20 hindsight. Damage control is a shitty job, so it’s best not to let it happen in the first place (by both the individual and the provider).

I also wonder if the Unfair Contract Terms Act would be applicable in the case of all lehman-related investment product. This is from Clause 4, Part 1 of the Act:

Unreasonable indemnity clauses.
4. —(1) A person dealing as consumer cannot by reference to any contract term be made to indemnify another person (whether a party to the contract or not) in respect of liability that may be incurred by the other for negligence or breach of contract, except in so far as the contract term satisfies the requirement of reasonableness.

(2) This section applies whether the liability in question —

(a) is directly that of the person to be indemnified or is incurred by him vicariously;

(b) is to the person dealing as consumer or to someone else.

MAS believes in hands off approach…Over regulation can stifle. FIs are free to do anything they deem good and can make more money so they can pay more corporate taxes. Contracts are biased in favour of the FIs. To encourage more consumption by rolling ‘new’ products to excite the consumers. The merits of the products MAS will not interfere. Toxic or not is left to the consumers to find out,.
Caveat Emptor is the basis of all tracsactions. Consumers get cheated can report.
Insurance agents and RMs can misrepresent so long they are not caught.They are encouraged to qualify for MDRT , COT or TOT so they can pay more income tax. Blur and old consumers must learn to read prospectus and insurance benefit illustration so that they can make informed decision.Putting everyhting in one basket is the vogue theory of diversion-fication. It makes easier for RMs and insurance to close more sales.More risk more return. If don’t want put in CPF and be rich and you can get a statement every month. It is caveat emptor. If you make wrong decision too bad. Everybody must be like the professor Ho Yew Kee of NUS business school with financial knowledge to make caveat emptor decision. Consumers wishing to buy structured products are encouraged to enroll for MBA course in NUS business school where prof Ho will teach how to unravel the intricacies of the complicated structure products and invest in these products wihtout fear and tear.,. Public education will help the the Ah Peks and AhSohs to understand the prospectus better so to make INFORMED DECISON. They are expected to know evrything before investing.Maybe Mr .Lim HK, the deputy chairman of MAS should conduct a course on how to make informed decision for financial products.
Lastly,Alan Greenspan is available for hire after the Congressional Grilling and Barbeque session. . MAS should consider hiring him to tap on his expertise on non regulation and lassier faire . It is greed and fear that cause the financial turmoil and nothing to do with regulation.

Dear all,

I think I have to make myself clear as there are some here who are so blinded by fear and helplessness that they will attribute ulterior motives to anyone here who offers alternative views. With passions running high, it is important that I state where I am coming from to prevent any misunderstanding.

First, let me declare that I am not from MAS (or any authority or government department) and I am not from the issuer financial institutions. I have never worked with or in NTUC Income and I do not have any axe to grind with NTUC Income, its current CEO, or its ex-CEO. In fact, I have been and still am a customer of NTUC Income.

I have not bought any of those affected structured products. But I do have investments in equities, and as we speak, I am down by more than 50%. As, the current financial crisis joke goes, this is worse than a divorce – I have lost half my assets and STILL stuck with my wife. I reckon my loss is higher than 95% of those who bought the affected products. So, I hope those who think I am unaffected or uncaring will be more miserly with your pinch of salt.

The only reason I am sharing my views here is what I thought this website is all about – exercising my right and obligation as an online citizen.

All of us want justice and equity to be done, and seen to be done. However, the way some of us here are going about it, is, in my opinion very wrong and smacks of double standards. Remember, justice and fairness works both ways. Just because we are hurt financially, does not mean that the financial institutions or those financial reps who sold those products are not hurt. In fact, they are hurt more.

Those affected can be grouped under four categories:
a) Wrong target market – too old or illiterate
b) Misrepresentation by the financial reps
c) Those who are aware of the risks
d) Sophisticated investors

Now, of the roughly 10,000 investors who were sold those affected financial products, those in a) and b) ought to be compensated, or have their contracts revoked. My comments and views were and are targeted at c) and d), which could range from 10% to 50% of the 10,000 investors. Now, for these investors, I don’t think they should be compensated at all.

We talk about justice for the poor investors. What about justice for the financial institutions if those who bought the products knowingly also pretend to suddenly become financially and linguistically illiterate? They are literally fishing in murky waters and taking advantage of the situation to wriggle out of their losses.

Now, in our eagerness and appreciation to someone who champion our cause, we cannot be so partition and biased as to give the champion a blank check to exaggerate or tell little white lies. Just to avoid any names, let me cite a hypothetical case. Image if someone who used to run one of the biggest financial institution in Singapore were to claim that he is a layman financially, or do not understand the prospectus, then what hope is there for the rest of the citizens (or any investors) who have not worked in a financial institution at all?

The implication of this is dead serious. What this means is that every single investor in Singapore can wriggle out of any bad trade or investment. If an ex-CEO of a financial institution cannot understand an investment, then who can? So, the issuer banks should compensate every single investor. Clearly, this is grossly unfair to the banks/FIs.

There is no need for T (#90) to continue his insult and remain anonymous.

T objects to this statement made by me: “Try reading the prospectus. The ordinay layman (includign me) cannot understand what is written there. ”

The choice of words was unfortunate. The statement could have been more properly written as ““Try reading the prospectus. The ordinary layman cannot understand what is written there. Even a knowledgeable person like me cannot understand it”.

There is no justification for T to call me a liar, just for this mistake. Whether I am a layman or not does not change the meaning of my message.

I do not like T to put words in my mouth, which is what he has done in the last paragraph of his #90. I have stated myself clearly in my posting #74.

T is obviously well educated and wish to argue a point of view strongly. It is time for him to declare his identity.

Those affected can be grouped under four categories:
a) Wrong target market – too old or illiterate
b) Misrepresentation by the financial reps
c) Those who are aware of the risks
d) Sophisticated investors

Now, of the roughly 10,000 investors who were sold those affected financial products, those in a) and b) ought to be compensated, or have their contracts revoked. My comments and views were and are targeted at c) and d), which could range from 10% to 50% of the 10,000 investors. Now, for these investors, I don’t think they should be compensated at all. – T (#89)

If you had actually read all of Tan Kin Lian´s blog posts since the MAS/DBS/Lehman Saga begun, you would have realised that Tan Kin Lian´s position on the above matter is similar to yours. My position on this incident is also similar. The problem here is not Tan Kin Lian providing civil society leadership to defend investors that fall under (a) and (b), but rather investors that fall under (c) and (d) choose to jump onto Tan Kin Lian´s bandwagon.

You are targeting the wrong person.

Those affected can be grouped under four categories:
a) Wrong target market – too old or illiterate
b) Misrepresentation by the financial reps
c) Those who are aware of the risks
d) Sophisticated investors

Now, of the roughly 10,000 investors who were sold those affected financial products, those in a) and b) ought to be compensated, or have their contracts revoked. My comments and views were and are targeted at c) and d), which could range from 10% to 50% of the 10,000 investors. Now, for these investors, I don’t think they should be compensated at all. – T (#89)

Dear T (#89),

If you had actually read all of Tan Kin Lian´s blog posts since the MAS/DBS/Lehman Saga begun, you would have realised that Tan Kin Lian´s position on the above matter is similar to yours. My position on this incident is also similar. The problem here is not Tan Kin Lian providing civil society leadership to defend investors that fall under (a) and (b), but rather investors that fall under (c) and (d) choose to jump onto Tan Kin Lian´s bandwagon.

You are targeting the wrong person.

Hi Donaldson Tan (#92)

i am not sure if there are people in category (c) and (d). If the financial institutions had been aware about the actual nature and risk of the structure and had represented in correctly to the investor, then these categories exist.

It is for the financial instituton to come forward and say, “We have provided the appropriate training to our sales representatives and given them these information to disclose clearly to the end customers”. If they have given the right training, it is easy for them to show proof that their representatives had given the correct information on the product to the end investors and reject those in the categories (c) and (d).

Petition #2 ask MAS to check the training materials of the financial institutions to verify this point. Let us see if MAS is able to give a statement on this matter, after they have done their investigation.

I ask the retail investors who claim to be misled to sign a statutory declaration – so that the bandwagon jumpers have legal liability on their statement. MAS said that it is not necessary. Maybe, MAS should change their stance on this matter.

My comments and views were and are targeted at c) and d), which could range from 10% to 50% of the 10,000 investors. – T (#89)

i am not sure if there are people in category (c) and (d). – Tan Kin Lian (#93)

T (#89),

Seriously, who knows what the actual figures are? Nobody can confirm, even. Tan Kin Lian isn´t sure if anyone falls under categories (c) and (d) while your estimate (10% – 50%) is as good as a random guess.

TKL,
I noticed that each time you lost an argument, you will resort to calling people rude or insulting you. If there is anyone who is doing the insulting, it is you. You are the one insulting the intelligence of everyone here by claiming you are a layman and do not understand prospectuses written in clean plain English.

How has T’s words insult you? To me, he’s just pointing out what you wrote is not correct. And how would the fact that asking him to reveal his identity change the facts of his statement? Assuming T is Tan Ah Kow, would his argument be less true?

Come on TKL, you made an astonishing statement for an ex-CEO of a financial institution, T pointed out your error, and instead of correcting yourself, you made it worse by calling him rude and insulting.

I notice you have climbed down a bit, by referring to “The choice of words was unfortunate”. What a cop out. Does that mean the issuer banks and Lehman can now say, “their choice of words was unfortunate as well”. That they meant the investment has some risks, and not low risks?

Donaldson, if you have actually read all of T’s posts, you would know that he’s only objecting to TKL’s calling himself a layman. By doing so, he is as good as saying no one in Singapore will be able to understand these products or their risks. TKL is clearly very partition – on the investors’ side. As champion, he should be more fair-minded. At least T is balanced in his views. And T does not appear to be targeting TKL, only his misrepresentation of himself as a layman. Mind you, this whole thread is all about misrepresentation and mis-selling. And you have an ex-CEO of one of the biggest home-grown insurance company selling billions of dollars of insurance products and equity-linked investments claiming that he is only a layman and don’t understand prospectus. Now you tell me who is doing the misrepresentation here?

#60 T : Read the prospectus again. The onus is on you, the buyer, to “ensure”. The exact wordings are: “You should ensure that you understand the nature of the Notes, …”

You should ensure. The issuers’ reps do not have to ensure…

Thank you T, Finally I understand why RM cannot be trusted. They don’t have to ensure the customer understand the prospectus. They only need to ensure the customers signed on the dotted lines. I will passed this new knowledge to as many people as possible.

T,
as many have replied, there is nothing wrong about this statement
“THERE WILL BE NO GUARANTEE FROM ANY ENTITY TO YOU THAT YOU WILL RECOVER ANY AMOUNT PAYABLE UNDER THE NOTES AND YOU COULD LOSE ALL OR A SUBSTANTIAL PART OF YOUR INVESTMENT IN THE NOTES.”

But it is something wrong when this statement is purely used as basis of investors of not getting any money back in case of mass mis-selling or mis-representation.

If it is a normal case when investors place money and , and get burn, and it is not due to mis-selling/mis-representation (as there is no complain), I saying this statement that you mention is valid,
but in this case where you have whole lot of investors complaining that RM did not tell them what they need to know then the statement cannot be justified as a repercussion of mis-selling/mis-representation. And That is why commenters here are very frustrated over your significance of the statement.

In other words, Mis-selling/mis-representation cannot be condone based on this statement
“THERE WILL BE NO GUARANTEE FROM ANY ENTITY TO YOU THAT YOU WILL RECOVER ANY AMOUNT PAYABLE UNDER THE NOTES AND YOU COULD LOSE ALL OR A SUBSTANTIAL PART OF YOUR INVESTMENT IN THE NOTES.”

By doing so, he is as good as saying no one in Singapore will be able to understand these products or their risks. TKL is clearly very partition – on the investors’ side. – Umpire (#95)

Of course, TKL has to take side. He is championing the interest of investors who fall under:

(a) Wrong target market – too old or illiterate
(b) Misrepresentation by the financial reps

You have to take side if you are pushing for action. Choosing middle-ground is only applicable if Tan Kin Lian is a messenger for MAS to the victimised investors and a messenger from the victimised investors to MAS.

The choice of words was unfortunate. The statement could have been more properly written as ““Try reading the prospectus. The ordinary layman cannot understand what is written there. Even a knowledgeable person like me cannot understand it”. – Tan Kin Lian (#93)

Given that Tan Kin Lian has rectified his statement, there is no need to continue to pursue something so trivial. Accidentally labelling himself as a layman is stretching the definition of layman at best, since he is a qualified actuarian and not a chartered financial analyst.

And you have an ex-CEO of one of the biggest home-grown insurance company selling billions of dollars of insurance products and equity-linked investments claiming that he is only a layman and don’t understand prospectus. Now you tell me who is doing the misrepresentation here? – Umpire (#95)

This logic is flawed. A CEO´s job is to make good strategic decision in face of limited business intelligence and a lot of uncertainty. The CEO doesn´t actually micro-manage the investment portfolio of investment fund related to the investment-linked schemes.

Micro-managing the investment fund is the job of professional investment managers, not the CEO. If the CEO can´t understand the way the investment manager manages the fund, then the investment manager isn´t doing a good job in presenting to the CEO.

No doubt, the CEO´s understanding in the micro-management of the investment fund will improve as he attends more presentations by his subordinate investment managers. Hence, Tan Kin Lian is knowledgeable individual.

So, the issuer banks should compensate every single investor. Clearly, this is grossly unfair to the banks/FIs. – T (#89)

Fairness depends on how you perceive the overall environment. Remember that MAS inaction would cost more for the investors than the financial institutions. Your claim of grossly unfair would only be applicable if the regulatory environment is not what it is prior to MAS/DBS/Lehman saga.

Donaldson,

/// Given that Tan Kin Lian has rectified his statement, there is no need to continue to pursue something so trivial. ///

Did TKL rectify the statement? He made it sound like an honest mistake. He still think I am insulting him. I disagree with you strongly that this is trivial. He is fighting for those who claimed not to understand the risk. By misrepresenting himself to be just another Joe the plumber, he is in fact saying that everyone can claim ignorance, however well qualified they are. He is in fact opening the door for all and sundry to “buat bodoh”. I didn’t say a CEO should micro-manage. But the list I expect of a CEO from a FINANCIAL INSTITUTION to be more knowledgeable than the average Joe, Jane, Jamal or Jayakumar.

Donaldson, yes he can take side. But there is a huge difference between taking side when facts are on your side, and misrepresenting. Being partition give you the licence to suddenly become a layman without any financial understanding.

Donaldson, you mentioned “Mis-selling/mis-representation cannot be condone based on this statement.” Now, answer me honestly, can misrepresentation of one’s competence/knowledge be condoned? Especially if it opens the floodgate for those in c) and d) to also feign ignorance. This is key. It is not trivial.

Sorry, last paragraph should be directed to Daniel.

I do not wish to engage in argument with anonymous people (i.e. T or Umpire). I do not know if they are the same person or different people.

T did called me a “liar” in a post that has since been deleted. He continued his insult by mentioning something about ex-CEO of a financial institituion. It does not matter.

I have explained why I do not understaand the prospectus. The wordings of the 50 to 100 pages are in English, but the meaning is hard to fathom. It is easy to be misled. – and many people have been misled.

My explanation is in #74.

I still ask T to declare his identity. I ask if he is a lawyer involved in writing the prospectus.

T, we don’t know what axe you are trying to grind. But you are getting on other’s nerves. If you have a plan to help investors, let’s hear it. If not, please refrain from personal attacks against Mr Tan. Perhaps you had a previous encounter before or perhaps you had bought a couple of million of the locabl banks’ preference shares. Whatever, it is don’t take out your frustration and anger at this forum. IT IS VERY UNPRODUCTIVE!!!

Apart from the issue of the level of risk associated with the product, I believe another pertinent issue is how the bank approached the customers in the place. In a typical case, we all know that an RM usually try to sell a customer after the customer has been recommended by a bank counter officer who has just realized that the customer has a sum (sometimes huge) of money in his bank account.

My point is, is there any breach of banking secrecy regulation here ? I know the RM and the bank counter officer are both employess of the bank. But I do feel that an RM should not have access to the customer’s account information unless the customer volunteers it. This (arguably unauthorised) access to the customer’s account information allows the RM to practise unethical selling potentially.

I think MAS ought to look into this aspect of the transaction. For the longest time they have turned a blind eye to this. In fact they ought to have been looked into it long ago, and if they had done so, the current saga would not have erupted.

I agree with T, I believe justice should be a fair treatment to both sides…

If every single investor gets a bailout, I think this could create a moral hazard..and this is definitely not a fair treatment to both sides.

I hope Tan Kin Lian could be more open to criticism. Many have called him “hero”, but I believe a true hero should not be afraid of unfavourable comments, these comments can give a more balanced view.

# Singasoft on October 26th, 2008 6.23 pm

Please lah. You think critics here are asking for blanket favourable treatment to only one side meh.

As for the other side, do you think they are so jialak and lack of resources that they will not be able to defend themselves if they are wrongly aggreived.

Do you also think that critics here are so goondoo that we cannot see clearly which groups (a, b, c, d groups) should be defended as mentioned by T.

And Do you think that people on this site cannot grasp the concept of moral hazard fairly ? Anyway, you brought up a good point on moral hazard and as things go this should apply to both sides also, especially to those at a most superior end in terms of information with first or second contact with the vulnerable groups (a & b groups as mentioned by T).

Yes, justice should be a fair treatment to both sides and we hope that no one is wrongly penalised or no one is unnecessarily rewarded at the end of the day.

I have being following this link for the past hour and could not help but contrinute my fair share as one who sold investment products before.
I have being an insurance agent with AIA and a financial advisor (FA) in DBS before and have left the industry good eight years ago. It is unfortunate that besides the mandatory paper work such as risk profiling and product brochures, supervision of how we sell the bank products is minimal. One can simply says the product “sure make money don’t worry uncle” and move on to our salespitch anchored at making the sales. Obviously, all sales agents want to make a sales to make a living. However, by tying commission to the sales of a product to low,medium or high risk profiled clients, we all tend to misrepresented one way or another. If the client asked “Risky or not?” what do you think the RM will do? “Where got risk uncle? Just sign here la.” The sales is closed. A top notched RM in DBS can make around $5k to 6k in commissions alone excluding basic salary. Most RMs will target aunties and uncles as they are the easiest to sell for they hardly understand any financial jargon and trust bank staff too willingly for their own good. If we explain the minibonds to them and revealed that
For the sake of our investors, banks and financial institutions need to do away with the commission-based remuneration package. A fixed salary with a bonus tied to our sales seems reasonable. I remembered my monthly sales quota in DBS was a million dollars in trust funds. If not, within three months of failing to hit your target, you can kiss your job good bye. I automatically left on my own accord as I don’t feel good “cheating” customers of their hard earned money. My batch of 20 FAs also found the job too challenging for them and within a year half has left the industry. I am sure the other half should have gone by now.
Hopefully when the storm dies down, banks will come up with a favourable salary package for the RMs/FAs and our investors can have the confidence to part with their money again for yet another series.

I disagree with “T” and those who think likewise that being a a former CEO of an insurance company or even an FI is necessarily investment savvy. Yes he may know a little bit more but still clueless when it comes to some exotic products like structured products., except Professor Ho of NUS business school who teaches financial engineering and who can make informed, caveat emptor decision.This guy belongs to the academia.
If these people with financial background are clueless what about the man in the street , they are even worse. Reading the prospectus does not mean you understand the mechanics of the products, especially the intricacies of derivatives.
For many who got burned how many did understand what actually they got into and made Informed decision without help and without the pushing and “influence” from the RMs.I beleive many were pushed into signing on the dotted line, even the so called educated and CPA and MBA. I define ‘pushing ‘ as applying undue pressure and ‘influence’ as mis-selling and misrepresenting” to induce someone to take action.
Those who were prospected by RMs were definitely mis-sold and misrepresented. Those who walked into the bank and asked for the products might be misrepresented and sold.
Those who placed order with their private bankers might be savvy or pretend to be savvy . For this group we are not concerned, they can donate to the pockets of the salesmen or women who disguised as private bankers . Mr. Tan is definitely NOT taking up the cudgels for this group.

Dear all,

This is a personal plea to all contributing parties to this topic of discussion.

I have been following this forum because of the very high level of sharing and everyday I am learning something new from it.

I would like for this to continue because I am 100% certain that the outcome will benefit the people each of you has set out to help.

It is understandable that emotions would run high too because the engagements come in fast and furious and there will surely be instances when languages used may not exactly reflect what the party actually wants to convey.

In such instances, where clarification is sought and given, it is to everyone’s interest that we return our focus on the main topics of discussion.

From the discourse above, it is very clear for followers like myself, to see that each party is trying their very best to contribute and share the knowledge that each of the party wants to share, and all for the better outcome of the suffering investors.

For those who feel that the investors ought to be the ones to be protected, do remember that there will be those who also feels that the banks and FI’s interest also needs protection. This is where swords will be crossed.

At times like these, we would do well to listen to the reasons from both sides and then work together for the outcome that this discussion wants to achieve, which is, to help the investors.

Let not this discussion degenerate into a mud-slinging event. It’s purpose will then be lost to no one’s benefit.

Thank you, gemami.

To everyone: Please refrain from making personal attacks. I have allowed as many comments as possible and I have disallowed some.

Please stick to the issue – and refrain from making further disparaging remarks about fellow commenters or the author of the article.

Keep to the issue and all should be fine – else this thread will have to be closed for comments.

Thanks.

Regards,
Andrew Loh

Singasoft (#105) aka T Phua has an axe to grind and was creating a lot of trouble for me. It is not for him to lecture me about being open for criticism.

To everyone: please do not be overly sensitive on opposing views or comments.

I hope the community here can debate things as mature as possible.

Look at the debate between Obama and McCain…I’m hoping that we can be as matured as them when debating over an issue.

I believe most who are affected will want to be compensated fully by the FI, but let’s realize that it is not something fair to the other parties. However, I hope that those affected to be compensated as much as possible. But, be mentally prepared that in many cases you will probably lose much of your monies.

When the deputy chairman of MAS said that MONEY SENSE public education can help investors or consumers to make informed decision. I wonder he was so naive or he was making a clown of himself. I wonder whether he has ever attended a MONYSENSE talk?
Money sense at the best helps consumers to make sense of some financial words
and equip them with conversational vocabularies.Example, to understand what is whole life products , ILPs or UTs or diversification or asset allocation.They don’t equip the consumers with skills to DIY. The deuty chairman misrepresented the objectives of Money Sense. and DEFINITELY It will NOT help them to make informed decision.
MS aims to do as that , to make consumers financially literate and not an expert.

“Look at the debate between Obama and McCain…I’m hoping that we can be as matured as them when debating over an issue.”

You must be joking to have even brought up this example. They way they go about open discussion and debate will make us look like boy scouts. They have developed into a fine art of how spinning and mud slinging is being done.

If we are in anyway close to them, similar form of our engagement (perhaps by more well known persons) would have already been done and aired in our so-called MSM – so that weakness or strength of any view / counter-view can be
seen through by a much wider audience.

You should know by now that maturity comes from both people and the good system by design which feed on one another.

To #113:

yes, I hope we are moving towards that direction. But this issue itself deserves another separate thread.

Here, I think it is suffice to say we should not be overly sensitive towards opposing comments. These comments can give a more balanced view.

Singasoft: If you are talking about fairness, why only “unfair” to the other parties?

I believe the comment from Mr. TKL (TKL’s blog FAQ from investors) is more sensible.

Fair compensation
…..to investors who have been misled. A fair compensation is for the loss to be shared equally between the investor and the distributor.
Some investors expect 100% compensation. This is unreasonable. The distributor expects to get away with no compensation. This is unreasonable also.

> Tan Kin Lian (#93)
> i am not sure if there are people in category (c) and (d). If the financial institutions had been aware about the actual nature and risk of the structure and had represented in correctly to the investor, then these categories exist.
>
> a) Wrong target market – too old or illiterate
> b) Misrepresentation by the financial reps
> c) Those who are aware of the risks
> d) Sophisticated investors

To be fair to everyone, we can’t compensate people category in (c) and (d). I’m sure there are people who have taken the risks willing but still want to have a free-ride on any possible compensate for genuine victims of unethical selling.

People in (c) and (d) should NOT be compensated. They have to shoulder their own responsibility just like unethical businesses.

“Here, I think it is suffice to say we should not be overly sensitive towards opposing comments. These comments can give a more balanced view.”

The gist of the content is more important. Level of tone and emotion just gives it added flavour or bad taste depending on which side you stand.

Emotion will definitely show for some who are more invested into the issue and / or delibrately choose not to hold back this emotion for the purpose of effect or who may not have the predisposition to hold back this emotion.

A rose by any other name still smells like a rose.

In any thread, contributions of various persuasions (the more the merrier) will either reinforce or convert an existing view. A balanced view is still the same whether it is said in a tone of an uncouth person with barely any education or some cultured Phd material.

Donaldson, yes he can take side. But there is a huge difference between taking side when facts are on your side, and misrepresenting. Being partition give you the licence to suddenly become a layman without any financial understanding. – T (#99)

There is no mis-representation here, but your mis-interpretation. In the course of his campaign for rightful compensation for victimised retail investors, did he ever give out specific investment advice? No, not at all. Your presumption that being a former CEO of NTUC Income makes him an investment expert is flawed. Being CEO only meant that he is an acknowledged expert in business management of the insurance industry.

Speaking from an ex-financial advisor, the way we sell the financial products to the aunties and uncles certainly smelled of misrepresentation. We ourselves were not properly briefed by the topbrass of financial products. By the way, the way the minibonds is structured, no one will be able to understand it unless we have a degree in financial analysis or accounting. If we are to comprehend the product thoroughly and then sell it to the consumers with the same explanation, I am sure no one will buy it as from what I read, it is a failry risky product.
However, since when there is a no-risk investment product? Even cash in the bank carries risk unless the government guarantees it’s cash deposits when the bank goes bust.
We are merely briefed the main points of the products and often given brochures to sell. Most importantly, clients want principal guaranteed products are if they know that their money is sfae, they will buy.
Our cash deposit interest rate has all along being very low at one precentage point or lower so I don’t people with cash to look for higher yield. It is not greedy but also financially prudent to look for a better yielding safe investment.
A few lessons to learn here:
1. RMs/FAs need to be better positioned both in knowledge and ethics to market financial products. Remuneration should not be soley tied to commission earns from sales of such products so RMs do not face the stress of monthly sales target.
2. Consumers need to be more enquiring when investing in such products in the future. If they don’t feel ’safe”, they should not invest at all.
3. Our retirees need a retirement institution to help them to invest in a retiree fund for better returns. In Australia, a retiree fully-funded insitituion called Centrelink looks into the retirement needs of retiree funds. The returns will then be given in the form of monthly cheque for retirement needs. It also looks into welfare retirement cases.
4. MAS so far has not aken a strong-arm watchdog view of the whole financial situation and this is the correct approach. In a free economy, less governmental involvement is appreciated so that banks and FIs can develop fully.
5. In this once a lifetime financial tsunami, one needs to know that everything that you put your money in will go south. Investors in stocks, unit trusts, property, businesses, currencies, etc will depreciate. If you are an investor, you will know what I mean.

The best advice to all is still prudence in investment and goodwill to mankind. There is more to ife than money and materialism. Learn to smell the roses along the way in life.

Thanks all.

Gilbert
NSW Sydney

Remuneration of RMs, consultants, insurance agents must change to prevent conflict of interest.. Remuneration must be based on advisory work provided and the fee charged negotiable with the customers. The products carry a very low nominal ‘commission’ to compensate for the die hard salesmen for too much sweet talking., beating round the bush and lies.
This model allows customers who think they are smart enough to DIY. In fact there are people who DIY their investment. It is good , it is ok.They save on commission. Salesmen don’t give advisory service that is commensurate with the commission they receive.The DIY investor are responsible for any outcome. They buy directly from distributor and they conduct their due diligence.
How does it affect the products?
The products will be able to give better return and if it is an insurance product better return, higher protection and at lower cost..
Somebody told me if this happens not many will want to join this profession.
It is fantastic,!! Whatever they are doing will be professionalised . Now it is more like con job. This will eliminate the salesmen, reduce the consultant /insurance agent population from 14,000 to 5000. The 9000 can be deployed to industries where their ’skills’ are much needed instead of bringing in foreign talents. The 5000 left can be more professional, passionate, highly competent, advisory not product peddling and ethical and give to the best to consumers.
The life insurance industry is seen as a get rich quick industry. Tom , dick and harry, may or mary, Ah beng, Ah lian, including Ah meng join because of the commission they can rob from Ah Pek, Ah Sohs , uncles and old aunties and the uneducated.
I remember someone from MAS remarked that commission driven remuneration inevitably leads to conflict of interest, mis-selling and misrepresentation. It was reported in the paper. So what is MAS doing about it?

Many insisted that the prospectus is an easy document to read and understand and therefore able to make an informed decision.Don’t be fooled by MAS and the FIs .You need help and the RM is supposed to help not only to understand but also to tell you whether the product is suitable for you after looking into your circumstances. The onus lies with them. They need only to tell either of these words, good or not good for you.
Below is a testimony of a financially trained person.

Vincent said…

Just want to share a personal experience. I am a Malaysian working in Singapore & married to a local Singapore girl. My in-law sold their property in 2007 & went to a local bank to deposit the proceeds & they were persuaded to invest in Lehman mini-bonds. Fortunately, I found out about it the same day & I brought them down to the bank to see the manager; I asked them to explain clearly & in absolute details what product has been sold to my in-laws …. they could not satisfactorily explained. Now, I have been an investment professional for more than 10 years & I have gone through the documents myself 3 times & I could not even understand what this product is! Luckily, the bank agreed to void this deal. Shh, lucky.

If the compensation (if any) is at “market value”, investors will get very little back. Just look at the various unit trusts and equities and how they have been performing the past couple of months. How anyone wants to get back 100% at this time is beyond me.

Clear not?

“Prospective investors in the Notes should note that there are many different types of notes or bonds in the market
place, many of which will have unique and distinctive features. Not all notes or bonds are capital protected. Notes
which are sold or redeemed before their maturity date will be subject to unwinding or other transaction costs, and the
amount received by prospective investors may be lower than the initial amount invested.
The purchase of any Notes to be issued under the Programme involves certain risks. You should ensure that you
understand the nature of the Notes, in particular, the section headed “Risk Factors”, and should carefully study the
matters set out in the relevant Pricing Statement, before you invest in the Notes. There will be no guarantee from any
entity to you that you will recover any amount payable under the Notes and you could lose all or a substantial part
of your investment in the Notes.”

mengmeng (#122),

When the relationship manager is trying to hard sell you and attempts to distract you from reading the prospectus, what should you do? Downplaying the risk is mis-representation. Distracting the retail investor from reading the prospectus until the contract has been signed is also mis-representation.

If the prospectus denies the distributor of any liability relating to financial advisory, while the distributor is also acting as a financial advisor to the retail investor, there is no way financial institutions cannot see any conflict of interest and that the set-up undermines the retail investor right from the start.

I think if you are first time investor (never invest shares, bonds, etc.) and lowly educated, you could reasonably be considered as “vunerable”. Age should not be an important factor.

I also think everyone and every hero can agree that not all should be compensated as that could create moral hazard and it’s not fair to the shareholders of the FI.

It is unbelieveable that many by now still think the issue is “CAVEAT EMPTOR”.
The main focus issue is whether there is misrepresentation and misselling NOT CAVEAT EMPTOR.

“Prime Minister Lee reiterated MAS’s stance that the government should and would not step in to interfere with the process, citing it as a “moral hazard”, thereby leaving it entirely to the financial institutions to work out a deal with individual investors.” – wayangparty

I’d like to cautious people not to give mis-leading hope to those investors and to be realistic. Please be aware of the “moral hazard” issues. Also, fairness should be looked from both sides.

Please be aware of the “moral hazard” issues. – Singasoft (#126)

Fence-sitting is the least effective mean to pressure for action.

Also, fairness should be looked from both sides. – Singasoft (#126)

Yes. In the case of DBS High Notes 2 and 5, the legal and commercial set-up is already unfair right from the start. DBS is the issuer, arranger and distributor. Moreover, the same contract is used for both financial advisory and sales of investment product. The set-up is already unfair.

This is an excerpt from Lee Hsien Long’s Biodata on Cabinet Website:

In 1990, Mr Lee was appointed Deputy Prime Minister with responsibilities for economic and civil service matters. He also concurrently served as Chairman of the Monetary Authority of Singapore (MAS) from 1998 until 2004, and Minister for Finance from 2001 until 2007.

At the MAS, Mr Lee initiated reforms to liberalise the financial sector and to shift the emphasis from one-size-fits-all regulation towards a lighter supervisory touch, relying more on disclosure and caveat emptor.

Does this suggest that over-zealous middle managers at MAS may hesitate to go against policies that LHL had spearheaded when he was Chairman of MAS?

Please be aware of the “moral hazard” issues. – Singasoft (#126)

Moral hazard is only applicable for MAS and the government because they play the role of regulators. It does not apply to victimised investors and financial institutions which have clearly defined their position. It also does not apply to people who has already chosen what side they will take.