Announcement: All investors in credit linked securities are invited to attend a meeting at Speakers’ Corner today, Oct 18, at 6pm. There will be two short speeches by Tan Kin Lian (in English) and another speaker (in Mandarin). Visit Tan Kin Lian’s blog for more.
Andrew Loh / Deputy Editor
Anyone who has been following the unfolding saga of the chain of events resulting from the collapse of Lehman Brothers would be scratching his head. He would be questioning what the Monetary Authority of Singapore (MAS) is doing – or not doing – and why it is not leading but following.
From the get-go, the MAS seemed to be lost – lost in how to deal with the financial and credit crisis, lost in how to deal with aggrieved investors who are clamouring for redress, and lost in providing leadership at a time of uncertainty.
Perhaps I should have already noticed this when Mr Tan Kin Lian went to the MAS’ office in Shenton Way to deliver a petition on behalf of the investors two weeks ago. I was there to meet Mr Tan who had gone in earlier to deliver the petition. While waiting for him outside the building, I was approached three times by security guards and by a lady who said she was “from the comms department”, meaning their corporate communications department. She obviously was quite concerned that I would take photographs of the building or of any proceedings from that meeting Mr Tan was having with the MAS.
She asked me twice if I were from the media and kept reminding me that no pictures were allowed and that this was “our premises”. Seeing how uncomfortable she was with me waiting there (and how one of the guards kept looking in my direction), I asked if it was better if I waited somewhere else. She replied that if it was more comfortable, maybe I should. I chose to stay put.
Perhaps that was a sign of the chaos and fear, one would imagine, within the MAS. In the weeks following that encounter, many things have happened, which has led to some people questioning the actions of the MAS.
As fellow blogger Lucky Tan http://singaporemind.blogspot.com/2008/10/minibonds-no-leadership-in-times-of.html said, our Government seem to take their cue from the Hong Kong Government, keeping one step behind, sometimes two.
When the saga first broke, the MAS was rather dismissive of investors’ complaints, telling them to go settle it with their banks individually, in contrast to the Hong Kong Government’s tough stance on the banks which had sold the structured products to unwary investors. In fact, the chairman of the MAS, Senior Minister Goh Chok Tong, irked many when he later advised that “that’s life, if you want good rewards, you have to take risks. Otherwise, leave your money with the CPF.” Some I spoke to were quite upset at those words.
The MAS then told the banks (the same banks which investors are complaining about) to appoint their own “independent investigators” to look into the merits of the complaints. When this was met with protests from investors, the MAS made a u-turn and decided to appoint its own investigators instead. And as Lucky Tan also noted, this was done without the MAS meeting a single one of the investors affected.
When the Hong Kong Government announced that they were providing guarantees for bank deposits, the Singapore Government reassured Singaporeans that our financial and banking systems were sound and, as many understood it, the Government was not going to do the same as Hong Kong by providing guarantees for bank deposits. The very next day, however, the Singapore Government made another u-turn of sorts and declared that it too would guarantee bank deposits in Singapore- an unprecedented move in our 43-year history as a nation. This however is being met with some questions: Is it because the Government cares about Singaporeans’ money or that money, by the millions, will flow out of Singapore? With the markets in flux, depositors would naturally want to park their funds in territories or countries with such a guarantee, wouldn’t they? It doesn’t take a genius to figure this out. So the question is why the hesitation on MAS’ part when Hong Kong (and several other countries) already adopted this measure?
In the latest development in the saga, the MAS again took its cue from Hong Kong, it would seem. The Government in Hong Kong has launched investigations into the possible mis-selling of the products. A day after, the MAS announced, in a press conference, that it basically is going to do the same.
Perhaps what the MAS will be doing next is to – again – follow Hong Kong’s lead. Hong Kong has given the banks there an ultimatum to respond to its proposal to buy back the structured products from investors and it also said it was ready to top up the legal funds pool which aggrieved investors could use to initiate legal proceedings against the banks. This is something which is quite unthinkable in Singapore and to my memory, nothing of this sort has ever happened here.
In the light of the depressing lack of leadership from the Singapore Government, it is left to the investors – and public-spirited individuals such as Mr Tan Kin Lian – to do what they can to seek what they consider justice and fairness.
As for the MAS, one would hope that more initiative would be forthcoming. Else, in the words of Lucky Tan, despite paying our ministers the highest salaries in the world, Singaporeans would be given “no leadership in times of trouble!”.
Thus far, the MAS looks more like a headless chicken desperately dashing around than an authority providing certainty in leadership.
I think 10,000 investors deserve better.
——-
It is so easily taken in from the news you hear about Hong Kong making swift reactions to help those affected by the minibond saga. Emotions will rule in this case.
Here’s what had taken place. it is not after much ranting and protesting and “parliament infighting” before the HK government decided that they can take no more such beating and sort of put an action plan to calm the investors but it is far from over (Investors may only get their money back at market value IF the Banks buy back the bonds). It is currently under valuation by appointed committee to look into this. Let’s see whether the one week time line will have any effect (don’t count on an absolute resolution that investors will hold their peace). Banks contacted over here have no further responses to investors who visited them daily to ask for update and progress. Donald Tsang in his recent quarterly addresses even implied that the MKA Secretary did not do his job well. A guy most Hong Kong people think made loads of money for HK government when Hong Kong recovered from the 2003 SARs incident. In Hong Kong, the sentiment of those not affected may be different. Government can do anything to help but all hell will break loose if ever the government dares to commit to top up the difference if those affected investors did not get their full refund (some is asking for interest as well). By the way, this is what the people are fighting for.
Some accredited Hong Kong movement as swift. I think people here think other wise. In this debacle, HK is also a follower in terms of making guaranteed to Bank deposits (yes, the fact that they are one day or a couple of days ahead of the Sg Government in making that announcement but not after pressure from China Central Government and the people of HK as a whole who are concerned with their deposits after the scare of BEA incident and the rumors of possible bank/s collapsing). Likewise US (the main culprit of this Bond debacle, they created this instrument).
The first country (or rather the persons ~ Brown and his entourage) that initiated the guarantee of Bank deposits is UK then EU follow suit, then South America, US & China then HK, then obviously Singapore and the rest of the world.
Someone mentioned the melamine disclosure that HK was quick in making announcement. Sorry to disappoint, for this case, Singapore was way ahead of Hong Kong. When Singapore was testing the contents of those imported milk products from China and making regular update on their findings, Hong Kong done nothing at all during that time. This is again, only after much pressure and too many cases surfacing. Sotres will slow in removing contaminated products from the shelves.
Anyway, if there must be a scapegoat to blame on these failed investments, it has got to be ‘Big Brother’ US. This financial tsunami has gotten so big that all countries in the world (who have vested interest in US with enormous amount of reserves in US denominated currencies and big time creditor of US) have no other choices but to chip in to bail US out. Imagine you have to bail out someone who owed you money big time to save your own economy? If greed is not part and parcel of the game in investment, I think the twisted MiniBonds (initiated from US) will not take off in such a scale that when the bubble burst, all who had invested (even those who had nothing to do with this) are affected.
Just for my personal recollection, I revisited the article that was posted sometime back “A nation of Gamblers – or Investors”. Very interesting reflection indeed when reading through those posted comments. (I like #19 Sam’s comment, very accurate description of the sentiment fo the innocents who got dragged into this in terms of the state of the economy worldwide).
As much as some claimed that they were mislead (I believe there are genuinely people who do but may be a minority). Might greed be instrumental in this case? After-all, the word “investors” implied that people who know or had calculated and accepted the risk for a better return of their investment. Or was there another connotative meaning which some like to see it. In this perspective, I disagree with what Andrew term the majority of those affected “unwary investors”. I do agree the SingLand like many others are at a lost of what is a good remedy to this problem.
Even though I personally think that the part of the blame has to come from the investors for allowing their senses to be blurred by the relentless promotion of these twisted derivatives (then no one ever say this is junk, not one that I knew off when talking to those friends in Hong Kong who had years and years of investing knowledge and made loads of money from it). What’s left to do, I hope those affected will have evidence of proof that they are being con into putting their hard earned savings. If this debacle took on full litigation process, hard facts is important (even if it is a witness or a scratch of paper or email correspondence or any form of telephone recordings) in order to get their refund back. The banks are not going to take it lying down. This is more so in Hong Kong where the judiciary system is truly open and absolute independent. Government cannot just mandate the Bankers here to pay up. I see at the end of the day, those attorney firms will stand to benefit the most of it. So a friendly advise to those who seek legal help, know your terms and have your agreement vetted by someone (when speaking to the attorney it is best to bbring someone with you in case you need a witness) and state your objective/s clearly to avoid any possible ambiguity. The best way is like what Kim Lian had prescribed (in the Sg context), collective petition, but honestly, it is a tall and uphill battle (for some).
1) Investors decision to invest in Lehmann minibonds or other toxic products is seriously their own decision; and hence they should bear the brunt of the decision themselves and not demand for compensation from the government and banks etc.
If you think about it, Lehmann Brothers was a rather reputable and successful financial firm before the crisis began. It is common sensical to believe that products bought from these firms are credible, given their reputation, despite the complexity of the product in question. If you would expect the RMs or even DBS to be able to succintly highlight the risks and problems involved in the purchase of such products, this crisis would NEVER have happened in the first place. Noone would have predicted that Lehman will collapse or is in a highly risky position. We only saw it as ‘obviously risky’ due to the benefit of hindsight.
It is hence unfair to put the blame solely on the banks themselves and accuse them of misleading their customers.
2) Quote ” So the question is why the hesitation on MAS’ part when Hong Kong (and several other countries) already adopted this measure?” unquote
MAS response to the debacle was calculated and cautious at best. It has repeatedly emphasised on the sound fundementals of local banks. To say this and then guarantee deposits is conflicting. By guaranteeing deposits or launching investigations into the banks, people will think that MAS thinks thatsg’s banking system is fraying up and it may even trigger a bank run, with disastrous consequences.
The reason why MAS was forced to guarantee deposits was due to the fear that money will outflow to HK banks especially after HK announced a guarantee on bank deposits. It is meant to maintain the competiveness between sg and hk banks. If you notice, Malaysia also began guaranteeing deposits after sg announced it will do so, for the same reason.
MAS is lagging behind hk because it wants hk to bear the brunt of the negative effects. It can simply claim thereafter that it implemented simialr policies to proctect the competitveness of sg banking industry. It is being shrewed, not a desperate headless chicken.
3) MAS priority was to help secure compensation for the retired and elderly, for obvious reasons. Personally, I think those 30+ year olds out there who bought those products and lost a few thousand shouldnt be compensated, because it was the decision they took (refer to point 1).
To compensate ALL investors, like what hk or Mr Tan is intending to do, is foolish and at worse potentially damaging in the future. Compensating these failed, risky products will certainly much reduce the risks involved in the purchase of such risky products, leading to reckless investing in the future. Because people will know that the government will back these toxic products up; all they need to do is to go to the “streets” to protest.
#45 Donald Tan mentioned that several MPs have prepared a list of questions for the SM in Parliament next week.
Many questions but not one MP is asking “Why did MAS approved/allowed these complex and risky structured products to be sold to retail investors in the first place ?? “. They should ask SM to investigate if there was a breach of duty for MAS failure in this aspect”. MAS is the root cause of this fiasco.
But very obviously, no MP dare ir care enough to ask this very important question.
This just proves the MPs are just doing a wayang show to try to ward of criticism. SIgn.. .what a pathetic state Singapore has become.
#54) gvhg01:
“To compensate ALL investors, like what hk or Mr Tan is intending to do, is foolish and at worse potentially damaging in the future. Compensating these failed, risky products will certainly much reduce the risks involved in the purchase of such risky products, leading to reckless investing in the future. Because people will know that the government will back these toxic products up; all they need to do is to go to the “streets” to protest.”
I believed not all investors should be compensated. But definitely, those retirees or even those who are already 45years old ..will find it hard to have any 20+ years of productive job that pays. So, those should definitely be COMPENSATED FULLY (If possible). They have no earning power.
Now, whether the compensation will ultimately lead to reckless investing by the public whom later claimed ignorance is left up to discussion.
However, one thing is for certain, the banks/FI will now exercise more RESTRAIN in recommending risky investments to retirees as the banks/FI will have already been bitten by this minibond compensation.
So, prevention is better than cure. If the banks/FI starts correcting their RM’s consulting process and starts recommending only suitable investments, then it might minimize future occurence of such problems.
#55) isa
I completely agree that those retirees or elderly should be compensated fully, for social reasons; whether this sum is funded by the banks or the govt or both is yet unknown.
But 1 should put themselves in the banks shoes also. Before the crisis, banks saw these investments as non-risky (or at least the financial institutions and credit-rating agencies in the US says so). If they know that these products are risky, they wont buy and sell them in the 1st place, and possibly this whole crisis wont even begin in the 1st place.
Ultimately, it is immensely difficult to ‘distribute’ blame in this situation. If you ask me who is at fault, I would probably say Lehman Brothers should take the bulk of the responsibility, but the problem is that they no longer exists.
MAS remedy to Lehman’s fiasco is to appoint 3 independent parties to review the internal complaints handling and resolution processes of the FI to determine whether these processes are independent, fair and transparent. The independent parties will not be personally involved in the resolution and settlement of individual complaints.
How in the world by looking at FI complaint processes helps investors to resolve the issue? These independent parties are not looking into if the complaint is valid or if the product is mis-sold and mis-leading claims being dispense by FI to the public!
It would NOT look into if MAS has erred in approving the misleading brochure, prospectus etc for Minibond to be distributed by the FIs. It would NOT looking into if the FI approved in selling these products is the correct sales channels. Many financial experts have questioned the rationale for MAS to approved such Credit-linked-Notes to be sold to the retail public. They said that these products should only be available to Institutional Investors where there are financial and legal expertise to evaluate the complex contents of its prospectus.
Do you know that Minibond is distributed through Security House [brokerage] besides banks ? Last week, when a group of investors sent in their letter of complaint to SH, they were told by its Senior HOD that it is just an “Order Executor” and it has no responsibility to give advise to the investors! She said its customer service officer is there to help customers to fill in their applicaition forms. Even if a 80 year old women that speak only dialect put in the application form, it would accept it!
If there is NO selling and mis-selling can only come about when selling is involved,
Why is MAS asking Minibond victims to send in their letter of complaint to a FI that outright disclaiming its responsibilities for selling?
Simply put, MAS is a Clueless, Headless, Chicken. It is paralyzed by Fear and waiting for Political Leadership to issue the command. It is afraid of making a fool again after the 24 hr turnaround on guarantee bank deposits!
In this Lehman crisis, if HK MAS again come up top in resolving the problem, Singapore’s dream to become the leading financial center in Asia will definitely remain to be a dream!
gvhg01,
It is easy to blame Lehman just like the little people is to blame for loss of Mas Selamat. But read further from more posts, and you find it is the system or lackof system in place that is the cause.
I strongly suggest you read LuckyTan and Tan Kin Lian’s blogs. They are enlightening and clearly show it is greed couple with lack of control, over-de-regulation among the factors. Most importantly there is a serious lack of risk management and risk analysis on the bank’s and MAS part. Why is the risk not properly explain, and why is it that MAS fail to audit the bank ? And why risk term replace by positive marketing jargon ?
Sometimes, ignorance is blissful as Malaysia realises now. The latest post by LuckyTan show how lucky Malaysia is.
1. Banks have no robust risk management plan? Do they really have professional risk managers or have the risk managers really understand the risks of these products themselves? May be they are the one who play down the risks before selling them in the market. And who approved the risks then?
2. The banks have no emergency response mechanism in place? At least for this one, right?! Why took so long to just say we will investigate any mis-selling… May be they are in complete shock! And still recovering from the shock. Didn’t plan for any worse case scenario like this – at least from observation. May be they are too complacent during good time. Time to wake up.
3. Poor aunties and uncles. Don’t think majority of them are sophisticated enough to really understand such products and real risks! May be they just happen stumbled into sales persons selling these products and convinced by them to put in hundreds of thousands life saving. Bad luck! Blame themselves for signing the dotted lines without knowing they are signing for. Use entire life saving to buy a painful lesson. Really expensive, huh?! Thanks TKL for helping them.
Perhaps banks should take more pro-active roles in resolving issues like this rather than waiting for complaints to escalate before re-acting. This leaves the public real bad impressions about the banks. Hope the banks have not only learned this “painful” lesson, but to really buck up! (Opsss… it’s not painful for them if they don’t compensate…and leave the whole problems to so called investors…and they have the legal right to do so).
Blaming on that investors should be wise not to buy into these derivative products are oversighted. Please do not jump conclusion that investor is to blame for buying the product,
First of all, most of these are elderly, auntie and uncle who are conservative and cautious, and even educated are not knowledgeable in these product, hence they can only place trust on the BRAND of the bank. The very reason that these people invest are mainly because DBS which acquire POSB is a gov brand and gov hold a stake in these bank, and given that they believe that gov can be trusted to do the right thing and will responsible. And most important if you ever approach these investors, you will find major reason they invest is because their perception as DBS is Government-related and hence safe to invest, and that like government, DBS will be stable, reliable and trustable, after all gov don’t screw the citizen , right ? That is precisely what brand suppose to do. It is to reduce searching and evaluation time, and create repeat purchase.
People do have trust and at some point in time, your decision not matter how much due diligent you have conducted before you purchased anythng is still limited and ultimately based on the element of trust, whether it is brand or product.
I remember there is a enlightening post talking about satisfice by Mr Wang. Should read it up. I’m not sure if he remove it as I couldn’t find it now.
1) Certainly Lehman is maybe a victim of its economic era, ie one of unregulated capitalism ran amok. Like I mentioned earlier that it is immensely difficult to pinpoint the fault in the system given the multi-variables that the present in the complex (convoluted) financial system we have today. But do you expect DBS or the government to soak up all the responsibility?
2) Do you seriously think that Malaysia’s central bank has a more ‘stringent’ policy than sg’s? Malaysia is famous for its capital controls imo, and its not a prominent financial centre in the region. LuckyTan and many others had the benefit of hindsight.
3) Certainly this debacle signals and end to the Regan-Thatcher era of deregulation and will probably usher in a new (or old, depending on how you see it) era of heavy govt intervention; its a whole cycle actually. LuckyTan was quite right in criticizing the greed and over-deregulation of free-market capitalism. However, it is impt to note that these ‘cycles’ are brought about not just by deregulation, the govt, banks or certain unscrupulous individuals, but also by the increasing levels of greed that every single one of us people possess.
If a RM tells you that a product has higher returns for lower risk, you will certainly be skeptical or at best cautious rite?
And for the past few years, these flawed products have been reaping in good returns, has it not? I bet many of these people protesting now have gloated at least once about that.
Boss,
If the government do the right thing to show that they do care about their citizens, and support justice, there is no need to worry about the next election. The % of votes will increase relative to the opposition, may be by a big margin. The other way is also true. With so much publiciity, this is a national issue now.
#60)
Trust, likewise, is difficult to quantify.
People -trust- DBS(govt) -trust- Lehman -trust- US housing mkt -trust- Americans to keep spending ………
Trust is the basis of all economic decision. If I am not mistaken there’s an article in the most recent issue of “The Economist” that discusses this.
All of these economic agents made the error of (quote)”serious lack of risk management and risk analysis”. Why then apportion all the blame to DBS and the govt?
” But do you expect DBS or the government to soak up all the responsibility?”
We know that by tomorrow, we can comment on that then.
I can say the very fact that the system we have today is because no one in the stat board dare to raise the question (culture of fear) in the government until things blow up. Are MAS ,and BANK guility of that in the first place . We know by tomorrow.
“Do you seriously think that Malaysia’s central bank has a more ’stringent’ policy than sg’s? “”
No , I don’t think so but I guess that democracy (even though not perfect) and people’s power prevent such stupid product from been sold without consequences. Why will the gov and their regulatory board put themselves in hotshoes if they going to sell product they not even understand and face increasing backslash from citizen that are more daring and vocal and especially they are scrutinized heavily as of recent years ? If the people’s voice and power is greater in Singapore, do u think the MAS and gov here dare to relax and anyhow approve product ? Do not forget that there is conflict of interest in MAS and bank as there are gahmen which make relationship more complicated.
“If a RM tells you that a product has higher returns for lower risk, you will certainly be skeptical or at best cautious rite?”
Not when you have assurance from RM of gov-related bank who use the government linkage and gov brand as reason to back it as a feasible and trustworthy product. Question why DBS get more backslash compare to other product from other banks and you know what I mean, the answer is simply more people buy such product from DBS.
Perception of DBS = as stable, reliable, trustworthy as government.
That is what many people like elderly, aunties, uncle ,or even educated ppl think all along and happily trust the DBS brand. This is the power of brand. Brand short-circuit searching, evaluation and testing. Gov knows it and that is why they always use gov as a factor to ask you to trust the bank, don’t you think ?
If you have a friend you trust 100% and base on numerous positive track records of working with your friend, how is the chance you agree you work with your friend the subsequent ? Will you re-evaluate the relationship again ? ANS: you relax your guard and skepticism because your friend become a ‘brand’ you can trust, and trust is important in business.
Now I fear worse can be said of Temasek holding which the government has no control over investment decision. Don’t you think Temasek holding is far worse than Lehman’s saga (because no layman people explicity buy the product off directly but Temasek directly buy product/contract instead from FI which conditions are all kept confidential/No reporting ) ?
Our ministers, all top brains and should be paid the world top salary and the MP also getting $25k per month. Now what, they do —- just keep quiet …. who cares!!!!!!!!! At the end of the month, they got their indecent salaries… Why cant they say something and champion the poor affected investors’ cause. Who know, at the end of the day, how many suicide cases, when these people realised that they cant even get 10% of their coffin money. Look like the poor investors have to fight it out with the strong FI and the PAP men just enjoying the show happily and clapping hands and the winner is ?????????
I admire the HK govt… The Hongkong ministers dont get top of the world salary and they are equally as good as PAP ministers. One thing the HK ministers have over our guys here, is that they have a heart…
As the cantonese says ‘ ley say ley ko si mo ma fun ngo’
nobody can help us now, only pm lee and mm lee can help us, bcos they sue so many ppl. let us quiet and pray pm lee and mm lee cos they are godddddddd
The majority of DBS shares owned by government and the government represent the people, in short DBS is owned by all Singaporean in regardless. So whom should be protect 1st? 10,000 people or 4.5million people? – #33
Conflict of interest. The reality of GLCs and TLCs is now biting us back. Isn´t it strange the regulator owns the regulated?
MAS should ask for the closing down of all priority banking section in all banks in Singapore. Why? People who have $ & can afford to make a loss during these times are those clients with private banks that have millions. People who only have S$100-S$200K to invest are not rich at all!!
Hi fellow Singaporean,
I think most of the attention in getting our government to provide a solution for Singaporean to ride over the economic recession has been diverted to this minibonds incident. Looks like veryone has forgotten about the rising cost of living despite the tumbling of the economy in Singapore.
Our government has already mentioned that retrenchment will soon hit the Singapore job market. So many will have no jobs which can make lives very difficult as most have families to feed. But still not many people are fighting for reduction in electricity tarrif or bus fare and MRT fare increased, diesel surcharge still remains dispite the fall in oil price, office rental remains high, increase in phone charges, increase in newspaper price, ERP charges etc which have an immediate impact of everyday life. But many are still chasing for money that has been gone down with the collapse of Lehman Brothers.
I do see that this issue of minibonds has become a smoke screen to cover the mores serious matters the affect everyone on the street for now till the recession is over which can be easily more than a year from now.
But please don’t mistaken that I am saying we can leave this minibonds matter to natural cause. We still have to take this matter with MAS but at the same time, we need to take care of our everyday living expenses too.
69) Singlish on October 20th, 2008 1.35 pm
Agree that we should not forget the ever rising cost. These MiniBonds and the Sub-Prime debacle had certainly triggered a global recession that even the innocent by stander got dragged into it.
May be they should use part of the reserves (say 50 billion?), payout to those needy (let’s say 2~2.5 million natives) to help them weather through these obscene price hike for the next 2~3years (while rebuilding the Singapore economy). This is not too much to ask of from the “disciplined and hard working people who built all this” as VB regurgitated what he heard from MM. If they deemed this is in principle violated their enshrined doctrine teaching to not allow Singapore to become a welfare state, they can always temporarily lift the ban on withdrawing our CPF money (let’s put a cap of 25,000 in any total withdrawal within a 3 year time frame). No one will be seen to be in favor as we are only making early withdrawals of our very hard earn money to make ends meet and to help spurs economy at the same time. At least this will not deviate from their policy of non-welfare. In adverse time, we need adverse resolution (not just those affected).
So I will make this plea to those ministers. Can do or not?
To the people who left comments that it was investor greed that led to the loss of investment.
Allow my to explain my story in order that you may reconsider.
I bought MiniBond3. Was told that I will be buying into a fund that is holding the bonds issued by 6 entities. Needless to say if any of these 6 entities goes bust then the value of the fund will decrease by the value of the bonds held. I was not told that there was a so-called risk to a 7th entity – Lehman Brothers. And this fact was buried only in a fine line on one of the many many many pages of documents that I signed. And neither was I told that these were complex credit derivative investments. Simple bonds – called Minibond in small denominations for retail.
I hope you can understand why some people felt misled and mis-sold.
When Lehman Brother went bust – I said to myself that I was fortunate as Lehman Brothers was not one of the 6 banks. I did not realise that there was an ‘undisclosed’ 7th bank. So how? My fault as I was greedy?
For example : You put your car from a Parallel Imported and was told that the COE is guaranteed. After 3 bids still no COE. You ask why still no COE since Guaranteed. PI says COE Guaranteed means they guarantee they will bid. Being successful is another matter. So how? You fault as you greedy?
You buy a camera from shop which says GUARANTEED NOT SPOILT. The camera breaks down when you bring it home and you ask for refund but shop says that the sign should read from right-to-left (it is a chinese shop). So how? Your fault as you greedy?
headless chicken ? don’t blame them. they are so well paid that they need alot of their time to decide on their holidays and how to spend their fat salaries/bonuses !
72) Minibond3 on October 20th, 2008 2.38 pm
You have my empathy, but then again, I think “Trust” plays a role in your deciding factor when you invested the MiniBond3 that you mentioned. I assumed you had put in considerable amount of time and discussions with someone closed to you reaching a consensus before embarking in this investment. I also assumed that you are taken in by the good return and was bought in that these “BIG” institutions will not fail.
You had already give away that you knew there were risks involved when you say: “Needless to say if any of these 6 entities goes bust then the value of the fund will decrease by the value of the bonds held. “. So in this respect, you have already mitgate the risk factor and thought it is worth taking. No?
Ya, agree with you that you were not told of the 7th Bank. Question is, do they (these RMs) aware of this 7th Bank? Assume there is a litigation process, they could categorically deny that they too are not aware of the 7th Bank swifting the blame entirely to Lehman. So, in this context if taken in as argument in court, there was not misleading facts.
Just like any advertisements you see daily, how genuine are they? You will not see an advertisement that does not promote the good quality of their products/services they tried to sell. Whether you choose to believe what had been promoted, it is entirely an individual’s decision. Too much “Trust” and to easy a “Trust” may not be a good thing. The lesson learned here is, sometime, it is good to take a step back and consider the motives behind each unseemingly wonderful proposition. Is it too good to be true? That is a question I constantly ask and advise my friends since I have decided not to partake in any investments of any sort since 1982.
72) Minibond3
i do sympathise the position you’re in and to listen to all these accusations of greed and what not, but, do take a moment to reflect on them . . . .
as for the position you’re in, the underlying factor when you chose to invest is to increase your wealth. you would have done well to pay closer scrutiny to the fine prints even if there were pages upon pages of documents to sieve through. if you haven’t the time or the capacity to understand each of the written word than it becomes an increased risk which you willingly took. you loss.
unfortunately, there were too many risk-takers out there, that’s why the current turmoil.
now, take a moment to look at it from a non-investor’s point of view.
i knew about risks, not because I am savvy in the area of financial management. i know nuts about these things. i have friends around me who had been egging me to buy these minibonds and each time i would decline because i was not comfortable taking such a risk especially with a family to provide for. i was even ridiculed by these investor-friends.
and these are the same people we are asked to stick with? whoever made the statement to stick together is giving me another slap in the face.
now the whole world is depressed and in recession and i am stretched to the bone to provide for my family.
tell me, how would you feel if you were me?
The whole saga taught me one thing only.
Don’t put your money in Singapore.
The questions I feel we should be asking is
1) Is there mis-selling?
2) Who to take responsibility if there is mis-selling
3) Are there also other products, other than those that are already shortlisted, that is also in this category?
For (1) my feel is that there was rampant mis-selling. First, there were many illiterate retirees who bought the product. I heard from a friend that his father is 75 years old, in ill health, and they push him this structured product that tied most of his money for 5 years! If touch wood he is to die, that product will have to be liquidated at a loss. Another friend told me that they ask her to borrow money from cashline to invest!
It is not only the retirees who should be protected. Even professionals could be cheated. Not many people will want to invest in a product that gives you 5% return but runs the risk of total loss of capital if any 1 of a basket of organization fail. When presenting the product, did the seller make it very clear that there could be total loss of capital (not partial loss but total loss)? Did they highlight that the more the number of reputable banks in the list, the higher the risk of the product – where the large number of banks is actually to the buyer’s disadvantage? Did bank staff claim that the risk of bank failure is very low, despite the financial crisis that starts unfolding last year? Did bank staff ask the retirees to put ALL their savings into something that is not capital protected?
If there is mis-selling, who should bear the loss and to what extent? If the banks mis-sell, they should be punished. Even if it is not possible to compensate investors who lost money in the investment, I feel that a fine should be imposed on the bank. And if it can be proven that there is deliberate attempts to con investors, bank staff/management should be fined or jailed. If MAS do not take serious actions, history will repeat itself. Mark Twain once said that history does not repeat itself but it sure rhymes.
MAS has a ruling that only the very well to do with huge assets can invest in hedge funds because they are complicated products and most normal people will not understand them. These Lehman products are not easy to understand either. It is the responsibility of the bank to understand the risk of the products in order to market them – they cannot escape that responsibility.
More banks may fail. MAS should be more proactive and do a thorough review of all structured products sold by banks. Are any of these products CPF approved? If yes, better let the commoners know and take appropriate steps before $500 mil become $1 billion.
Another point I want to highlight about this incident is the question brought up by Siew Kum Hong : “Why did MAS not appoint the three individuals reviewing certain financial institutions’ internal processes, instead of leaving them to be appointed by the financial institutions and thereby permitting possible perceptions of conflicts of interests.” This is a very valid point and goes to show a very serious problem with MAS. A key principle of handling dispute is for a 3rd party to be the judge. Unless they have a very good answer, this shows that MAS makes decision without thinking and did not give the complaint due consideration. It is like telling the people “Don’t bother me and work out the solution on your own”. It will be good for PAP to remind people in MAS that they are public servants … they are supposed to serve the public.
The people in MAS, ICA, GIC, etc serve the public and they should not forget that. I was very disappointed in Jan 08 when I read an article that tells us of how GIC came to invest in UBS. The decision to invest was made in 2-3 days! Hello, this is not your grandfather shop where you can just go around to tikam our money. This is the people’s money and due diligence should be carried out especially when you are doing something out of your norm – to change from taking small stakes in a diversified portfolio to large stakes in 1 sector. Tony says that we don’t buy subprime because we do not understand it – kudos to you. However for GIC it is ok to buy banks that have a lot of subprime exposure even if we are not sure of the extent of its problem? Where is the logic? It is better to lose a good deal than to lose money. Don’t forget, bankers are very good at selling and not telling you the whole picture – ask those people at Speaker’s corner. When making such huge investment, there should be a cooling period to think the deal through. Don’t fall for tricks from Sales Tactic 101, i.e. once in a lifetime opportunity, offer valid for 3 days only, etc.
i learn new things everyday.
MAS really ought to take the bull by the horn and get these institutions to come clean and if, like puffyeye relates above, there is any discovery of wrong-doings, mis-selling etc. the criminal actions must follow.
Then we can proceed to look after the innocent masses and help them insulate as best as possible against the aftershocks of a depressed global economy.
This is very cruel things to do to those ah mahs and ah gongs monies. Besides their cpf life savings which already being locked by the garment, these old folks can only rely on their daily savings to look forward to survive through their old age. And now, they are being victims of all these crooked mis-selling so called investments, the garments just wash their hands off and now tries to tai-chi their ways to avoid the accountabilities to the citizens instead. Where are your hearts all you these so called world class public servants?
Why have we all ended up in such a state?
High cost of living has been a topic of discussion for the past two years. But not much have been done. Prices keep going up day after day even in today’s bad economy. The revision of GST to 7% has been debated on many times but our government defended it tightly. Followed by inflation. Even in bad times like now, electric tariff still have to go up by 22%. But about 6 months ago when one of our minister was asked in a dialogue session if Singapore would go into a recession as the American economy has just fallen into a recession. And he answered that Singapore will not go into a recession as we have strong infrastructure to ride through the storm and our GIC has diverse investments in various countries to cushion any recession. Well, what he said did not happen. We are in a recession now.
You see, our government just do not listen to people on the ground. They operate this country just like running a company – need to make money. In regardless of the money is coming from foreign or local – Singapore need to have big sum of reserve. Has this huge reserve done the people of Singapore any good? Even now when many people loss their hard earn money in bonds sold by our banks and can no longer sustain 3 meals and a roof over their heads, help is still far far away. While our ministers are pocketing millions of dollars as salary because they are claimed to be top brains in the country, cannot do anything for a man on the street that is struggling to put food from hand to mouth.
All these are not new. So do you think they can do much about the minibonds and give you money back when the bus fare has been increased 3 times within 18 months and they don’t want to do anything about it? Even if they do give you money back for your losses, it will be a very small sum. And as usual, they will claim it back many folds in terms of increase in other necessities.
“Ya, agree with you that you were not told of the 7th Bank. Question is, do they (these RMs) aware of this 7th Bank? Assume there is a litigation process, they could categorically deny that they too are not aware of the 7th Bank swifting the blame entirely to Lehman. So, in this context if taken in as argument in court, there was not misleading facts.”
Observer,
Minibond3 mentions that lehmen bank “And this fact was buried only in a fine line on one of the many many many pages of documents that I signed.”
RM has to do due dilligence of understanding whatever in the contract, and how is it that RM has missed the small print unless RM choose to ignore it. The question is why is it the Lehman is putting into small print instead of normal print ?
If there is one RM that forget fine but you have many RM fail to mention Lehman, and thing sound even more fishy.
Minibond3,
can you please email your encounter to Tan Kin Lian and request it as article in his blog ?
72) Minibond3 on October 20th, 2008 2.38 pm
To the people who left comments that it was investor greed that led to the loss of investment.
Allow my to explain my story in order that you may reconsider.
I bought MiniBond3. Was told that I will be buying into a fund that is holding the bonds issued by 6 entities. Needless to say if any of these 6 entities goes bust then the value of the fund will decrease by the value of the bonds held. I was not told that there was a so-called risk to a 7th entity – Lehman Brothers. And this fact was buried only in a fine line on one of the many many many pages of documents that I signed. And neither was I told that these were complex credit derivative investments. Simple bonds – called Minibond in small denominations for retail.
I hope you can understand why some people felt misled and mis-sold.
When Lehman Brother went bust – I said to myself that I was fortunate as Lehman Brothers was not one of the 6 banks. I did not realise that there was an ‘undisclosed’ 7th bank. So how? My fault as I was greedy?