The following is a letter sent to The Online Citizen by a group of minibonds investors.
Brokerages the weakest link in Minibonds Complaints Resolution
We are a group of frustrated Minibonds investors who bought Minibonds, Pinnacle Notes or Jubilee Notes from Brokerage Firms [not Banks] and have been given the runabout for the last 3 weeks.
Unlike banks that have made attempts to engage the investors in open dialogues; the top management of brokerages have already taken a firm stand that they are only the “Order Executor” and that their staff are forbidden to give financial advice to customers (i.e. absolved from their responsibilities in the sales advisory process). Under such circumstances how can there be any mis-selling? They are thus only paying lip-service to the complaint investigation process by going through the motion of recording customer complaint.
The authorities, the media and many others, are not aware of the situation faced by the investors who bought minibonds through brokerages. We attempt to enlighten using the following analogy, and we trust the authorities will act to ensure a fair and independent investigation and resolution.
A Layman’s Guide to Minibonds sold by Brokerages – using an analogy.
A well-known drug manufacturer LB has developed a new painkiller MiniCure. It contains very complex components, potentially toxic blend, and has not been tested as safe for general consumption.
Pharmacy O saw potential of this drug for the local market. Its Product Specialist team assessed the drug and its risks, and recommended that MiniCure is suitable for direct distribution to the public (as opposed to a prescriptive drug)
In its marketing brochures, Pharmacy O highlighted that MiniCure is a solid cure for headache and is safe for long-term consumption (over 5 years). It used several large local institutions for product endorsement. It omitted LB is the manufacturer.
Pharmacy O aggressively marketed MiniCure. It prominently displayed marketing materials in its premises and other public places, and on newspapers. It sent bulk mailers and emails to its customer contacts.
Pharmacy O also distributed MiniCure through various sales channels. It organized road shows and seminars, jointly with manufacturer LB, the latter to answer technical questions.
Pharmacy O enlisted Doctors to promote MiniCure to their walk-in patients. Pharmacy O provided the Doctors with an “Introducer Script” which stated they do not give medical advice to patients. Some Doctors used this script, others mentioned it “in passing”, while the rest did not disclose this to their trusting patients.
Within several months, consumers of MiniCure fell critically ill. On 6 Oct, 350 patients who have taken Batch J of MiniCure, all died a sudden death. There was no post-mortem done. There was little press coverage. The next-of-kin tried in vain to seek fair compensation from the distributors of this toxic drug.
Pharmacy O now claims that MiniCure is an Over-The-Counter drug and it holds no responsibility for giving medical and product advice to the customers.
Pharmacy O now points out to customers that they had signed a Master OTC Agreement (during point of sales, and as part of the pre-requisite membership application), which discharged Pharmacy O of any liabilities.
Pharmacy now says consumers should have read the warning in the product leaflet, that MiniCure may cause serious illness or even death. These leaflets are mostly found inside the box packaging, made available to consumers only after they have purchased and opened the packaging. Due to lack of quality control, many packaging did not even carry these warning leaflets.
Consumers turned to the National Health Authority for assistance in a fair and independent investigation. The National Health Authority subsequently mandated that compensation be given to vulnerable consumers who are above 62 years and below Primary school education. This forms the minority of consumers.
The consumers outside of the vulnerable category are advised to lodge a complaint against Pharmacy O. Pharmacy O would conduct an interview with the consumers and would determine an outcome. This despite the many confirmations received from experts and researchers in the medical faculty that MiniCure is indeed a toxic drug. Some consumers have received an outcome from Pharmacy O – they have been told to file their case against the Doctors.
The World Health Organization anticipates a global flu pandemic is impending. Consumers of MiniCure have extremely low immunity against the pandemic. Consumers look to the National Health Authority to intervene quickly before it turns into a national crisis.
From a group of Minibond investors who bought from Brokerages
[Many are of the "same (not different) kind of customers from a typical bank saver".]
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Why did the consumers self-medicate? “doctors” did not advice consumer to take – promotion is not a crime.
Why can take tried and tested Panadol do take, so experiment new thing?
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Want to early redemption without penalty – join the fixed deposit queue. try to jump queue to take quick and easy shortcut, but now found the shortcut lead to dead-end, want to join back queue.
Why will people learn to be responsible for their own decisions?
Dear Author,
You still have not elaborated how mis-representation has taken place. If you can supplement this, people would be more sympathetic to your case.
Best regards
I believe the author is trying to say tat even though there was agressive marketing and promotions, etc but nothing was said watsoever tat this can lead to serious illness.
Thus the pt of mis selling where the seller with held impt info. Although yes, it’s stated black and white. But then it would be the same as the Bank as seller where the Black and White was on the 1st and 2nd page but in bold.
But the sellers agressively marketed the product as low risk EVEN THOUGH it was stated in 1st and 2nd page tat it was high risk.
So it’s almost like, i keep telling u, this product STEADY~~~ then u trust me and dun really read the black and white from 1st page top to last page btm.
Sad to say, i dun do tat too. Reading black and white from 1st page top to last page btm. =( And if u ask me, 5% returns is surely low risk. =( So yes i do feel there’s mis selling.
Since if i ask u to buy a 5% return high risk product, wat would u say?
If u already bought the 5% return but marketed as low risk product and someone tells u, hey y did u buy a high risk 5% return? Wat would u say? Wat would u try to do?
“But the scheme will first apply to what the company calls the “vulnerable investors”. CIMB-GK said the group includes investors who are aged above 62, are less educated and have little investment experience. ”
CIMB-GK to buy back Lehman, Merrill Lynch-linked products
By Valarie Tan, Channel NewsAsia | Posted: 28 October 2008 1957 hrs
Some questions in my mind:
1. Why brokerage CIMB-GK buying back from “vulnerable investors” in the first place? Was it a sincere and serious offer? Do we know what is the progress?
2. The CNA report said: “Those who fall outside the vulnerable category will be handled on a case-by-case basis.” So it gave the impression that the brokerage is going to handle other mis-selling cases.
So, how wide spread is this the top management of brokerages have already taken a firm stand that they are only the “Order Executor” …. position?
/// It contains very complex components, potentially toxic blend, and has not been tested as safe for general consumption. ///
Very bad analogy – shooting yourself in both feet. If the drug has not been tested as safe for general consumption, it would not be permitted for sale. Period. End of story.
To 5) T
Actually it’s similar.
The structured products were very complex. High Risk, Low Returns and confirm not suitable for most of the investors profile.
Maybe the writer didn’t write clearly, but generally the concept his trying to explain is tat there was mis selling. And now the sellers r taking the stand tat it’s ur fault… For believeing me tat the product is suitable for u.
Of coz there r pple who out of greed bought the product. But i mean, i’m greedy too, but i won’t buy a 5% return high risk right? Since there’s lots of other 5% low risk products anyway.
Greedy pple would prefer HIGH returns HIGH risk… not LOW returns HIGH risk…
To 6)
I agree with your comment: Greedy pple would prefer HIGH returns HIGH risk.
The smart ones want Low Risk, High Returns.
Who want Low returns high risk? Only the dumb and dumber.
Can the writer reveal the names of these brokerage firms?
Daniel Ling on November 9th, 2008 11.11 pm
5% return high risk right ?
Daniel Ling and the guy in post #7) , you must be really brainwashed to believe that 5% is high-return-high (disapportionate)- risk. Do you know how bank is charging for late payment per annum with all the backing of the law behind them if you default.
Even your long-term or short-term borrowings from banks are mostly collaterised. Try not paying and you will see what you will get.
At 5% p.a, it will take you 20 years to recover the principal sum without even counting the usually inflating value of money.
9) To Daniel Ling. Are you real ? on November 10th, 2008 10.47 am
Hi, i’m very real… =D
Apologise but maybe u mis read my post?
In my opinion 5% is NOT high return. Which is y i feel there’s mis selling due to the marketing of the Mini Bonds as Low Return Low Risk. I hope this clarifies my previous post.
But of coz i may ve misunderstand ur post also… Apologise if i did and would hope tat u could explain farther.
I think post #7 also think the same as me such tat 5% is not high returns at all, thus not at all suitable for the high risk tat follows the product. And confirm not suitable for the investors profiles.
Hope this has clear things up. =D