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Loss of hard earned savings

Tan Kin Lian hopes Govt can restore investor confidence.

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Tan Kin Lian responds to Minister Lim Hng Kiang’s remarks in Parliament

Tan Kin Lian / Columnist

Several questions were asked in Parliament on 20 October 2008 about the failure of the structured products linked to Lehman Brothers. In his reply, the Second Minister of Finance said, among others, the following:

– MAS’ approach is one that balances regulation with the responsibility on the part of the institution to ensure that consumers are given a fair deal, and the responsibility on the part of the investor to understand the products he invests in.

– MAS requires financial institutions and issuers to properly disclose the features and risks of investment products to investors.

– MAS has put in place the necessary infrastructure to support this approach. There are two key pieces of legislation – the Securities and Futures Act, and the Financial Advisers Act.

– 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.

– The issuer and its advisers are responsible for ensuring that the prospectus complies with the law. MAS checks, based on information provided by the issuer and its advisers, that the prospectus discloses the risk and product features, and that there are no false or misleading statements.

– MAS registered the prospectuses for the Lehman Minibond Programme, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes as they met the requirements for registration under the SFA.

Prospectus

I searched the MAS website for the prospectus of the four structured products that they have approved as meeting the requirements for registration under the SFA. I was not able to find these prospectus.

I could locate the prospectus of several hundred products listed under the category of “collective investment schemes”. Why are the prospectus of these structured products, which are approved by MAS, not listed in their website?

Nature and risk of the structured products

Many investors have stated in writing and in letters published in newspapers that they were misled into believing that these structured products were invested in the bonds of the six reference entities and that all of these entities had to fail before they were to lose their entire invested sum. They were assured that the structured products were “low risk” and that the invested sum is “capital protected”, implying that they will get back the invested sum at the end of the term.

The investors in both the “vulnerable group” and the “non vulnerable group” comprising of educated professionals and others”, were horrified to find that these structured products are “extremely high risk” and are worse than investing in equities.

They now learn that the structured products face the risk of a substantial portion or the entire invested sum being wiped out under the following circumstances:

> the failure of any one of several reference entities
> the failure of a certain number of a specified large number of the underlying assets
> the failure of the swap counterparty

The term “failure” is not used in the prospectus. The actual term used is a “credit event”. The credit event is defined in certain wordings, but it is difficult for the investor to figure out what they actually mean.

It is now clear that these structured products have quite high risks. We now have to ask these questions: Are the risks adequately described in the prospectus? Is the necessary information about this important matter easily located in the prospectus?

The Minister said “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. “

Perhaps the Minister can read the prospectus to see if he has the information that he would reasonably need to make a proper assessment of the securities.

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?

Dishonest concealment of material facts

Section 200 of the Securities and Futures Act states that it is an offence for a person to induce another person to deal in securities through “dishonest concealment of material facts”.

An important piece of information is the risk of losing the entire invested sum. What is the extent of this risk? Is it 1%, 5%, 10% or 50%, during the lifetime of the investment?

Does the issuer know the extent of this risk? They probably have some idea, based on the premium received by them for providing the insurances to the counter party under the credit default swaps involving the reference entities and the underlying assets.

Should this material information be provided by the issuer in the prospectus? By failing to provide this material information, is the issuer committing an offence under the Act?

Fair dealing outcome

The Minister has also said that MAS’ approach is to ensure that the “consumers have a fair deal”. Perhaps it is appropriate for MAS to see if the structured products meet this test.

The product issuer does not disclose in the prospectus the total income received from the various investments of the structured products, including several highly risky credit default swaps. Where does this income go to? How is the income shared between the issuer, distributor and the note holders (i.e. the retail investors)?

Is the portion of the income, i.e. the target return of 5%, a fair outcome given the high risk of the structured product as reflected in the income streams?

I am not aware that any statement of account has been given to the investors in any of the structured products. Is there any breach of the Trustees Act? Does the product issuer (or product arranger) and the trustee have any fiduciary duty to look after the interest of the investors and render a full and complete statement of the affairs?

Spirit of the law

My final appeal to the Minister, Mr. Lim Hng Kiang, and the Monetary Authority of Singapore, is to see if there is a requirement under our legal system in Singapore that parties should observe both the spirit and the letter of the law.

I hope that appropriate action be taken to restore the confidence of the people in the fairness of the system in Singapore and to restore the reputation of Singapore as a financial hub that the Singaporeans and foreigners can trust to leave their money here safely.

————–

Read also Leong Sze Hian’s response to the minister’s remarks: Mis-selling 101.

And: Investors petition Lim Hwee Hua.

————–

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Indonesia

Miss Universe cuts ties with Indonesia chapter after harassment allegations

The Miss Universe Organization severs ties with Indonesia franchise due to harassment claims. Malaysia edition canceled.

Women allege body checks before pageant. Investigation launched. Safety prioritized.

Indonesia winner to compete in November finale. Height requirement controversy.

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WASHINGTON, UNITED STATES — The Miss Universe Organization has cut ties with its Indonesia franchise, it announced days after allegations of sexual harassment, and will cancel an upcoming Malaysia edition.

In the complaint, more than a half dozen women said all 30 finalists for Miss Universe Indonesia were unexpectedly asked to strip for a supposed body check for scars and cellulite two days before the pageant’s crowning ceremony in Jakarta.

Their lawyer said Tuesday that five of the women had their pictures taken.

“In light of what we have learned took place at Miss Universe Indonesia, it has become clear that this franchise has not lived up to our brand standards, ethics, or expectations,” the US-based Miss Universe Organization posted Saturday night on social media site X, formerly known as Twitter.

It said that it had “decided to terminate the relationship with its current franchise in Indonesia, PT Capella Swastika Karya, and its National Director, Poppy Capella.”

It thanked the contestants for their bravery in coming forward and added that “providing a safe place for women” was the organization’s priority.

Jakarta police spokesman Trunoyudo Wisnu Andiko said Tuesday that an investigation into the women’s complaint has been launched.

The Indonesia franchise also holds the license for Miss Universe Malaysia, where there will no longer be a competition this year, according to the New York-based parent organizer.

In a lengthy statement posted to Instagram, Indonesia franchise director Capella denied involvement in any body checks.

“I, as the National Director and as the owner of the Miss Universe Indonesia license, was not involved at all and have never known, ordered, requested or allowed anyone who played a role and participated in the process of organizing Miss Universe Indonesia 2023 to commit violence or sexual harassment through body checking,” she wrote.

She added that she is against “any form of violence or sexual harassment.”

The Jakarta competition was held from 29 July to 3 August to choose Indonesia’s representative to the 2023 Miss Universe contest, and was won by Fabienne Nicole Groeneveld.

Miss Universe said it would make arrangements for her to compete in the finale, scheduled for November in El Salvador.

This year’s Indonesia pageant also came under fire for announcing a “significant change in this (year’s) competition guidelines” with the elimination of its minimum height requirement after it had crowned a winner.

In its statement, the Miss Universe Organization said it wanted to “make it extremely clear that there are no measurements such as height, weight, or body dimensions required to join a Miss Universe pageant worldwide.”

— AFP

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Malaysia

A Perodua service centre in Kuantan, Malaysia went viral for its strict dress code, Perodua responds

A dress code for vehicle servicing? A Malaysian car brand’s service centre dress code signage has puzzled netizens, raising queries about the need for attire rules during a routine service.

The manufacturer responded with an official statement after a flurry of comments, seeking to clarify and apologize.

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MALAYSIA: A dress code signage positioned at a service centre belonging to a prominent Malaysian car brand has sparked bewilderment among Malaysian netizens, who question the necessity of adhering to attire guidelines for a simple vehicle servicing.

The signage explicitly delineates clothing items that are deemed unsuitable, including sleeveless tops, short skirts, abbreviated pants, and distressed jeans.

The car manufacturer swiftly found itself flooded with comments from both inquisitive and irked Malaysian netizens. This surge in online activity prompted the company to issue an official statement aimed at clarifying the situation and extending an apology.

In a post that gained significant traction on the social media platform, politician Quek Tai Seong of Pahang State, Malaysia, shared an image to Facebook on Monday (7 Aug).

The image showcased a dress code sign prominently displayed at a Perodua Service Centre in Kuantan. Within the post, Quek posed the question: “Is this dress code applicable nationwide, or is it specific to this branch?”

The signage reads, “All customers dealing with Perodua Service Kuantan 1, Semambu, are requested to dress modestly and appropriately.”

Adding visual clarity to these guidelines, the sign features illustrative graphics that explicitly outline clothing items deemed unacceptable, including sleeveless tops, short skirts, short pants, and ripped jeans.

Delineating the specifics of the dress code, the signage stipulates that male visitors are expected to don shirts accompanied by neckties, opt for long pants, and wear closed shoes.

Conversely, female visitors are advised to don long-sleeved shirts, full-length skirts, and closed-toe footwear.

Perodua’s dress code sparks online uproar

Following the rapid spread of the post, Perodua’s official Facebook page found itself inundated with comments from both intrigued and frustrated Malaysian netizens, all seeking clarifications about the newly surfaced dress code policy.

Amidst the flurry of comments, numerous incensed netizens posed pointed questions such as, “What is the rationale behind the introduction of such regulations by the management? We demand an explanation.”

Another netizen expressed their dissatisfaction, arguing against the necessity of the rule and urging Perodua to take inspiration from the practices of other 4S (Sales, Service, Spare Parts, and Survey) automotive dealerships.

A concerned Facebook user chimed in, advocating for a more lenient stance, asserting that attempting to dictate customers’ clothing choices might not be in the company’s best interest.

Someone also commented in an angry tone, “Oi what is this? Going there for car service, not interview or working, right.”

As the discourse unfolded, it became evident that while some inquiries carried genuine weight, others chose to inject humor into the situation, playfully remarking, “If I wanted to buy a Myvi, I should buy or rent a formal attire first.”

“I sell economy rice at a hawker centre, I have never worn a long sleeve shirt and a tie… I guess I will not buy a Perodua car then.”

“I guess they will not serve those who wear short pants.”

Perodua addresses dress code controversy

As reported by Chinese media outlet Sin Chew Daily News, the manager of Kuantan’s Perodua Service Centre had acknowledged that the images on the dress code signage were misleading.

In response, the manager divulged that discussions had transpired with the head office, leading to the prompt removal of the signage to prevent any further misconceptions.

The manager clarifies, “We do encourage visitors to adhere to the dress etiquette, but we won’t go to the extent of restricting their choice of attire.”

He also revealed that currently, no complaints have been directly received from the public.

However, feedback from certain customers was relayed through Perodua’s agents.

Perodua also released an official statement by chief operating officer JK Rozman Jaffar on Wednesday (9 Aug) regarding the dress code on their official Facebook page.

The statement stated the dress code etiquette is not aligned with their official guidelines and they are currently conducting an official investigation on the matter followed by corrective measures to avoid the same incident from happening.

Perodua also extends its apologies for any inconvenience caused.

 

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