http://www.lloyds.com/dj/DowJonesArticle.aspx?id=406944
HONG KONG (AFP)--Hong Kong's financial services chief on Thursday weighed in on the dispute over the possible mis-selling of investment products backed by failed U.S. bank Lehman Brothers (LEH).
Chan Ka-cheung, secretary for financial services, met representatives of 21 banks, who are accused by disgruntled investors of mis-selling "mini-bonds" that could now be worthless.
"The secretary met with representatives from the Hong Kong Monetary Authority, the Securities and Futures Commission, and the banks today," said a government spokeswoman.
"The meeting was held with the hope that the banks can find ways to step up their communication with the retail investors and increase their transparency."
Some of the banks, including DBS (D05.SG) and DahSing (2356.HK), had agreed to settle through mediation and have been negotiating with individual investors on compensation deals, according to a report in the Apple Daily.
The move has put pressure on other banks to find a solution, prompting Chan to hold the meeting, the report said.
The investors, who bought HKD12.7 billion ($1.63 billion) of the complex financial products, had earlier threatened to sue the banks for not explaining the risks involved before selling them the bonds.
Many of the investors are retired and had put all their savings into the investment because they trusted their banks.
The Securities and Futures Commission said previously it has launched an investigation into some of the institutions on alleged mis-selling.
Lehman Brothers, one of Wall Street's most established banks, collapsed last month, sparking turmoil on financial markets across the world.
Dow Jones Newswires
Wednesday, October 1, 2008
Loss of hard earned money (2)
Dear Mr Tan,
My 71-year old mother is a victim of the recent Lehman Brothers collapse. She worked hard in the civil service for more than 30-years of her life, skimped and saved to provide for her family. Now, her life savings and retirement funds are suddenly lost. All because she invested $100,000 in the mini-bonds sold by Hong Leong Finance just a year ago.
The money was originally in a Fixed Deposit account with HLF until the relationship manager promoted the Lehman product to her last year, saying it would offer her a much higher interest rate of 5%. My mother is not investment-savvy, neither would she be able to read, much-less understand, the fine prints of the 'Agreement' (if there was any at all) that she ignorantly signed on the spot. She did not know that HLF was merely an 'agent' for selling those bonds. She trusted HLF as a secure local banking institution with which she has placed her savings all this while. Therefore, when the bank's executive promoted the mini-bonds to her, she felt safe enough to take it. Afterall, this past one year, she has been receiving the interest as promised. There were no warning signs whatsoever that the minibonds were about to come to zero value and her money might be gone.
Our burning questions as layman in this tumultous financial market are these :
1. Was Lehman Brothers already in dire straits when they sold these mini-bonds? Were these one of their life-lines?
2. Did our local banks know what they were selling to their clients? Did they exercise due diligence by checking up on Lehman's financial standing before they acted as agents for the bank? Were our banks aware of the huge risks that their clients bear vis-a-vis the interest they get?
3. When our agent banks promoted the product to Singaporeans, did they explain in detail the risks and implications especially to the elderly folk knowing that they are putting their entire life savings into this very risky venture, before they enticed them with the attractive interest rates? Did they inform clearly that they were not underwriting any risks since they were just agents for Lehman? Were the sales people just interested in getting the agent's commission?
4. Where does MAS come into the picture here? Is there any auditing on what our banks are selling? Is there auditing on the bank's process and practices? Is there control at all, akin to what insurance companies like AIA are claiming as stringent controls by MAS such that they are now able to stand firm amid AIG's struggles?
Mr Tan, we badly need some answers. You will be well aware how the man-in-the-street, old folks, non-investors, non-speculators, have lost their hard-earned money overnight. The outlook appears grim as there seems to be no legal recourse in sight, and MAS has not taken a stand perhaps because this has not reached industry proportions.
We feel our mother's pain, as well as the suffering of all those who are depending on these funds for their retirement years, medical needs etc. I am sure they are lack of sleep and unable to eat during this period. It hurts terribly to think that life savings have gone to feed the highly-paid executives of Lehman who have probably mis-managed the company and still sitting rich now. Do we just blame it on hard luck?
As if their anxiety counts for nothing, the victims were given a letter by the bank and told to wait for further decision and announcement.
Mr Tan, we appreciate your help in championing this, and are hoping against hope that something reasonable will come out of it to mitigate the suffering of all those affected by this sudden turn of events.
MW
My 71-year old mother is a victim of the recent Lehman Brothers collapse. She worked hard in the civil service for more than 30-years of her life, skimped and saved to provide for her family. Now, her life savings and retirement funds are suddenly lost. All because she invested $100,000 in the mini-bonds sold by Hong Leong Finance just a year ago.
The money was originally in a Fixed Deposit account with HLF until the relationship manager promoted the Lehman product to her last year, saying it would offer her a much higher interest rate of 5%. My mother is not investment-savvy, neither would she be able to read, much-less understand, the fine prints of the 'Agreement' (if there was any at all) that she ignorantly signed on the spot. She did not know that HLF was merely an 'agent' for selling those bonds. She trusted HLF as a secure local banking institution with which she has placed her savings all this while. Therefore, when the bank's executive promoted the mini-bonds to her, she felt safe enough to take it. Afterall, this past one year, she has been receiving the interest as promised. There were no warning signs whatsoever that the minibonds were about to come to zero value and her money might be gone.
Our burning questions as layman in this tumultous financial market are these :
1. Was Lehman Brothers already in dire straits when they sold these mini-bonds? Were these one of their life-lines?
2. Did our local banks know what they were selling to their clients? Did they exercise due diligence by checking up on Lehman's financial standing before they acted as agents for the bank? Were our banks aware of the huge risks that their clients bear vis-a-vis the interest they get?
3. When our agent banks promoted the product to Singaporeans, did they explain in detail the risks and implications especially to the elderly folk knowing that they are putting their entire life savings into this very risky venture, before they enticed them with the attractive interest rates? Did they inform clearly that they were not underwriting any risks since they were just agents for Lehman? Were the sales people just interested in getting the agent's commission?
4. Where does MAS come into the picture here? Is there any auditing on what our banks are selling? Is there auditing on the bank's process and practices? Is there control at all, akin to what insurance companies like AIA are claiming as stringent controls by MAS such that they are now able to stand firm amid AIG's struggles?
Mr Tan, we badly need some answers. You will be well aware how the man-in-the-street, old folks, non-investors, non-speculators, have lost their hard-earned money overnight. The outlook appears grim as there seems to be no legal recourse in sight, and MAS has not taken a stand perhaps because this has not reached industry proportions.
We feel our mother's pain, as well as the suffering of all those who are depending on these funds for their retirement years, medical needs etc. I am sure they are lack of sleep and unable to eat during this period. It hurts terribly to think that life savings have gone to feed the highly-paid executives of Lehman who have probably mis-managed the company and still sitting rich now. Do we just blame it on hard luck?
As if their anxiety counts for nothing, the victims were given a letter by the bank and told to wait for further decision and announcement.
Mr Tan, we appreciate your help in championing this, and are hoping against hope that something reasonable will come out of it to mitigate the suffering of all those affected by this sudden turn of events.
MW
Investigation into potential wrong-doings by financial institutions
Revised (1)
1. Introduction
Many people invested a large sum of money, or their life savings, in the credit linked securities, in the mistaken belief that these securities have low risk and are safe. These securities include the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacle Notes and Merill Lynch Jubilee Notes.
These investors lost a large part or all of their investments due to the financial crisis. They were shocked that these structured products had high risk, which they were not properly informed.
I suggest that the Government to investigate if there were any wrong-doing on the part of the financial institutions that created or marketed these structured products.
These wrong doings could be in the form of negligence, dishonesty or fraud.
2. Potential wrong-doings
I suggest that the Government should appoint competent people to look into the following areas:
2.1 Were the products created with the aim of defrauding the investing public? Were the drafting of the prospectus, advertisements and other documents carried out with the intent of hiding the true facts from the investing public?
2.2 Were the financial institutions that marketed the product aware about the real risks of the products? Did they train their front line advisers to hide the true facts? Were they negligent in not understanding the true risk? Did they monitor the conduct of their front line advisers to ensure that the products are sold to the right people, based on their risk profile and preference?
2.3 What were the actual charges taken out of the structured products to pay the distributor and the product creator? Were these charges disclosed in the prospectus? Were the charges at a reasonable level, in comparison with the work that has to be done and the risk taken by the parties?
2.4 Were there conflicts of interest involved in the transactions between the various parties? Were the conflicts of interest adequately disclosed? Were the decisions on the pricing of the products made fairly in the interest of the investors? Was there any arrangement to ensure that the pricing is made based on fair market values?
2.5 Does this arrangement fall under certain laws, such as the Trust Act or more specific laws? Was there any breach of any of the provisions of these laws?
2.6 Does the fund manager break any law, if it takes out money from the structured product that are not authorised by the trust deed?
2.7 Were the financial institutions acting in a negligent or irresponsible manner when they continued to market the structured products after the mortgage market crisis unfolded in the summer of 2007?
2.8 Is there a case of misrepresentation when the financial institutions marketed these products as capital protected or capital guaranteed or as “minibonds” when they were not bonds?
3. Call for action
I hope that the Government look into these areas, to see if there were any wrong doing that led to such large losses among the investing public.
If there were wrong doing, the Government can take the appropriate action to bring the offenders to Court and to seek suitable compensation for the losses suffered by the investors.
I hope that the Government can play an active role to minimise the losses of the investors and ensure that the underlying securities are NOT un-wound at fire sale prices.
1. Introduction
Many people invested a large sum of money, or their life savings, in the credit linked securities, in the mistaken belief that these securities have low risk and are safe. These securities include the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacle Notes and Merill Lynch Jubilee Notes.
These investors lost a large part or all of their investments due to the financial crisis. They were shocked that these structured products had high risk, which they were not properly informed.
I suggest that the Government to investigate if there were any wrong-doing on the part of the financial institutions that created or marketed these structured products.
These wrong doings could be in the form of negligence, dishonesty or fraud.
2. Potential wrong-doings
I suggest that the Government should appoint competent people to look into the following areas:
2.1 Were the products created with the aim of defrauding the investing public? Were the drafting of the prospectus, advertisements and other documents carried out with the intent of hiding the true facts from the investing public?
2.2 Were the financial institutions that marketed the product aware about the real risks of the products? Did they train their front line advisers to hide the true facts? Were they negligent in not understanding the true risk? Did they monitor the conduct of their front line advisers to ensure that the products are sold to the right people, based on their risk profile and preference?
2.3 What were the actual charges taken out of the structured products to pay the distributor and the product creator? Were these charges disclosed in the prospectus? Were the charges at a reasonable level, in comparison with the work that has to be done and the risk taken by the parties?
2.4 Were there conflicts of interest involved in the transactions between the various parties? Were the conflicts of interest adequately disclosed? Were the decisions on the pricing of the products made fairly in the interest of the investors? Was there any arrangement to ensure that the pricing is made based on fair market values?
2.5 Does this arrangement fall under certain laws, such as the Trust Act or more specific laws? Was there any breach of any of the provisions of these laws?
2.6 Does the fund manager break any law, if it takes out money from the structured product that are not authorised by the trust deed?
2.7 Were the financial institutions acting in a negligent or irresponsible manner when they continued to market the structured products after the mortgage market crisis unfolded in the summer of 2007?
2.8 Is there a case of misrepresentation when the financial institutions marketed these products as capital protected or capital guaranteed or as “minibonds” when they were not bonds?
3. Call for action
I hope that the Government look into these areas, to see if there were any wrong doing that led to such large losses among the investing public.
If there were wrong doing, the Government can take the appropriate action to bring the offenders to Court and to seek suitable compensation for the losses suffered by the investors.
I hope that the Government can play an active role to minimise the losses of the investors and ensure that the underlying securities are NOT un-wound at fire sale prices.
ANZ pays out $200,000 to elderly investor
Link : http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10535307
ANZ pays out $200,000 to elderly investor
4:00AM Thursday Oct 02, 2008
By Maria Slade
ANZ bank has paid out more than $200,000 to an elderly woman whose life savings are tied up in a credit crunch-affected ING fund.
The 87-year-old, who is in poor health and whose only other income is her pension, put the money into the ING Diversified Yield Fund on the advice of her ANZ financial planner.
The fund, and its companion Regular Income Fund, had exposure to the US sub-prime mortgage market and were indefinitely frozen in March because of the effects of the global credit crisis.
The deal is one of a number of settlements the Herald is aware the bank has reached with people who invested through their ANZ financial advisers. ANZ owns 49 per cent of ING New Zealand. In another case, a family has been paid out a substantial portion of the $90,000 investment their late father made in the Diversified Yield Fund.
With the funds frozen, the family had been unable to settle their father's estate.
Both deals came after the involvement of the Banking Ombudsman.
The deceased man's son-in-law believes without his help the settlement with the bank would not have occurred.
The ombudsman's office says complaints about the ING funds currently make up more than half of its caseload. ANZ was a heavy seller of the investments, and other banks also sold them.
The ombudsman has identified bank customers suffering financial hardship as a result of the freeze on their funds, and helped arrange some relief on a goodwill basis.
In some cases this has come in the form of interest-free loans from the banks in question.
Numerous cases are yet to be settled. Auckland man Murray McNabb and his partner have $80,000 tied up in the Regular Income Fund, and are waiting to hear back from the ombudsman. "We wanted this money to pay off a mortgage. Now we're going to have to refinance the mortgage at 2 per cent higher than what it was."
In its assessment of her investment needs, ANZ characterised the 87-year-old as a "defensive" or conservative investor. In May Steven Giannoulis, general manager of marketing at ING, told the Herald the two funds were at the higher-risk, higher-return end of the ING range of investments.
Financial planner Jeff Matthews, of Spicers Wealth Management, said the advice ANZ gave was poor. "They weren't trying to solve someone's [investment] problem, they were just pushing product."
The ING funds invested in CDOs and CLOs, now notorious financial products which bundle various types of debt into a tradeable security.
With the credit crunch the market for these products all but disappeared and ING was forced to suspend redemptions from its two funds, leaving 8000 investors unable to access a collective $521 million.
When ING announced the freeze in March the unit price for the DYF was 81.05c and the RIF was at 70.5c, down from their $1 issue price.
Last week the unit prices were down to 62.35c and 55.45c respectively - almost half the original price.
ANZ pays out $200,000 to elderly investor
4:00AM Thursday Oct 02, 2008
By Maria Slade
ANZ bank has paid out more than $200,000 to an elderly woman whose life savings are tied up in a credit crunch-affected ING fund.
The 87-year-old, who is in poor health and whose only other income is her pension, put the money into the ING Diversified Yield Fund on the advice of her ANZ financial planner.
The fund, and its companion Regular Income Fund, had exposure to the US sub-prime mortgage market and were indefinitely frozen in March because of the effects of the global credit crisis.
The deal is one of a number of settlements the Herald is aware the bank has reached with people who invested through their ANZ financial advisers. ANZ owns 49 per cent of ING New Zealand. In another case, a family has been paid out a substantial portion of the $90,000 investment their late father made in the Diversified Yield Fund.
With the funds frozen, the family had been unable to settle their father's estate.
Both deals came after the involvement of the Banking Ombudsman.
The deceased man's son-in-law believes without his help the settlement with the bank would not have occurred.
The ombudsman's office says complaints about the ING funds currently make up more than half of its caseload. ANZ was a heavy seller of the investments, and other banks also sold them.
The ombudsman has identified bank customers suffering financial hardship as a result of the freeze on their funds, and helped arrange some relief on a goodwill basis.
In some cases this has come in the form of interest-free loans from the banks in question.
Numerous cases are yet to be settled. Auckland man Murray McNabb and his partner have $80,000 tied up in the Regular Income Fund, and are waiting to hear back from the ombudsman. "We wanted this money to pay off a mortgage. Now we're going to have to refinance the mortgage at 2 per cent higher than what it was."
In its assessment of her investment needs, ANZ characterised the 87-year-old as a "defensive" or conservative investor. In May Steven Giannoulis, general manager of marketing at ING, told the Herald the two funds were at the higher-risk, higher-return end of the ING range of investments.
Financial planner Jeff Matthews, of Spicers Wealth Management, said the advice ANZ gave was poor. "They weren't trying to solve someone's [investment] problem, they were just pushing product."
The ING funds invested in CDOs and CLOs, now notorious financial products which bundle various types of debt into a tradeable security.
With the credit crunch the market for these products all but disappeared and ING was forced to suspend redemptions from its two funds, leaving 8000 investors unable to access a collective $521 million.
When ING announced the freeze in March the unit price for the DYF was 81.05c and the RIF was at 70.5c, down from their $1 issue price.
Last week the unit prices were down to 62.35c and 55.45c respectively - almost half the original price.
NTUC Income Money Market Fund (Flexi-cash)
Dear Mr. Tan,
I have been a close follower of your blog site for the past 1.5 years. Based on the blog postings, I have invested a significant portion of my savings in NTUC Income's Flexi Cash Policy.
The NTUC Income website describes the Flexi Cash Policy as being "As Safe as a Bank Deposit" and "virtually impossible to lose your capital." I understand that the underlying investments are the Money Market fund, and the top holdings of the fund are in Government Bonds and High Quality Corporate Bonds.
However recently I have seen the fund price drop from 1.091 to 1.090 to 1.089. I am concerned because the fund's past trend has been to slowly increase upwards in small increments. This is the first time the fund has been dropping continuously, and with current events, I guess there is a lot of fear and uncertainty in the market.
I would like to ask for your advice on whether I should hold on to my investment or to liquidate and convert to cash as I am worried about further losses.
REPLY
The drop is small. It is probably due to an increase in interest rate. I think that there is no need to worry about it.
If you are still unsure, I suggest that you write to ask NTUC Income to tell you the reason for the drop in price. You can also ask them to confirm that the fund is still invested in high quality assets.
I have been a close follower of your blog site for the past 1.5 years. Based on the blog postings, I have invested a significant portion of my savings in NTUC Income's Flexi Cash Policy.
The NTUC Income website describes the Flexi Cash Policy as being "As Safe as a Bank Deposit" and "virtually impossible to lose your capital." I understand that the underlying investments are the Money Market fund, and the top holdings of the fund are in Government Bonds and High Quality Corporate Bonds.
However recently I have seen the fund price drop from 1.091 to 1.090 to 1.089. I am concerned because the fund's past trend has been to slowly increase upwards in small increments. This is the first time the fund has been dropping continuously, and with current events, I guess there is a lot of fear and uncertainty in the market.
I would like to ask for your advice on whether I should hold on to my investment or to liquidate and convert to cash as I am worried about further losses.
REPLY
The drop is small. It is probably due to an increase in interest rate. I think that there is no need to worry about it.
If you are still unsure, I suggest that you write to ask NTUC Income to tell you the reason for the drop in price. You can also ask them to confirm that the fund is still invested in high quality assets.
European Central Bank - an excellent approach
Hi, Mr. Tan,
I just heard BBC News (Radio88.9) at 8 pm: European Central Bank said banks selling risky products to investors must share risks. Don't know whether SM Goh and MAS officials heard this news.
REPLY
This is an excellent approach. More details are found here:
http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/business/7646863.stm
Unfortunately, this proposal does not help investors who already bought the risky products in the past from getting compensation. The compensation has to be obtained through existing channels.
I just heard BBC News (Radio88.9) at 8 pm: European Central Bank said banks selling risky products to investors must share risks. Don't know whether SM Goh and MAS officials heard this news.
REPLY
This is an excellent approach. More details are found here:
http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/business/7646863.stm
Unfortunately, this proposal does not help investors who already bought the risky products in the past from getting compensation. The compensation has to be obtained through existing channels.
Signing of Pettion
I need your full name for the Petition. The full name is, for example, Tan Kin Lian. If you give a partial name, it will be rejected.
If you did not give your full name, we will call you and ask for your full name. There is no need to re-sign the petition at this time.
If you did not give your full name, we will call you and ask for your full name. There is no need to re-sign the petition at this time.
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