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http://theonlinecitizen.com/2008/10/more-than-1000-people-at-speakers-corner/
Monday, October 13, 2008
Ignorance and greed
TodayOnline - Tuesday, October 14, 2008
AS HONG Kong investors took to the streets, seeking redress for the failed Mini-Bonds series structured by Lehman Brothers, about 1,000 Singapore investors gathered at Hong Lim Park over the weekend.
Their plight triggered memories of my previous job, and it dawned on me that I could have been responsible for their indignation, either directly or indirectly.
You see, I used to work for a bank, selling similar structured products, unit trusts and insurance to the bank’s customers. Among them were retirees, housewives and professionals — some with high risk appetites, others not at all. And it was my job to convince them of the benefits of the products the bank was promoting.
The remuneration package was structured such that sales performance received a significant weightage when my performance came up for review.
Also, there was a quota of financial products to be sold, so that I did not incur a huge penalty in commissions. For example, if there was enough revenue clocked from unit trusts, but not enough insurance or housing loans revenue,I would lose a sizeable sum.
There was always the pressure to meet any shortfalls in the designated monthly quota, so that both career and salary did not suffer.
There was also external pressure from management. I was hounded daily by my superiors on the shortfalls and sometimes, in order to fulfil the cluster’s overall target, I was told to concentrate on certain products that were not moving. Often, these were dangled with attractive incentives to ensure that I would be more willing to sell them over others.
But with the carrot also came the stick: There was a ranking-list flashed at meetings, with the names of staff who did not meet their sales targets. It was a public shaming routine, and to meet the targets, my weekends were usually spent at roadshows.
Operating in such a high-pressure environment meant that some sales staff resorted to employing strong sales techniques to get the customer to sign on the dotted line.
One senior manager even said that customers were only interested in benefits, so it was advisable to come up with a pitch that maximised these benefits and minimised the costs.
At times, scripts were handed to frontline workers. We were forced to memorise them for a flawless presentation.
Perhaps to avoid accusations of “mis-selling” in future, the time is ripe for financial institutions to review their procedures for assessing sales staff. They should tweak the promotion criteria, which relies heavily on sales results. Benchmarks like service attitude and turnaround time — such as attending to customers’ mundane requests promptly — could be given greater weightage. Customer feedback in the assessment of their relationship managers could be another criteria — after all, most banks covet customer loyalty.
On the other hand, consumers must be aware of what they are investing in. This could be done through more investor-education programmes. Proactive steps should be taken by financial institutions to work with MoneySense, a national investment education body, to acquaint customers with risk management, instead of just concentrating on product-pushing.
As the adage goes, it takes two to tango. If consumers are befuddled by the complex nature of some financial products, they should seek clarifications, or not invest at all.
After all, stable low returns beat sleepless nights, any day.
The author was a financial consultant for two years.
http://www.todayonline.com/articles/281339.asp
AS HONG Kong investors took to the streets, seeking redress for the failed Mini-Bonds series structured by Lehman Brothers, about 1,000 Singapore investors gathered at Hong Lim Park over the weekend.
Their plight triggered memories of my previous job, and it dawned on me that I could have been responsible for their indignation, either directly or indirectly.
You see, I used to work for a bank, selling similar structured products, unit trusts and insurance to the bank’s customers. Among them were retirees, housewives and professionals — some with high risk appetites, others not at all. And it was my job to convince them of the benefits of the products the bank was promoting.
The remuneration package was structured such that sales performance received a significant weightage when my performance came up for review.
Also, there was a quota of financial products to be sold, so that I did not incur a huge penalty in commissions. For example, if there was enough revenue clocked from unit trusts, but not enough insurance or housing loans revenue,I would lose a sizeable sum.
There was always the pressure to meet any shortfalls in the designated monthly quota, so that both career and salary did not suffer.
There was also external pressure from management. I was hounded daily by my superiors on the shortfalls and sometimes, in order to fulfil the cluster’s overall target, I was told to concentrate on certain products that were not moving. Often, these were dangled with attractive incentives to ensure that I would be more willing to sell them over others.
But with the carrot also came the stick: There was a ranking-list flashed at meetings, with the names of staff who did not meet their sales targets. It was a public shaming routine, and to meet the targets, my weekends were usually spent at roadshows.
Operating in such a high-pressure environment meant that some sales staff resorted to employing strong sales techniques to get the customer to sign on the dotted line.
One senior manager even said that customers were only interested in benefits, so it was advisable to come up with a pitch that maximised these benefits and minimised the costs.
At times, scripts were handed to frontline workers. We were forced to memorise them for a flawless presentation.
Perhaps to avoid accusations of “mis-selling” in future, the time is ripe for financial institutions to review their procedures for assessing sales staff. They should tweak the promotion criteria, which relies heavily on sales results. Benchmarks like service attitude and turnaround time — such as attending to customers’ mundane requests promptly — could be given greater weightage. Customer feedback in the assessment of their relationship managers could be another criteria — after all, most banks covet customer loyalty.
On the other hand, consumers must be aware of what they are investing in. This could be done through more investor-education programmes. Proactive steps should be taken by financial institutions to work with MoneySense, a national investment education body, to acquaint customers with risk management, instead of just concentrating on product-pushing.
As the adage goes, it takes two to tango. If consumers are befuddled by the complex nature of some financial products, they should seek clarifications, or not invest at all.
After all, stable low returns beat sleepless nights, any day.
The author was a financial consultant for two years.
http://www.todayonline.com/articles/281339.asp
Protest outside DBS headquarters
Posted in another Forum
Some people have been warned by the police against protesting outside DBS’s Shenton Way headquarters. For those who wish to take effective action, I urge that you first master your own emotions before fighting back. How would breaking the law help you? If even a small group of investors were arrested, it would terrorize the rest into sullen submission. Any attempts at trying to build a case or even to win public opinion would collapse. Do not allow yourself to be used by people with other motivations. There are groups that wish to expand their anarchical ranks and would happily urge you to break the law, but I ask that you stay within the law.
Even though the contracts that have been signed appear to be ironclad, a case of misrepresentation can still be made if it can show that the employees of the financial institutions deployed deceptive sales tactics. Misrepresentation is a criminal act and the investigation and legal prosecution of it would be undertaken by the state via the Commercial Affairs Department and Attorney General. It is not a civil representative lawsuit hence there are no legal liabilities which you need to pay. The penalty for misrepresentation is up to seven years jail.
But in order to motivate an investigation, it is necessary to first make a case that misrepresentation has occurred. To do so would require a concerted effort on the part of investors in gathering evidence that can be used to persuade the authorities and the public. The chances of success maybe slim, but if investors were to throw themselves against the rocks in the name of justice, then the chances of success would be zero. Do not do what many stupid and selfish politicians in Singapore have done and seek self destruction when an intelligent and courageous drive to uncover the truth is needed. More than ever, you need to endure and stand tall.
http://forum.channelnewsasia.com/viewtopic.php?p=2308570#2308570
Some people have been warned by the police against protesting outside DBS’s Shenton Way headquarters. For those who wish to take effective action, I urge that you first master your own emotions before fighting back. How would breaking the law help you? If even a small group of investors were arrested, it would terrorize the rest into sullen submission. Any attempts at trying to build a case or even to win public opinion would collapse. Do not allow yourself to be used by people with other motivations. There are groups that wish to expand their anarchical ranks and would happily urge you to break the law, but I ask that you stay within the law.
Even though the contracts that have been signed appear to be ironclad, a case of misrepresentation can still be made if it can show that the employees of the financial institutions deployed deceptive sales tactics. Misrepresentation is a criminal act and the investigation and legal prosecution of it would be undertaken by the state via the Commercial Affairs Department and Attorney General. It is not a civil representative lawsuit hence there are no legal liabilities which you need to pay. The penalty for misrepresentation is up to seven years jail.
But in order to motivate an investigation, it is necessary to first make a case that misrepresentation has occurred. To do so would require a concerted effort on the part of investors in gathering evidence that can be used to persuade the authorities and the public. The chances of success maybe slim, but if investors were to throw themselves against the rocks in the name of justice, then the chances of success would be zero. Do not do what many stupid and selfish politicians in Singapore have done and seek self destruction when an intelligent and courageous drive to uncover the truth is needed. More than ever, you need to endure and stand tall.
http://forum.channelnewsasia.com/viewtopic.php?p=2308570#2308570
Leveraging and greed
Businesses are greedy. They like to earn a ROE (return on equity ) of 15% to 20% per year. This can only be achieved by taking excessive risk, through leveraging (i.e. borrowing several times of their equity).
In a competitive market, a business can earn a return of say 8% per annum. If all the capital is funded by equity, the ROE is 8% and the risk is low.
If they issue a bond at 5% of the same amount as equity (i.e. leverage of 1 time), they hope to earn the difference of 3% on the bond. This will give a return of 8% + 3% on the equity, i.e. 11%. This is risky as the interest on the bond has to be paid first from the profit.
If they are greedy and are leveraged 2 times, they hope to earn 8% + 2 X 3% or a total of 14% on the equity. This is more risky compared to a leverage of 1 time.
Some investment banks were leveraged 20 times. This is madness.
To make matters worse, the borrowings were made on 30 or 90 days credit, instead of long term bonds. During good times, the cost of short term credit is lower than the cost of bonds. The businesses were greedy to make higher profits on the spread. This is extreme madness.
During the financial crisis, they were not able to get new borrowings to repay back the old borrowings. This lead to the collapse of the global financial system.
In the new financial system, there has to be regulatory control over the amount of leveraging. especially for financial companies, including hedge funds.
In a competitive market, a business can earn a return of say 8% per annum. If all the capital is funded by equity, the ROE is 8% and the risk is low.
If they issue a bond at 5% of the same amount as equity (i.e. leverage of 1 time), they hope to earn the difference of 3% on the bond. This will give a return of 8% + 3% on the equity, i.e. 11%. This is risky as the interest on the bond has to be paid first from the profit.
If they are greedy and are leveraged 2 times, they hope to earn 8% + 2 X 3% or a total of 14% on the equity. This is more risky compared to a leverage of 1 time.
Some investment banks were leveraged 20 times. This is madness.
To make matters worse, the borrowings were made on 30 or 90 days credit, instead of long term bonds. During good times, the cost of short term credit is lower than the cost of bonds. The businesses were greedy to make higher profits on the spread. This is extreme madness.
During the financial crisis, they were not able to get new borrowings to repay back the old borrowings. This lead to the collapse of the global financial system.
In the new financial system, there has to be regulatory control over the amount of leveraging. especially for financial companies, including hedge funds.
DBS will take responsibility, in some cases
TodayOnline
DBS Bank says it will take responsibility for some of the Lehman Brothers products sold through its network in Singapore and Hong Kong if there was mis-selling.
“In specific cases when evidence of mis-selling is established, DBS (Hong Kong) Limited and DBS Bank (Singapore) will take responsibility,” the bank said yesterday.
It issued the statement in reply to queries about a recent report in the South China Morning Post that said it would consider full compensation for losses on one of Lehman’s structured products sold in Hong Kong if its investigations showed that buyers had been misled by the bank’s sales staff.
DBS also pointed out in a separate statement last night that customers in Singapore who had bought High Notes 5, a structured product sold with Lehman as one of the reference entities, may not get a cent back.
The collapse of Lehman triggered the early redemption of High Notes 5 and the unwinding process has begun.
“We expect that the final valuation of the Notes, which is market determined,
will be completed on or around Oct 31. In the worst case scenario, customers could lose their entire investment,” it said.
The bank has since set up dedicated Investor Care Centres in Hong Kong and Singapore, manned by experienced staff specially trained to handle queries about the troubled structured products.
Mr Rajan Raju, DBS’ managing director and head of consumer banking, added: “More than 300 customers have approached our Investor Care Centre and we are addressing their concerns about their investments. As soon as each case is reviewed, DBS will inform the respective customers of the outcome.”
http://www.todayonline.com/articles/281348.asp
DBS Bank says it will take responsibility for some of the Lehman Brothers products sold through its network in Singapore and Hong Kong if there was mis-selling.
“In specific cases when evidence of mis-selling is established, DBS (Hong Kong) Limited and DBS Bank (Singapore) will take responsibility,” the bank said yesterday.
It issued the statement in reply to queries about a recent report in the South China Morning Post that said it would consider full compensation for losses on one of Lehman’s structured products sold in Hong Kong if its investigations showed that buyers had been misled by the bank’s sales staff.
DBS also pointed out in a separate statement last night that customers in Singapore who had bought High Notes 5, a structured product sold with Lehman as one of the reference entities, may not get a cent back.
The collapse of Lehman triggered the early redemption of High Notes 5 and the unwinding process has begun.
“We expect that the final valuation of the Notes, which is market determined,
will be completed on or around Oct 31. In the worst case scenario, customers could lose their entire investment,” it said.
The bank has since set up dedicated Investor Care Centres in Hong Kong and Singapore, manned by experienced staff specially trained to handle queries about the troubled structured products.
Mr Rajan Raju, DBS’ managing director and head of consumer banking, added: “More than 300 customers have approached our Investor Care Centre and we are addressing their concerns about their investments. As soon as each case is reviewed, DBS will inform the respective customers of the outcome.”
http://www.todayonline.com/articles/281348.asp
DBS to settle case by case: Rebecca Lee
I am Mrs Rebecca Lee. I wrote to Straits Time basically saying DBS is omnipotent since DBS defended all their relationship managers and that they have explained all the risks to us "investors". But that's not why I write this. What's important is for all to know:
In Today's news, DBS is saying it will settle case by case. This is obviously a reaction to the gathering that Mr Tan have brought all the victims of DBS HN2, 5 together with others. DBS high note victims have scheduled to go to DBS shenton way 10 am to demand a settlement and bring all documents along. DBS must have gotten wind of this and decided to do a divide and conquer. I just want to make sure that none of us is stupid enough to let this happen and that we will continue to find where the other 1400 investors are, gather friends and family to give us the support and get justice done this Wednesday 10 am as agreed. If not for this gathering, DBS would not have any response. The squeaky door gets the oil. Please get more people to support the DBS HN victims. For some it's their life long savings - for others, it's their children's future that got pawned away.
Look at what the HongKongers do and see what DBS's reaction to them. Don't be a door mat or we will get stepped all over by DBS.
Mrs Rebecca Lee
In Today's news, DBS is saying it will settle case by case. This is obviously a reaction to the gathering that Mr Tan have brought all the victims of DBS HN2, 5 together with others. DBS high note victims have scheduled to go to DBS shenton way 10 am to demand a settlement and bring all documents along. DBS must have gotten wind of this and decided to do a divide and conquer. I just want to make sure that none of us is stupid enough to let this happen and that we will continue to find where the other 1400 investors are, gather friends and family to give us the support and get justice done this Wednesday 10 am as agreed. If not for this gathering, DBS would not have any response. The squeaky door gets the oil. Please get more people to support the DBS HN victims. For some it's their life long savings - for others, it's their children's future that got pawned away.
Look at what the HongKongers do and see what DBS's reaction to them. Don't be a door mat or we will get stepped all over by DBS.
Mrs Rebecca Lee
Look at the Product Advice
Hi Mr Tan,
I am one of the investors in Minibond. I would like to share with the rest of the investors on what I have found out in the Product Advise Report.
In my Product Advice Report, under the section Recommendations and Acknowledgement, it was written that I want to invest in bonds (which was what I said to the Financial Planner) but the Financial Planner recommended minibond to me which invest in CDOs. As I bought 3 series of Minibond from 3 different financial planners, all told me that I was investing in bonds issued by the corporations listed in the brochures. I have since written my complaint to the distributor, FIDReC, one of the three well-respected individuals to oversee the relevant FIs’ complaints, my MP and HSBC Trustee.
Maybe, you can advise those investors who bought these structured products to take a look at the Product Advice Report and see whether there was any evidence of misrepresentation by the financial planners.
On a separate note, I noticed that the prospectus was only given to investors weeks (at least 3 weeks) after investors have bought the structured notes. Is this the correct and acceptable practice by MAS? Shouldn't the financial institutions give out the prospectus (like the case in IPOs although I know not many people read them) before investors invest in these structured products since MAS already approved their products and prospectus?
KK
REPLY
It is wrong for the financial institution to give the prospectus a few weeks after the product was sold. You can mention this point in the statutory declaration (affidavit).
I am one of the investors in Minibond. I would like to share with the rest of the investors on what I have found out in the Product Advise Report.
In my Product Advice Report, under the section Recommendations and Acknowledgement, it was written that I want to invest in bonds (which was what I said to the Financial Planner) but the Financial Planner recommended minibond to me which invest in CDOs. As I bought 3 series of Minibond from 3 different financial planners, all told me that I was investing in bonds issued by the corporations listed in the brochures. I have since written my complaint to the distributor, FIDReC, one of the three well-respected individuals to oversee the relevant FIs’ complaints, my MP and HSBC Trustee.
Maybe, you can advise those investors who bought these structured products to take a look at the Product Advice Report and see whether there was any evidence of misrepresentation by the financial planners.
On a separate note, I noticed that the prospectus was only given to investors weeks (at least 3 weeks) after investors have bought the structured notes. Is this the correct and acceptable practice by MAS? Shouldn't the financial institutions give out the prospectus (like the case in IPOs although I know not many people read them) before investors invest in these structured products since MAS already approved their products and prospectus?
KK
REPLY
It is wrong for the financial institution to give the prospectus a few weeks after the product was sold. You can mention this point in the statutory declaration (affidavit).
Sales representatives did not know - misrepresentation
Hi Mr Tan
I appeal you to highlight this. I feel that most wales representatives thought the credit securities products were "not High Risk" products. If they had known that it is a high risk product, they would not have recommended people to invest.
Therefore, it is definitely a misrepresentation by sales representatives - the way the credit linked products were marketed as relatively "Safe/Low Risk" products by Lehman, Merrill, Morgan to the banks & financial institutions which was in turn presentated to the investors.
It is common sense that if it was marketed as high risk - few people would have invested.
I appeal you to highlight this. I feel that most wales representatives thought the credit securities products were "not High Risk" products. If they had known that it is a high risk product, they would not have recommended people to invest.
Therefore, it is definitely a misrepresentation by sales representatives - the way the credit linked products were marketed as relatively "Safe/Low Risk" products by Lehman, Merrill, Morgan to the banks & financial institutions which was in turn presentated to the investors.
It is common sense that if it was marketed as high risk - few people would have invested.
Hong Kong Lawmakers Criticize Bks Over Lehman-Backed Mini-Bond Sales
October 13, 2008: 03:26 AM EST
HONG KONG -(Dow Jones)- Hong Kong banks came under fire Monday from lawmakers who accused them of playing down the risks of structured products backed by Lehman Brothers Holdings Inc. (LEH) that were sold to thousands of small investors.
The investors lost millions of dollars when Lehman declared bankruptcy last month and many have been protesting in the streets as officials look into the matter.
In an emergency hearing on the crisis, lawmaker Cyd Ho accused bank managers of pressuring staff to sell the products quickly, by playing down risks to customers.
BOC (Hong Kong) Ltd. (2388.HK) and DBS Bank (Hong Kong) Ltd. pledged Monday to compensate customers if they found any wrongdoing occurred, as the products, known as "mini-bonds," were sold to retail customers. "If we find there was any wrongdoing during the sales of structural products, we will be responsible and compensate the customers fully," DBS head of consumer banking Linda Wong told the lawmakers Monday.
BOC (Hong Kong) head of personal banking Lawrence Law said the bank was willing to compensate customers "but needs to look at the cases on an individual basis."
The Hong Hong Monetary Authority has received 9,281 complaints from investors and said last week it was investigating sales of the structured products by nine banks. HKMA officials said they might also consider whether retail banks should be stopped from selling such products.
http://money.cnn.com/news/newsfeeds/articles/djf500/200810130326DOWJONESDJONLINE000106_FORTUNE5.htm
HONG KONG -(Dow Jones)- Hong Kong banks came under fire Monday from lawmakers who accused them of playing down the risks of structured products backed by Lehman Brothers Holdings Inc. (LEH) that were sold to thousands of small investors.
The investors lost millions of dollars when Lehman declared bankruptcy last month and many have been protesting in the streets as officials look into the matter.
In an emergency hearing on the crisis, lawmaker Cyd Ho accused bank managers of pressuring staff to sell the products quickly, by playing down risks to customers.
BOC (Hong Kong) Ltd. (2388.HK) and DBS Bank (Hong Kong) Ltd. pledged Monday to compensate customers if they found any wrongdoing occurred, as the products, known as "mini-bonds," were sold to retail customers. "If we find there was any wrongdoing during the sales of structural products, we will be responsible and compensate the customers fully," DBS head of consumer banking Linda Wong told the lawmakers Monday.
BOC (Hong Kong) head of personal banking Lawrence Law said the bank was willing to compensate customers "but needs to look at the cases on an individual basis."
The Hong Hong Monetary Authority has received 9,281 complaints from investors and said last week it was investigating sales of the structured products by nine banks. HKMA officials said they might also consider whether retail banks should be stopped from selling such products.
http://money.cnn.com/news/newsfeeds/articles/djf500/200810130326DOWJONESDJONLINE000106_FORTUNE5.htm
FAQ from investors (1)
Here are some frequently asked questions. I shall speak on these points at Speaker's Corner on Saturday 18 October at 6 p.m.
1. Can I lodge a complaint?
Some investors ask if they can lodge a complaint, if they have signed certain forms, or if they had bought in a different mode (e.g. by responding to a mail). Each case has to be considered on its own merits. It is impossible for me to give this type of advice.
Generally, you can lodge a complaint if you have been misled into buying the product. This misleading sitaution could occur in various ways, e.g. from the advertisements, brochure, verbal statement and assurances and other forms. You must get the facts and write a sworn statement (i.e. statutory declaration or affidavit).
2. How to get advice
It is best that you get advice from your fellow investors in similar situation. You should join a group and keep in touch with them. You should also read my blog, www.tankinlian.blogspot.com.
I am not able to give individual advice. Each day, 20 people write to me, expecting me to understand their situation. It is impossible for me to perform this role. You are not the only person that needs help. I do not have the time to give proper advice.
3. Gather the facts
Many investors asked me, "Should I sell or hold on to this investment?". This type of question can only be answered, if you get the facts. You cannot expect anyone to give you the answer without the facts.
If the facts are not available, no one can answer them. If you ask about the future, no one knows the answer (except God).
4. To hold or sell?
Many people are uncertain and frightened. They ask for advice on whether to sell or hold to a certain structured product. They have to find out the facts about the product. What is the current price now. What are the quality of the underlying assets?
There are more than 50 different types of structured products in the market. Each product is complicated and different from the other products. Even the financial institutions marketing the product do not know what they are.
The best is for you to ask the financial institution and get the facts. Do not expect someone else to know the answer. If the facts are not available, you should not expect any outsider to be able to get the answers for you.
Here are my general advice:
a) If you sell any structured product now, you are likely to get a bad price. The market is very bad. It is generally better to keep the product and hope for the best.
b) Nobody knows if the situation will get worse. You cannot expect anyone to help you to know the future. You have to make the decision on your own. It is your own money.
c) If things are uncertain, I will wait and not sell now. I hold shares and are losing money. I decide to keep them and wait for things to recover.
5. Financial institution to pressure their sales representatives
Some investors said that the financial institutions are putting pressure on their sales representative to tell lies, so that they will protect the institution. This is unethical, but it cannot be helped. If the representatives tell lies, they are committing a crime of cheating. This can be serious.
6. DBS to compensate on case by case basis
Some investors said that DBS has agreed to compensate the investors on a case by case basis. This is the correct apporach.
Any claim for compensation has to be decided on a case by case basis. Some people are misled and need to be compensated. Other people are not misled and cannot claim for the same type of compensation.
7. Fair compensation
I hope that the financial institution will offer a fair compensation to investors who have been misled. A fair compensation is for the loss to be shared equally between the investor and the distributor.
Some investors expect 100% compensation. This is unreasonable. The distributor expects to get away with no compensation. This is unreasonable also.
Tan Kin Lian
1. Can I lodge a complaint?
Some investors ask if they can lodge a complaint, if they have signed certain forms, or if they had bought in a different mode (e.g. by responding to a mail). Each case has to be considered on its own merits. It is impossible for me to give this type of advice.
Generally, you can lodge a complaint if you have been misled into buying the product. This misleading sitaution could occur in various ways, e.g. from the advertisements, brochure, verbal statement and assurances and other forms. You must get the facts and write a sworn statement (i.e. statutory declaration or affidavit).
2. How to get advice
It is best that you get advice from your fellow investors in similar situation. You should join a group and keep in touch with them. You should also read my blog, www.tankinlian.blogspot.com.
I am not able to give individual advice. Each day, 20 people write to me, expecting me to understand their situation. It is impossible for me to perform this role. You are not the only person that needs help. I do not have the time to give proper advice.
3. Gather the facts
Many investors asked me, "Should I sell or hold on to this investment?". This type of question can only be answered, if you get the facts. You cannot expect anyone to give you the answer without the facts.
If the facts are not available, no one can answer them. If you ask about the future, no one knows the answer (except God).
4. To hold or sell?
Many people are uncertain and frightened. They ask for advice on whether to sell or hold to a certain structured product. They have to find out the facts about the product. What is the current price now. What are the quality of the underlying assets?
There are more than 50 different types of structured products in the market. Each product is complicated and different from the other products. Even the financial institutions marketing the product do not know what they are.
The best is for you to ask the financial institution and get the facts. Do not expect someone else to know the answer. If the facts are not available, you should not expect any outsider to be able to get the answers for you.
Here are my general advice:
a) If you sell any structured product now, you are likely to get a bad price. The market is very bad. It is generally better to keep the product and hope for the best.
b) Nobody knows if the situation will get worse. You cannot expect anyone to help you to know the future. You have to make the decision on your own. It is your own money.
c) If things are uncertain, I will wait and not sell now. I hold shares and are losing money. I decide to keep them and wait for things to recover.
5. Financial institution to pressure their sales representatives
Some investors said that the financial institutions are putting pressure on their sales representative to tell lies, so that they will protect the institution. This is unethical, but it cannot be helped. If the representatives tell lies, they are committing a crime of cheating. This can be serious.
6. DBS to compensate on case by case basis
Some investors said that DBS has agreed to compensate the investors on a case by case basis. This is the correct apporach.
Any claim for compensation has to be decided on a case by case basis. Some people are misled and need to be compensated. Other people are not misled and cannot claim for the same type of compensation.
7. Fair compensation
I hope that the financial institution will offer a fair compensation to investors who have been misled. A fair compensation is for the loss to be shared equally between the investor and the distributor.
Some investors expect 100% compensation. This is unreasonable. The distributor expects to get away with no compensation. This is unreasonable also.
Tan Kin Lian
Concern about disorderly behaviour
Dear Mr Tan,
I appreciate that you are trying to help those people who were at Hong Lim Park on Saturday. As a great amount of money is involved, and from what I gathered at the park, there were many people who had possibly lost their life savings, emotions will indeed run high as some people will inevitably be in desperate positions.
I do want to caution you as a concerned citizen that I am indeed worried about some of the group leaders encouraging the people to gather at the banks at a scheduled day and time. I had no intention of prying into the matter but I cannot help overhearing the plan to crowd the banks. I am not so sure that it is safe for the public to have a big group of unhappy investors gathered in a public place at the same time. The people were even advised to pretend not to know each other.
I am not so sure that the group leaders will be able to keep order if the group of unhappy people do not get what they want and react emotionally that could lead to disorder.
I respect that you are a former CEO of a big company like NTUC Income and that with your in-depth knowledge of the financial matters, you might be able to provide some guidance to many people who are apparently feeling very helpless. May God bless you.
I had wanted to speak to you about this on Saturday but I did not get the chance. I just feel that there must be other ways of addressing this problem. As you mentioned that you are in communication with SM Goh, perhaps you can ask him to arrange a proper venue and get all the banks involved in addressing this matter.
I wish you God’s speed and wisdom.
I appreciate that you are trying to help those people who were at Hong Lim Park on Saturday. As a great amount of money is involved, and from what I gathered at the park, there were many people who had possibly lost their life savings, emotions will indeed run high as some people will inevitably be in desperate positions.
I do want to caution you as a concerned citizen that I am indeed worried about some of the group leaders encouraging the people to gather at the banks at a scheduled day and time. I had no intention of prying into the matter but I cannot help overhearing the plan to crowd the banks. I am not so sure that it is safe for the public to have a big group of unhappy investors gathered in a public place at the same time. The people were even advised to pretend not to know each other.
I am not so sure that the group leaders will be able to keep order if the group of unhappy people do not get what they want and react emotionally that could lead to disorder.
I respect that you are a former CEO of a big company like NTUC Income and that with your in-depth knowledge of the financial matters, you might be able to provide some guidance to many people who are apparently feeling very helpless. May God bless you.
I had wanted to speak to you about this on Saturday but I did not get the chance. I just feel that there must be other ways of addressing this problem. As you mentioned that you are in communication with SM Goh, perhaps you can ask him to arrange a proper venue and get all the banks involved in addressing this matter.
I wish you God’s speed and wisdom.
Sales representatives should tell the truth and admit mistakes
Dear Mr. Tan
I have spoken to my financial advisor who sold me the Notes. My financial advisor mentioned that it seems like the banks & financial institutions are trying to protect their interests and have pushed all responsibilities of misrepresentation to the sales persons selling the Notes products to investors.
I need to highlight this because if the sales person is the one who misrepresented, the banks and financial instituations can claim they are not in the postition to refund or attend to our complaints.
Apparently, my financial advisor mentioned that last week, his company has gotten all their sales staff to sign some documents that in the event of misrepresentation to investors, the sales persons will have to bear the compensation to investors themselves.
REPLY
The responsibility lies with the financial institution, as they have not provided the correct information and training to the sales representatives.
The sales representatives should tell the truth and not be intimidated into telling lies. If they lie, they are commiting a crime. If they make a mistake and gave the wrong information, they should admit it, as it is a genuine mistake.
It is better for the sales representative to tell the truth.
I have spoken to my financial advisor who sold me the Notes. My financial advisor mentioned that it seems like the banks & financial institutions are trying to protect their interests and have pushed all responsibilities of misrepresentation to the sales persons selling the Notes products to investors.
I need to highlight this because if the sales person is the one who misrepresented, the banks and financial instituations can claim they are not in the postition to refund or attend to our complaints.
Apparently, my financial advisor mentioned that last week, his company has gotten all their sales staff to sign some documents that in the event of misrepresentation to investors, the sales persons will have to bear the compensation to investors themselves.
REPLY
The responsibility lies with the financial institution, as they have not provided the correct information and training to the sales representatives.
The sales representatives should tell the truth and not be intimidated into telling lies. If they lie, they are commiting a crime. If they make a mistake and gave the wrong information, they should admit it, as it is a genuine mistake.
It is better for the sales representative to tell the truth.
HK legislators criticize regulators over bonds
Monday October 13, 2:51 am ET
By Min Lee, Associated Press Writer
Hong Kong legislators criticize regulators over Lehman-backed bond fiasco
HONG KONG (AP) -- Hong Kong legislators on Monday accused regulators of failing to monitor banks that sold Lehman Brothers-backed bonds that have put hundreds of millions of dollars in doubt after the U.S. investment bank failed amid the global financial crisis.
Hong Kong's Securities and Futures Commission estimates outstanding value of Lehman-related investment products in the city at about $2 billion. Hundreds of Hong Kongers are worried about the state of their Lehman-related bonds after the company's collapse, and have held protests and demanded compensation.
Billions of dollars in souring debt forced Lehman Brothers Holdings Inc., once the fourth-largest investment bank in the U.S., to file for bankruptcy last month amid the world's worst financial crisis in decades.
In a full-day hearing on the issue Monday, Hong Kong lawmakers questioned if officials had made sure banks properly explained the risks the bonds carried. Investors -- among them retirees who invested their life savings -- have complained that bank salespeople were misleading.
The chief executive of Hong Kong's de facto central bank, Joseph Yam, said the Hong Kong Monetary Authority had asked banks to classify as high-risk bonds that involved complex collateralized debt obligations, or CDOs, after the U.S. sub-prime crisis broke out last year.
CDOs are securities backed by underlying bonds and other fixed-income assets.
Pro-government legislator Lau Kong-wah questioned if the move came too late.
"Many people had already bought the bonds. Some citizens shifted their life savings, all their timed deposits to these bonds. You only told people these are high-risk products at the end of last year. Isn't that belated awareness of the problem?"
Yam responded that risk levels change, noting the bonds were not considered high-risk before the sub-prime crisis occurred. He said he repeatedly warned the public about the risk of financial investments.
Opposition legislator Lee Wing-tat asked if the bonds should be called bonds at all, giving the false impression that they are safe investments.
Securities and Futures Commission Chief Executive Martin Wheatley disagreed, saying it is incumbent upon investors -- and bank staff -- to explain the risk of the bonds.
"I would be shocked if anybody bought a product based on the name of the product. The requirement is to understand the features of the product," Wheatley said.
"Anybody who is offered via bank staff a product that pays 6 percent rather than half a percent on deposit, they should be asking, 'why?'" he said.
Last Monday, the Hong Kong government announced a scheme under which local banks and distributors of Lehman-backed bonds would buy back the products at a value to be decided on.
He Guangbei, chief executive of Bank of China (Hong Kong) Ltd. and chairman of the Hong Kong Association of Banks, said the banks welcome the proposal and are studying how it can be implemented.
Financial Secretary John Tsang, however, said the government will not reimburse investors. "It's not fair to the taxpayers," he said.
http://biz.yahoo.com/ap/081013/as_hong_kong_lehman_bonds.html
By Min Lee, Associated Press Writer
Hong Kong legislators criticize regulators over Lehman-backed bond fiasco
HONG KONG (AP) -- Hong Kong legislators on Monday accused regulators of failing to monitor banks that sold Lehman Brothers-backed bonds that have put hundreds of millions of dollars in doubt after the U.S. investment bank failed amid the global financial crisis.
Hong Kong's Securities and Futures Commission estimates outstanding value of Lehman-related investment products in the city at about $2 billion. Hundreds of Hong Kongers are worried about the state of their Lehman-related bonds after the company's collapse, and have held protests and demanded compensation.
Billions of dollars in souring debt forced Lehman Brothers Holdings Inc., once the fourth-largest investment bank in the U.S., to file for bankruptcy last month amid the world's worst financial crisis in decades.
In a full-day hearing on the issue Monday, Hong Kong lawmakers questioned if officials had made sure banks properly explained the risks the bonds carried. Investors -- among them retirees who invested their life savings -- have complained that bank salespeople were misleading.
The chief executive of Hong Kong's de facto central bank, Joseph Yam, said the Hong Kong Monetary Authority had asked banks to classify as high-risk bonds that involved complex collateralized debt obligations, or CDOs, after the U.S. sub-prime crisis broke out last year.
CDOs are securities backed by underlying bonds and other fixed-income assets.
Pro-government legislator Lau Kong-wah questioned if the move came too late.
"Many people had already bought the bonds. Some citizens shifted their life savings, all their timed deposits to these bonds. You only told people these are high-risk products at the end of last year. Isn't that belated awareness of the problem?"
Yam responded that risk levels change, noting the bonds were not considered high-risk before the sub-prime crisis occurred. He said he repeatedly warned the public about the risk of financial investments.
Opposition legislator Lee Wing-tat asked if the bonds should be called bonds at all, giving the false impression that they are safe investments.
Securities and Futures Commission Chief Executive Martin Wheatley disagreed, saying it is incumbent upon investors -- and bank staff -- to explain the risk of the bonds.
"I would be shocked if anybody bought a product based on the name of the product. The requirement is to understand the features of the product," Wheatley said.
"Anybody who is offered via bank staff a product that pays 6 percent rather than half a percent on deposit, they should be asking, 'why?'" he said.
Last Monday, the Hong Kong government announced a scheme under which local banks and distributors of Lehman-backed bonds would buy back the products at a value to be decided on.
He Guangbei, chief executive of Bank of China (Hong Kong) Ltd. and chairman of the Hong Kong Association of Banks, said the banks welcome the proposal and are studying how it can be implemented.
Financial Secretary John Tsang, however, said the government will not reimburse investors. "It's not fair to the taxpayers," he said.
http://biz.yahoo.com/ap/081013/as_hong_kong_lehman_bonds.html
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