Approach recommended by Mr. Glenn Knight
1. I have met with several investors and found that a collective action is difficult.
2. I proposed that the investors should come forward and to say how they have been ‘misled’ and by which party meaning the banks or the other financial institution. I will then these people according to the financial institution who sold them the product.
3. For each group, I will choose one client who will sue alone but who will be backed financially by the others of the same group. My estimate is about S$80,000 for each client for the suit. The case will be heard in the District Court.
4. If the client wins the case, it will be a crucial victory. I will then use this case to settle with that financial institution on behalf of the other investors, provided of course that this is agreed by the financial institution. In that way, all similar cases can be settled.
5. If I am not able to act against any financial institution due to conflict, I can arrange for another lawyer to act (e.g. Mr. Raymond Loo).
6. If I should lose the case, the amount involved would be on a scale basis (provided in the books) of S$40,000 say for a trial that would last 4 days.
7. In the event that there would be an appeal to a High Court Judge in chambers, then I will have to charge another S$30,000. But if I should lose the appeal the party would have to bear costs of S$15,000
Glenn Knight
Bernard & Rada Law Corporation
50 Robinson Road
#08-00 VTB Building
Singapore 068882
DID: (65) 63947 852
Main: (65) 68999 888
Fax: (65) 6338 5377
Web: www.brllawcorp.com
Tuesday, October 28, 2008
Buying Government Securities
Many people have asked how they can buy Government Securities. I asked Adrian Tan to do some research. Here are his findings.
DO-IT-YOURSELF
http://www.sgs.gov.sg/pub_guide/faqs/publ_faqindinvestors.html
Go to “PURCHASING AND SELLING SGS” section.
To summarise, you have to open an account with a primary dealer (these include ABN AMBRO, DBS, OCBC and UOB) or a secondary dealer. “Banks, merchant banks and stockbroking firms are among the approved Secondary Dealers”.
“With this account, you can purchase SGS over the counter with these banks.”
If you follow this route, make sure you ask about the commissions and other charges that are applicable.
If you face difficulties, say finding the right people in the bank to talk to, I suggest you tell MAS about your experiences.
ELECTRONICALLY (fundsupermat)
If you have have an investment account with fundsupermart, you may invest in SGS bonds using this existing account. If you have never opened an investment account, you will be required to open one before you can invest in SGS bonds https://secure.fundsupermart.com/main/acl/registerAccount1.tpl
You are only allowed to purchase SGS Bonds via this platform using cash
'For SGS Bond, the charges that you will incur is 0.1% processing fee and 0.1% annual custody fee. The 0.1% processing fee will be deducted from your nominal value upon purchasing and the remaining 0.1% annual custody fee will be deducted yearly from your coupon payment i.e. 0.05% semi annually as the coupon payment will be paid out every 6 months. Please be noted that no charges will be incurred when you sell the SGS Bonds.
Please refer to FAQ over the website:
http://www.fundsupermart.com/main/faq/sgs_faq.tpl?id=6546
http://www.fundsupermart.com/main/faq/sgs_faq.tpl?id=910
http://www.fundsupermart.com/main/faq/sgs_faq.tpl?id=3826”
Author's note -- You have to be personally satisfied that you are comfortable dealing with fundsupermarket.com or its related entities. Mr Tan Kin Lian or Adrian Tan are not making any representations about fundsupermarket.com or its related entities.
DO-IT-YOURSELF
http://www.sgs.gov.sg/pub_guide/faqs/publ_faqindinvestors.html
Go to “PURCHASING AND SELLING SGS” section.
To summarise, you have to open an account with a primary dealer (these include ABN AMBRO, DBS, OCBC and UOB) or a secondary dealer. “Banks, merchant banks and stockbroking firms are among the approved Secondary Dealers”.
“With this account, you can purchase SGS over the counter with these banks.”
If you follow this route, make sure you ask about the commissions and other charges that are applicable.
If you face difficulties, say finding the right people in the bank to talk to, I suggest you tell MAS about your experiences.
ELECTRONICALLY (fundsupermat)
If you have have an investment account with fundsupermart, you may invest in SGS bonds using this existing account. If you have never opened an investment account, you will be required to open one before you can invest in SGS bonds https://secure.fundsupermart.com/main/acl/registerAccount1.tpl
You are only allowed to purchase SGS Bonds via this platform using cash
'For SGS Bond, the charges that you will incur is 0.1% processing fee and 0.1% annual custody fee. The 0.1% processing fee will be deducted from your nominal value upon purchasing and the remaining 0.1% annual custody fee will be deducted yearly from your coupon payment i.e. 0.05% semi annually as the coupon payment will be paid out every 6 months. Please be noted that no charges will be incurred when you sell the SGS Bonds.
Please refer to FAQ over the website:
http://www.fundsupermart.com/main/faq/sgs_faq.tpl?id=6546
http://www.fundsupermart.com/main/faq/sgs_faq.tpl?id=910
http://www.fundsupermart.com/main/faq/sgs_faq.tpl?id=3826”
Author's note -- You have to be personally satisfied that you are comfortable dealing with fundsupermarket.com or its related entities. Mr Tan Kin Lian or Adrian Tan are not making any representations about fundsupermarket.com or its related entities.
Regulator should disallow the sale of bad products
The CEO of a large government owned organisation told me,
"Kin Lian, you are opening a pandora's box. By speaking for the investors who were misled into buying the structured products, you allow other sophisticated investors to claim that they were also misled and to claim compensation. How can you differentiate between the two group?"
I showed this blog to him on my notebook computer: http://tankinlian.blogspot.com/2008/10/nature-and-risk-of-structured-product.html
After reading it, he changed his mind. He did not realise that the product could be so toxic and was surprised that it was allowed to be sold. Nobody would have bought the product, if it was properly described to them.
I showed to him another potential time bomb, concerning the leveraged dual currency investment:
http://tankinlian.blogspot.com/2008/10/leveraged-dual-currency-investments.html
He was again surprised. He wanted to check if his wife also invested in these dual currency investment. It is so easy for the unsavvy to be fooled.
He suggested to me on how the message of these bad products could be disseminated more widely to inform the investors. I replied that, by naming the products, I stand the risk of being sued by the creators of these products. In my view, it is the job of the regulator to ensure that bad products cannot be sold.
"Kin Lian, you are opening a pandora's box. By speaking for the investors who were misled into buying the structured products, you allow other sophisticated investors to claim that they were also misled and to claim compensation. How can you differentiate between the two group?"
I showed this blog to him on my notebook computer: http://tankinlian.blogspot.com/2008/10/nature-and-risk-of-structured-product.html
After reading it, he changed his mind. He did not realise that the product could be so toxic and was surprised that it was allowed to be sold. Nobody would have bought the product, if it was properly described to them.
I showed to him another potential time bomb, concerning the leveraged dual currency investment:
http://tankinlian.blogspot.com/2008/10/leveraged-dual-currency-investments.html
He was again surprised. He wanted to check if his wife also invested in these dual currency investment. It is so easy for the unsavvy to be fooled.
He suggested to me on how the message of these bad products could be disseminated more widely to inform the investors. I replied that, by naming the products, I stand the risk of being sued by the creators of these products. In my view, it is the job of the regulator to ensure that bad products cannot be sold.
Singapore Kopitiam Forum
Dear Mr. Tan:
I would like to commend you for your selfless effort in helping the investors to get back some of their investments in Minibonds, DBS High Notes 5, Jubilee Notes, and Pinnacle Notes, etc.
I realize that you have to block some of the comments left by visitors to your blog in order to keep your blog clean.
In an effort to assist you to achieve your goal, I have set aside a "Finance/Str_Products/Stock" discussion board at "Singapore Kopitiam" Forum for investors to air their views, exchange ideas, and coordinate a common approach to financial institutions:
http://forums.delphiforums.com/n/mb/list.asp?webtag=sunkopitiam&ctx=32768&cacheTag=x10-28
Any visitor can register a free account at "Singapore Kopitiam" Forum and start posting without time delay or moderation. "Singapore Kopitiam" Forum has already carried some of the reposted messages from your blog and other news concerning Minibonds, DBS High Notes 5, Jubilee Notes, and Pinnacle Notes, etc.
I would appreciate it very much if you would publicize it on your blog and encourage investors to make use of the facilities to achieve their goals.
God bless you!
Regards
Victor Sun
Singapore Kopitiam
http://forums.delphiforums.com/sunkopitiam
I would like to commend you for your selfless effort in helping the investors to get back some of their investments in Minibonds, DBS High Notes 5, Jubilee Notes, and Pinnacle Notes, etc.
I realize that you have to block some of the comments left by visitors to your blog in order to keep your blog clean.
In an effort to assist you to achieve your goal, I have set aside a "Finance/Str_Products/Stock" discussion board at "Singapore Kopitiam" Forum for investors to air their views, exchange ideas, and coordinate a common approach to financial institutions:
http://forums.delphiforums.com/n/mb/list.asp?webtag=sunkopitiam&ctx=32768&cacheTag=x10-28
Any visitor can register a free account at "Singapore Kopitiam" Forum and start posting without time delay or moderation. "Singapore Kopitiam" Forum has already carried some of the reposted messages from your blog and other news concerning Minibonds, DBS High Notes 5, Jubilee Notes, and Pinnacle Notes, etc.
I would appreciate it very much if you would publicize it on your blog and encourage investors to make use of the facilities to achieve their goals.
God bless you!
Regards
Victor Sun
Singapore Kopitiam
http://forums.delphiforums.com/sunkopitiam
Nature and risk of the structured product
Hi Mr. Tan,
You said, on many occasions, that the investors have been mis-informed about the "nature and risk" of the structured product. Can you explain what you mean and what actually happened?
REPLY
If you invest in a bond of a company, you stand the risk of losing your investment if this company goes bankrupt. To reduce this risk, you can spread your investment over 6 bonds. If any one company goes bankrupt, you only lose 1/6 of your investment. This is called diversification and is a sound investment strategy.
If you invest in a structured product with 6 "first to default" swaps, you stand to lose all of your capital if any one of these 6 swaps failed. You stand the chance of losing your capital 6 times. Instead of reducing your risk to 1/6, you are multiplying your risk 6 times. It is highly risky. It is madness.
Many people were misled into thinking that they are reducing their risk by diversifying their investment into 6 entities. The actual situation is that they are increasing their risk 6 fold by the "first to default" swaps on these 6 entities.
This actual "nature and risk" of the structured product has not been properly explained in the prospectus and in the explanation given by the sales representative.
You said, on many occasions, that the investors have been mis-informed about the "nature and risk" of the structured product. Can you explain what you mean and what actually happened?
REPLY
If you invest in a bond of a company, you stand the risk of losing your investment if this company goes bankrupt. To reduce this risk, you can spread your investment over 6 bonds. If any one company goes bankrupt, you only lose 1/6 of your investment. This is called diversification and is a sound investment strategy.
If you invest in a structured product with 6 "first to default" swaps, you stand to lose all of your capital if any one of these 6 swaps failed. You stand the chance of losing your capital 6 times. Instead of reducing your risk to 1/6, you are multiplying your risk 6 times. It is highly risky. It is madness.
Many people were misled into thinking that they are reducing their risk by diversifying their investment into 6 entities. The actual situation is that they are increasing their risk 6 fold by the "first to default" swaps on these 6 entities.
This actual "nature and risk" of the structured product has not been properly explained in the prospectus and in the explanation given by the sales representative.
Make Government Bonds easily available
26 October, 2008
Editor
Forum Page
Straits Times
Make Government Bonds easily available to the public
The Singapore Government has decided to guarantee all deposits with banks in Singapore. This move is intended to maintain the depositors' confidence in Singapore banks and to prevent the flight of deposits to financial jurisdiction covered by a state guarantee.
I wonder why Singapore taxpayers should be bearing the cost of this guarantee? The Singapore banks now offer a low interest rate of less than 1% per annum and earn a high spread on the loans that they make out. They are able to lend out the money on loans and overdrafts at the prime rate of 4% plus a margin. Are the taxpayers subsidising the shareholders of these banks?
I like to suggest an alternative approach. The Singapore Government should issue more government bonds for durations of 1 to 30 years. This should be made easily available to the public to buy through ATMs or other channels. The money collected from these bonds can be lent out to the financial institutions based on the cost of funds plus a credit spread, for the financial institutions to make loans and overdraft.
This approach will allow the working people and retirees in Singapore to earn a market rate of interest on the government bonds, which is higher than interest paid on bank deposits. This higher interest rate will help to cushion the temporary high inflation rate in Singapore.
The banks should not be allowed to earn a high margin on their lending operations and benefit from the guarantee provided by the Government. The high margin increases the profits of the banks and benefits their shareholders, but comes at the expense of the deposits who are given a low interest rate.
Tan Kin Lian
Editor
Forum Page
Straits Times
Make Government Bonds easily available to the public
The Singapore Government has decided to guarantee all deposits with banks in Singapore. This move is intended to maintain the depositors' confidence in Singapore banks and to prevent the flight of deposits to financial jurisdiction covered by a state guarantee.
I wonder why Singapore taxpayers should be bearing the cost of this guarantee? The Singapore banks now offer a low interest rate of less than 1% per annum and earn a high spread on the loans that they make out. They are able to lend out the money on loans and overdrafts at the prime rate of 4% plus a margin. Are the taxpayers subsidising the shareholders of these banks?
I like to suggest an alternative approach. The Singapore Government should issue more government bonds for durations of 1 to 30 years. This should be made easily available to the public to buy through ATMs or other channels. The money collected from these bonds can be lent out to the financial institutions based on the cost of funds plus a credit spread, for the financial institutions to make loans and overdraft.
This approach will allow the working people and retirees in Singapore to earn a market rate of interest on the government bonds, which is higher than interest paid on bank deposits. This higher interest rate will help to cushion the temporary high inflation rate in Singapore.
The banks should not be allowed to earn a high margin on their lending operations and benefit from the guarantee provided by the Government. The high margin increases the profits of the banks and benefits their shareholders, but comes at the expense of the deposits who are given a low interest rate.
Tan Kin Lian
Not a happy time for me
26 October, 2008
Editor
Today Paper
I refer to your article entitled “Finally, a Change on Friday” (Today, 25 October 2008).
I thank your editorial director P N Balji for an excellent article in tracing the developments in Singapore on the structured products affected by the collapse of Lehman Brothers.
I also welcome the decision by the Monetary Authority of Singapore to help resolve the complaints of the investors in these structured products. Like the saying goes, “better late than never”.
The MAS has asked the financial institutions to give priority to the “vulnerable” investors, who are defined to be elderly and lowly educated. Many investors who fall outside of this category are worried that their claims may be ignored. MAS has since clarified that their complaints will also be attended to.
You made the following statement which I need to correct, “… they should not have maintained silence …. thus creating a vacuum which people like Mr.Tan filled happily”. I wish to say that it was not a happy time for me.
For the past one over year, I have advised visitors to my blog www.tankinlian.blogspot.com to avoid these structured products. I was horrified to learn, following the collapse of Lehman Brothers, about the extent of the losses incurred by the investors and how they were misled into investing in the structured products.
I decided to organise a Petition to ask the Government to investigate if there were breaches of the law and if so, could the relevant authority take relevant action to help the investors to seek fair compensation. I decided to hold a meeting at Speaker’s Corner to give an update of the Petition.
The past three weeks have been very stressful for me. I have to deal with more than 50 e-mails and postings to my blog each day. Many of the investors were lost and needed guidance. I am grateful for the large number of volunteers who came forward to help, but the main burden fell on my shoulders.
I wished that there was no vacuum that needed to be filled. In an earlier statement to the media, I express the wish that MAS could provide the appropriate assistance to the investors so that I do not have to “work so hard”. I hope that it is possible for me to step back soon to attend to my normal routine.
Tan Kin Lian
Editor
Today Paper
I refer to your article entitled “Finally, a Change on Friday” (Today, 25 October 2008).
I thank your editorial director P N Balji for an excellent article in tracing the developments in Singapore on the structured products affected by the collapse of Lehman Brothers.
I also welcome the decision by the Monetary Authority of Singapore to help resolve the complaints of the investors in these structured products. Like the saying goes, “better late than never”.
The MAS has asked the financial institutions to give priority to the “vulnerable” investors, who are defined to be elderly and lowly educated. Many investors who fall outside of this category are worried that their claims may be ignored. MAS has since clarified that their complaints will also be attended to.
You made the following statement which I need to correct, “… they should not have maintained silence …. thus creating a vacuum which people like Mr.Tan filled happily”. I wish to say that it was not a happy time for me.
For the past one over year, I have advised visitors to my blog www.tankinlian.blogspot.com to avoid these structured products. I was horrified to learn, following the collapse of Lehman Brothers, about the extent of the losses incurred by the investors and how they were misled into investing in the structured products.
I decided to organise a Petition to ask the Government to investigate if there were breaches of the law and if so, could the relevant authority take relevant action to help the investors to seek fair compensation. I decided to hold a meeting at Speaker’s Corner to give an update of the Petition.
The past three weeks have been very stressful for me. I have to deal with more than 50 e-mails and postings to my blog each day. Many of the investors were lost and needed guidance. I am grateful for the large number of volunteers who came forward to help, but the main burden fell on my shoulders.
I wished that there was no vacuum that needed to be filled. In an earlier statement to the media, I express the wish that MAS could provide the appropriate assistance to the investors so that I do not have to “work so hard”. I hope that it is possible for me to step back soon to attend to my normal routine.
Tan Kin Lian
Misleading advertisements
Dear Kin Lian,
Mr. Heng Swee Kiat, the Managing Director for the Monetary Authority of Singapore, is reported to have said, inter alia, ... "This group should have understood the risks of investing in these products and take responsibilities for their actions" [Sunday Times, Oct 26] when he expressed assurance that all investors’ complaints of mis-selling would be reviewed, with regard to their investment in structured products linked to bankrupt Lehman Brothers. Was it fair of Mr. Heng to pass such a comment? If mis-selling is considered a legitimate ground for seeking restitution, then it would have been more constructive if Mr. Heng had said: "Any bank or institution that has mis-sold or misrepresented must bear the loss suffered by the investor."
Some examples of mis-selling are clear-cut, and have been discussed in the local newspapers. An advertising pamphlet [M-pamphlet] produced for public consumption, for Minibonds Series 3, is a case in point. This M-pamphlet was produced with these enticing statements:
"Invest on solid foundations and earn 5% pa paid every 3 months for 53/4 years" and
"With our Minibond Series 3 credit-linked to six major financial institutions, you can enjoy the returns you deserve with peace of mind"
As a marketing ploy, these adverts make the product look attractive, but M-pamphlet was designed with deception in mind nevertheless, notwithstanding a disclaimer clause, in almost illegible fine print, placed at the bottom of the pamphlet. When the institution responsible for this M-pamphlet instructed the investor to sign on a modified version of M-pamphlet, the investor was probably not aware of the slight but crucial disparity between this modified version and M-pamphlet. And one cannot be faulted for saying that many, if not all, investors could have seen M-pamphlet and relied on the enticing statements mentioned above. And what is this disparity?
The disparity is that this encouraging and enticing statement "With our Minibond Series 3 credit-linked to six major financial institutions, you can enjoy the returns you deserve with peace of mind" and the disclaimer clause do not appear on the modified version. Any investors must still be given credit if they had noticed this disparity but had thought nothing of it. But if no one had noticed it they could not be faulted. It is clear that the advertising pamphlet was designed with a preconceived intention of misleading the public.
If MAS is serious in holding distributors responsible for mis-selling, MAS should ask for specimens of advertising materials/other documentation used by distributors when they were flogging these products, and critically examine them. The verbal input given to investors by relationship managers is no doubt an area of equal importance, if not more so, as a source of evidence for mis-selling or misrepresentation.
If any risk analysis completed for an investor shows the investor was NOT a high-risk taker, then the distributor was prima facie irresponsible for selling the product to the investor concerned and must now reimburse the investor for the loss. Should any distributor be found to be clearly at fault for mis-selling or misrepresenting a particular product, then MAS would do well to tell the distributor to reimburse all investors to whom they sold the product.
Richard Woo
Mr. Heng Swee Kiat, the Managing Director for the Monetary Authority of Singapore, is reported to have said, inter alia, ... "This group should have understood the risks of investing in these products and take responsibilities for their actions" [Sunday Times, Oct 26] when he expressed assurance that all investors’ complaints of mis-selling would be reviewed, with regard to their investment in structured products linked to bankrupt Lehman Brothers. Was it fair of Mr. Heng to pass such a comment? If mis-selling is considered a legitimate ground for seeking restitution, then it would have been more constructive if Mr. Heng had said: "Any bank or institution that has mis-sold or misrepresented must bear the loss suffered by the investor."
Some examples of mis-selling are clear-cut, and have been discussed in the local newspapers. An advertising pamphlet [M-pamphlet] produced for public consumption, for Minibonds Series 3, is a case in point. This M-pamphlet was produced with these enticing statements:
"Invest on solid foundations and earn 5% pa paid every 3 months for 53/4 years" and
"With our Minibond Series 3 credit-linked to six major financial institutions, you can enjoy the returns you deserve with peace of mind"
As a marketing ploy, these adverts make the product look attractive, but M-pamphlet was designed with deception in mind nevertheless, notwithstanding a disclaimer clause, in almost illegible fine print, placed at the bottom of the pamphlet. When the institution responsible for this M-pamphlet instructed the investor to sign on a modified version of M-pamphlet, the investor was probably not aware of the slight but crucial disparity between this modified version and M-pamphlet. And one cannot be faulted for saying that many, if not all, investors could have seen M-pamphlet and relied on the enticing statements mentioned above. And what is this disparity?
The disparity is that this encouraging and enticing statement "With our Minibond Series 3 credit-linked to six major financial institutions, you can enjoy the returns you deserve with peace of mind" and the disclaimer clause do not appear on the modified version. Any investors must still be given credit if they had noticed this disparity but had thought nothing of it. But if no one had noticed it they could not be faulted. It is clear that the advertising pamphlet was designed with a preconceived intention of misleading the public.
If MAS is serious in holding distributors responsible for mis-selling, MAS should ask for specimens of advertising materials/other documentation used by distributors when they were flogging these products, and critically examine them. The verbal input given to investors by relationship managers is no doubt an area of equal importance, if not more so, as a source of evidence for mis-selling or misrepresentation.
If any risk analysis completed for an investor shows the investor was NOT a high-risk taker, then the distributor was prima facie irresponsible for selling the product to the investor concerned and must now reimburse the investor for the loss. Should any distributor be found to be clearly at fault for mis-selling or misrepresenting a particular product, then MAS would do well to tell the distributor to reimburse all investors to whom they sold the product.
Richard Woo
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