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Tan Kin Lian
Friday, October 31, 2008
Educate the public about the structured products
Hi Mr Tan,
I am a HN2 investor and had attended the HN2 dialogue arranged by DBS. A lot of investors brought out their cases of how they were misled by the RM and bought the product. The DBS VP gave the standard answers in different forms by asking the individuals to sending in complaint and they will investigate case by case. Cases with evidence will be compensated with different amount.
Obviously this is "divide and conquer". Everyone complaint about their RM. Nobody complainted about DBS, the creator of the product. As a whole, this dialogue is just a SHOW put up by DBS. I think the VP is very happy that the focus is on the RMs and not DBS. I am very angry and disappointed.
I have brought out the question of whether it is a leverage product and whether it is a suitable product for general public. But no answer from him.
I feel that not many of the investors have realized that this is the DBS fault of creating such a toxic product and well packaged to be sold to investors who do not have much knowledge in the derivatives. (In fact even the university lecturer in Business got trapped.) It is regardless of whether you are educated or not, above age 62 or not, speaking only Chinese or not!
I have a suggestion here that shall we revealed to the public via media WHAT HN5 AND HN2 ARE. Show them what an expert had analyzed both in the technical and layman terms. Only in this way that we can make everyone understand how toxic the products are. Only in this way that we can tell those people who are un-empathized, and obviously not directly involved to shut their mouth.
We must not only be united within us, we must reveal everything to all Singaporeans and get all Singaporeans who have conscience to be united and don't get bullied by such an entrusted business giant.
Mr Tan, hope that you can advise us what we should do next so that DBS and MAS would face the problem and return to us, thousands of Singaporeans, a justice.
Many thanks again to what you have done for us!
LK
I am a HN2 investor and had attended the HN2 dialogue arranged by DBS. A lot of investors brought out their cases of how they were misled by the RM and bought the product. The DBS VP gave the standard answers in different forms by asking the individuals to sending in complaint and they will investigate case by case. Cases with evidence will be compensated with different amount.
Obviously this is "divide and conquer". Everyone complaint about their RM. Nobody complainted about DBS, the creator of the product. As a whole, this dialogue is just a SHOW put up by DBS. I think the VP is very happy that the focus is on the RMs and not DBS. I am very angry and disappointed.
I have brought out the question of whether it is a leverage product and whether it is a suitable product for general public. But no answer from him.
I feel that not many of the investors have realized that this is the DBS fault of creating such a toxic product and well packaged to be sold to investors who do not have much knowledge in the derivatives. (In fact even the university lecturer in Business got trapped.) It is regardless of whether you are educated or not, above age 62 or not, speaking only Chinese or not!
I have a suggestion here that shall we revealed to the public via media WHAT HN5 AND HN2 ARE. Show them what an expert had analyzed both in the technical and layman terms. Only in this way that we can make everyone understand how toxic the products are. Only in this way that we can tell those people who are un-empathized, and obviously not directly involved to shut their mouth.
We must not only be united within us, we must reveal everything to all Singaporeans and get all Singaporeans who have conscience to be united and don't get bullied by such an entrusted business giant.
Mr Tan, hope that you can advise us what we should do next so that DBS and MAS would face the problem and return to us, thousands of Singaporeans, a justice.
Many thanks again to what you have done for us!
LK
Invest in transparent and fair products
I advocate straight forward products - equity, bond, currency, deposits - that are transparent and fair to consumers.
It is all right to take risk, such as investing in equity or foreign currency, provided that you get both the upside and downside of the investment.
Here are the methods to reduce risk:
> diversify, i.e. invest in a fund containing many investments
> invest for the long term, to average out the good and bad years
You can reduce the risk (through diversification and long term averaging) and get the higher return from equity or foreign currency.
I advise investors to avoid all types of structured products (e.g. capital guaranteed, credit linked notes, dual currency investments), as they are structured to hide high expenses and profit margins and give a poor return to the investor.
I also advise investors to avoid investing in most types of life insurance products (i.e. whole life, endowment, investment linked policies) for the same reasons (i.e. high charges, poor return to policyholders).
You should avoid all types of investment products (i.e. bank or insurance products) that are marketed to you by sales representatives, as they have high charges to pay the distributor and to make profit for the product creator.
It is all right to take risk, such as investing in equity or foreign currency, provided that you get both the upside and downside of the investment.
Here are the methods to reduce risk:
> diversify, i.e. invest in a fund containing many investments
> invest for the long term, to average out the good and bad years
You can reduce the risk (through diversification and long term averaging) and get the higher return from equity or foreign currency.
I advise investors to avoid all types of structured products (e.g. capital guaranteed, credit linked notes, dual currency investments), as they are structured to hide high expenses and profit margins and give a poor return to the investor.
I also advise investors to avoid investing in most types of life insurance products (i.e. whole life, endowment, investment linked policies) for the same reasons (i.e. high charges, poor return to policyholders).
You should avoid all types of investment products (i.e. bank or insurance products) that are marketed to you by sales representatives, as they have high charges to pay the distributor and to make profit for the product creator.
Petition #4 - Review Complaint Handling Process
This Petition is addressed to the chairman of the Monetary Authority of Singapore and ask MAS to review the complaint handling process. Specifically, it ask:
1. That the Monetary Authority of Singapore appoints or sets up an independent unit to receive the complaints and to provide assistance to the complainants to write their statement.
2. That the Monetary Authority of Singapore encourage the financial institutions to adopt a collective approach in offering fair compensation to investors who have been misled into investing in these unsuitable investments, according to the category that the investors fall under. These categories could, for example, be determined by the manner in which the investors were advised or approached by the sales representative, or the alleged mis-information given to the investors.
You can click here to read the full Petition and sign it, if you agree with it:
http://www.petitiononline.com/PRCHP1/petition.html
1. That the Monetary Authority of Singapore appoints or sets up an independent unit to receive the complaints and to provide assistance to the complainants to write their statement.
2. That the Monetary Authority of Singapore encourage the financial institutions to adopt a collective approach in offering fair compensation to investors who have been misled into investing in these unsuitable investments, according to the category that the investors fall under. These categories could, for example, be determined by the manner in which the investors were advised or approached by the sales representative, or the alleged mis-information given to the investors.
You can click here to read the full Petition and sign it, if you agree with it:
http://www.petitiononline.com/PRCHP1/petition.html
High Notes Investor Group - Press release 30 Oct 08
HNIG Press Release 31st Oct 2008
1. On Thursday 30th October 2008, in response to a petition by the High Notes Investor Group (HNIG), DBS met up with approximately 400 investors of their DBS High Notes 5 (HN5) product in two separate sessions. Session 1 started at 2.00pm and Session 2 was at 5.00pm.
2. Both sessions were originally scheduled to last one hour, but eventually ran for more than two and a half hours each time.
3. Many attendees urged DBS to treat all investorsas a group rather than go through a case-by-case process on the subject of compensation.
4. To buttress the above argument, the HNIG revealed at the forum that they had requested an industry insider who has experience structuring such products to go through the HN5 pricing statement. After a six-hour preliminary analysis of both the document as well as the real-life experiences of investors, it would seem that in HN5, there appears to be SYSTEMIC Failure on three fronts:
a) Failure in the PRODUCT
i) Product was arranged, issued and sold by DBS
ii) Product was leveraged on Credit Default Swaps
iii) Product was secured on CDOs
b) Failure in the SALES PROCESS
i) Product was sold through a large sales force who were inadequately trained, and
ii) Relationship managers who were and are still not familiar with HN5 and customer’s suitability
c) Failure in CUSTOMER TARGETING
i) HN5 was sold to inappropriate customers
ii) HN5 was targeted at customers with little or no knowledge of financial concepts like CDS, CDOs, and Leverage
Because of the failures in the product itself, we are asking DBS to undertake compensation in a blanket or collective manner, and not on a case-by-case basis.
5. DBS was also questioned on the issue of RISK MANAGEMENT – there appears to have been serious lapses in this area that has resulted in a detrimental impact on the customers of HN5.
6. In response to questioning, Mr Rajan Raju, Head of Consumer Banking admitted that the HN5 is “NOT a low risk product”. Further, in response to a pointed question on the actual risks inherent in HN5, Ms Frances Chan, Senior Vice-President revealed that, on a scale of 1 to 10, the HN5 product was a “8 to 9”. We feel that a risk factor as high as this is in no way commensurate with the relatively low returns from HN5 and a locked-in period of 5.5 years. This bolsters our argument of the presence of a Systemic Failure in HN5.
Other Highlights
7. One attendee questioned the rationale for GIC to pump billions of dollars of government reserves into UBS and Citigroup to bail out foreigners while a government-linked bank like DBS is being parsimonious in compensating its customers in a cut-and-dried case of mis-selling and misrepresentation.
8. Many attendees highlighted their long-standing relationships with POSB/DBS, some stretching over a period of more than 30 years. They expressed a deeply felt sense of betrayal by DBS which they said violated their trust in the bank. Many also spoke of their past willingness to buy products from DBS because they saw it as “the national bank” they could have complete trust in.
9. There were detailed questioning on DBS’s ability and competence in giving timely advice on the status of HN5. Attendees referred specifically to a letter dated 31 March 2008 which had actually advised DBS customers to hold HN5 to maturity.
10. At least one attendee made the point that the overall mishandling by DBS of its affected customers will result in an eventual pulling-out of funds from DBS to its competitor banks, with a concomitant negative impact on its share price. The latter had already fallen drastically in recent weeks, a phenomenon which most analysts attributed partly to the fallout from its High Notes 5 debacle.
11. The immediate post-forum reaction of most attendees is that the Thursday sessions have not moved the complaint nor the compensation processes forward in any significant manner. In comments to HNIG, many people expressed the doubt that if DBS had sold HN5 in an irresponsible manner to make money, how seriously could they be taken when they are now in a damage control mode. The basis for such comments arises from bruising encounters customers have had with DBS’s Investor Care personnel in interview sessions where sometimes three to four staffers question a lone customer.
Others felt that DBS in referring Relationship Managers to the Monetary Authority of Singapore (MAS) is missing an important point - in the words of one DBS customer, “If the RM doesn’t know what he is doing, if he is set impossible targets, and if he is rewarded based on commissions, whose fault is it? DBS must teach RMs first”.
12. HNIG is a group of DBS High Notes (HN) investors that has been formed to communicate with DBS and undertake relevant collective actions where and when necessary.
13. HNIG currently has about 300 investors in our contact list and these consist of investors of various HNs. More joined during the dialogue sessions yesterday. HNIG handed out leaflets to request HN investors to turn up at 4.30pm on Saturday 1 November 2008 at Hong Lim Park (Clarke Quay MRT station).
14. For any clarifications, please contact dbs.hns@gmail.com. Our blog can be found at http://dbshns.blogspot.com.
1. On Thursday 30th October 2008, in response to a petition by the High Notes Investor Group (HNIG), DBS met up with approximately 400 investors of their DBS High Notes 5 (HN5) product in two separate sessions. Session 1 started at 2.00pm and Session 2 was at 5.00pm.
2. Both sessions were originally scheduled to last one hour, but eventually ran for more than two and a half hours each time.
3. Many attendees urged DBS to treat all investorsas a group rather than go through a case-by-case process on the subject of compensation.
4. To buttress the above argument, the HNIG revealed at the forum that they had requested an industry insider who has experience structuring such products to go through the HN5 pricing statement. After a six-hour preliminary analysis of both the document as well as the real-life experiences of investors, it would seem that in HN5, there appears to be SYSTEMIC Failure on three fronts:
a) Failure in the PRODUCT
i) Product was arranged, issued and sold by DBS
ii) Product was leveraged on Credit Default Swaps
iii) Product was secured on CDOs
b) Failure in the SALES PROCESS
i) Product was sold through a large sales force who were inadequately trained, and
ii) Relationship managers who were and are still not familiar with HN5 and customer’s suitability
c) Failure in CUSTOMER TARGETING
i) HN5 was sold to inappropriate customers
ii) HN5 was targeted at customers with little or no knowledge of financial concepts like CDS, CDOs, and Leverage
Because of the failures in the product itself, we are asking DBS to undertake compensation in a blanket or collective manner, and not on a case-by-case basis.
5. DBS was also questioned on the issue of RISK MANAGEMENT – there appears to have been serious lapses in this area that has resulted in a detrimental impact on the customers of HN5.
6. In response to questioning, Mr Rajan Raju, Head of Consumer Banking admitted that the HN5 is “NOT a low risk product”. Further, in response to a pointed question on the actual risks inherent in HN5, Ms Frances Chan, Senior Vice-President revealed that, on a scale of 1 to 10, the HN5 product was a “8 to 9”. We feel that a risk factor as high as this is in no way commensurate with the relatively low returns from HN5 and a locked-in period of 5.5 years. This bolsters our argument of the presence of a Systemic Failure in HN5.
Other Highlights
7. One attendee questioned the rationale for GIC to pump billions of dollars of government reserves into UBS and Citigroup to bail out foreigners while a government-linked bank like DBS is being parsimonious in compensating its customers in a cut-and-dried case of mis-selling and misrepresentation.
8. Many attendees highlighted their long-standing relationships with POSB/DBS, some stretching over a period of more than 30 years. They expressed a deeply felt sense of betrayal by DBS which they said violated their trust in the bank. Many also spoke of their past willingness to buy products from DBS because they saw it as “the national bank” they could have complete trust in.
9. There were detailed questioning on DBS’s ability and competence in giving timely advice on the status of HN5. Attendees referred specifically to a letter dated 31 March 2008 which had actually advised DBS customers to hold HN5 to maturity.
10. At least one attendee made the point that the overall mishandling by DBS of its affected customers will result in an eventual pulling-out of funds from DBS to its competitor banks, with a concomitant negative impact on its share price. The latter had already fallen drastically in recent weeks, a phenomenon which most analysts attributed partly to the fallout from its High Notes 5 debacle.
11. The immediate post-forum reaction of most attendees is that the Thursday sessions have not moved the complaint nor the compensation processes forward in any significant manner. In comments to HNIG, many people expressed the doubt that if DBS had sold HN5 in an irresponsible manner to make money, how seriously could they be taken when they are now in a damage control mode. The basis for such comments arises from bruising encounters customers have had with DBS’s Investor Care personnel in interview sessions where sometimes three to four staffers question a lone customer.
Others felt that DBS in referring Relationship Managers to the Monetary Authority of Singapore (MAS) is missing an important point - in the words of one DBS customer, “If the RM doesn’t know what he is doing, if he is set impossible targets, and if he is rewarded based on commissions, whose fault is it? DBS must teach RMs first”.
12. HNIG is a group of DBS High Notes (HN) investors that has been formed to communicate with DBS and undertake relevant collective actions where and when necessary.
13. HNIG currently has about 300 investors in our contact list and these consist of investors of various HNs. More joined during the dialogue sessions yesterday. HNIG handed out leaflets to request HN investors to turn up at 4.30pm on Saturday 1 November 2008 at Hong Lim Park (Clarke Quay MRT station).
14. For any clarifications, please contact dbs.hns@gmail.com. Our blog can be found at http://dbshns.blogspot.com.
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