Dear Mr. Tan
I suggest that we gather another petition to collect signatures for those who had not been offered compensation or low compensation to our MAS Chairman, Mr Goh, as he announced a fictitious figures of 2/3 being compensated. Judging from many I spoken to, I doubt this figuures are true.
EL
REPLY
According to the MAS statement, 2/3rd were offered compensation. But in many cases, the compensation was rather low (say 10%), and were not accepted by the investor.
I do not know if the investors are still keen to sign a Petition, as previous petitions have been ignored by MAS
Thursday, July 2, 2009
Show of support?
I gave my intelligence quiz (vol 1 and vol 2) and shape quiz to a non-Singaporean friend. He decided to buy 200 sets of each item to be given to the staff of his company. He wanted to show his support, in return for some help that I gave to him many years ago.
I appreciate his generosity. This type of attitude appears to be somewhat missing among Singaporeans. Most of us are too busy thinking of ourselves, and do not act to show support for others.
Someone posted a comment that my blog should not be promoting my products, as it should focus on giving advice on "insurance and investments". I do not know if this comment comes from a Singaporean, but I have a strong feeling that it does.
There are a few appreciative Singaporeans, but perhaps too few. They sent "thank you" cards or e-mail to me. One sent me a nice book. Another sent me a box of chocolates from Hawaii.
The easiest way to show your appreciation is to buy my books to give to your friends or to help in promoting my books. You can order them here.
I appreciate his generosity. This type of attitude appears to be somewhat missing among Singaporeans. Most of us are too busy thinking of ourselves, and do not act to show support for others.
Someone posted a comment that my blog should not be promoting my products, as it should focus on giving advice on "insurance and investments". I do not know if this comment comes from a Singaporean, but I have a strong feeling that it does.
There are a few appreciative Singaporeans, but perhaps too few. They sent "thank you" cards or e-mail to me. One sent me a nice book. Another sent me a box of chocolates from Hawaii.
The easiest way to show your appreciation is to buy my books to give to your friends or to help in promoting my books. You can order them here.
Was there an attempt to cheat?
Let us discuss this hypothetical case.
1. An investment bank was able to buy several credit default swaps (CDS) and collateralised debt obligations (CDOs) from the market to produce a return of 50% over 5 years.
2. It introduced an "innovative product" that pays an interest rate of 5% a year over 5 years, totalling 25%. It set aside 10% to pay a top legal firm to draft the prospectus and pay distributors to sell the products to its retail customers. The investment bank was able to keep a profit margin of 15% to sell the product. It planned to sell $100 million of the product, yielding a profit of $15 million to the investment bank.
3. The prospectus was drafted to be legally correct, but totally incomprehensible, even to the knowledgable people. The prospetus was "registered" with the regulatory authority, giving the impression that the product has been approved by the regulator.
4. The "genuis" who created this product wrote in the prospectus that the issuer had the right to choose the underlying assets after the launch of the product. This allowed the investment bank to select riskier assets (so long as they fit the credit rating) that produced a higher profit margin for the invsetment bank.
Does this hypothetical product sound familiar to you? Was the investment bank cheating the public?
Are these actions considered as "cheating"?
a) writing a prospectus that does not fairly describe the product or the underlying assets to the retail customer?
b) failing to disclose the expenses and profit margin, which are relevant for an analysis of the product?
c) giving a misleading description of the product in the advertisements?
d) knowing that the distributors (who are ignorant) are giving incorrect verbal statements of the product?
We do not know the real yield of the underlying assets and the profit margain made by the product issuer. If the profit margin is excessive, then the intent to cheat is more credible. If the profit margin is fair, the intent is harder to prove.
Only the regulatory authority, with the power to investigate and get evidence, can find out. "Lesser mortals", like the misguided investors and me, do not have this power. So sad.
Tan Kin Lian
1. An investment bank was able to buy several credit default swaps (CDS) and collateralised debt obligations (CDOs) from the market to produce a return of 50% over 5 years.
2. It introduced an "innovative product" that pays an interest rate of 5% a year over 5 years, totalling 25%. It set aside 10% to pay a top legal firm to draft the prospectus and pay distributors to sell the products to its retail customers. The investment bank was able to keep a profit margin of 15% to sell the product. It planned to sell $100 million of the product, yielding a profit of $15 million to the investment bank.
3. The prospectus was drafted to be legally correct, but totally incomprehensible, even to the knowledgable people. The prospetus was "registered" with the regulatory authority, giving the impression that the product has been approved by the regulator.
4. The "genuis" who created this product wrote in the prospectus that the issuer had the right to choose the underlying assets after the launch of the product. This allowed the investment bank to select riskier assets (so long as they fit the credit rating) that produced a higher profit margin for the invsetment bank.
Does this hypothetical product sound familiar to you? Was the investment bank cheating the public?
Are these actions considered as "cheating"?
a) writing a prospectus that does not fairly describe the product or the underlying assets to the retail customer?
b) failing to disclose the expenses and profit margin, which are relevant for an analysis of the product?
c) giving a misleading description of the product in the advertisements?
d) knowing that the distributors (who are ignorant) are giving incorrect verbal statements of the product?
We do not know the real yield of the underlying assets and the profit margain made by the product issuer. If the profit margin is excessive, then the intent to cheat is more credible. If the profit margin is fair, the intent is harder to prove.
Only the regulatory authority, with the power to investigate and get evidence, can find out. "Lesser mortals", like the misguided investors and me, do not have this power. So sad.
Tan Kin Lian
The Standard:New deal to settle minibond buyback
3 Juyl 2009
Sixteen banks which sold Lehman Brothers minibonds will pay most investors 60 percent of the principal as settlement - and no more.
Investors aged 65 and above will receive about 70 percent of their investment. In a formal proposal made to the Securities and Futures Commission yesterday, the banks said they will cap the total payable sum at 60 percent and will not repay the difference if collaterals are sold at a higher price in the future.
The move, which came a day after the July 1 protest, was a follow-up to the "touch base" meeting that representatives of the banks had with the SFC on Monday, in which no specific settlement plan was tabled.
It also came ahead of SFC chief Martin Wheatley's scheduled third meeting with a Legco panel today.
Explaining the cap, a source told The Standard that the banks will now lose as much as HK$1.5 billion rather than the HK$800 million as reported earlier by local media.
Some Lehman minibonds have lost all their value and a few are worth at most 20 percent of their original value.
Reports that the receiver of Lehman Brothers assets in Singapore will soon sign a deal offering the local liquidator an extra 20 percent to 30 percent of the collateral values of minibonds does not bode well for local investors, a banking source said.
"Investors may only get back less than 40 percent of their invested sum [rather] than the 53 percent Ernst & Young originally offered," the source said.
Possible litigation in the United States may also affect what Hong Kong investors retrieve.
The liquidator of Lehman assets has claimed that it has the right to own the collateral of all Lehman-related products globally.
This may compel distributor banks to go to court in the United States, where Lehman Brothers was based, and reduce any settlement with local investors.
Another source noted that the local investors' group - Allied Victims of Lehman Products - is avoiding the fact that few lenders have settled cases with a payback ratio higher than 60 percent to 70 percent and those payments were not retrospective.
The banking industry could lose up to HK$4.2 billion if the Lehman products' valuation drops to 26 percent of the original price, and up to HK$7.5 billion if they are worth nothing.
Lehman-related products worth HK$12 billion were sold in Hong Kong by 19 banks, according to the Hong Kong Monetary Authority.
Eleven of the banks were found to be involved in misconduct in the sale of those products, the SFC told lawmakers last week.
An SFC spokesman declined to comment on the banks' proposal.
But at last Friday's meeting at the Legislative Council, Wheatley said the SFC welcomed all proposals as long as they deterred misselling practices.
Meanwhile, the SFC said brokerage firms Sun Hung Kai Investment and KGI Asia have both completed their voluntary repurchase of Lehman Brothers minibonds, according to agreements they had with the regulator.
SHKI and KGI separately undertook to repurchase all outstanding Lehman Brothers minibonds subscribed, at a price equal to the principal amount, from eligible clients following the SFC's investigation into their sale of Lehman Brothers minibonds.
These agreements helped 329 clients recover their initial investments in full.
Last month, BOC Hong Kong (2388) - the largest vendor of Lehman minibonds - offered a similar payback ratio of 60 percent to 70 percent to investors plus a top-up for future collateral sales.
Sixteen banks which sold Lehman Brothers minibonds will pay most investors 60 percent of the principal as settlement - and no more.
Investors aged 65 and above will receive about 70 percent of their investment. In a formal proposal made to the Securities and Futures Commission yesterday, the banks said they will cap the total payable sum at 60 percent and will not repay the difference if collaterals are sold at a higher price in the future.
The move, which came a day after the July 1 protest, was a follow-up to the "touch base" meeting that representatives of the banks had with the SFC on Monday, in which no specific settlement plan was tabled.
It also came ahead of SFC chief Martin Wheatley's scheduled third meeting with a Legco panel today.
Explaining the cap, a source told The Standard that the banks will now lose as much as HK$1.5 billion rather than the HK$800 million as reported earlier by local media.
Some Lehman minibonds have lost all their value and a few are worth at most 20 percent of their original value.
Reports that the receiver of Lehman Brothers assets in Singapore will soon sign a deal offering the local liquidator an extra 20 percent to 30 percent of the collateral values of minibonds does not bode well for local investors, a banking source said.
"Investors may only get back less than 40 percent of their invested sum [rather] than the 53 percent Ernst & Young originally offered," the source said.
Possible litigation in the United States may also affect what Hong Kong investors retrieve.
The liquidator of Lehman assets has claimed that it has the right to own the collateral of all Lehman-related products globally.
This may compel distributor banks to go to court in the United States, where Lehman Brothers was based, and reduce any settlement with local investors.
Another source noted that the local investors' group - Allied Victims of Lehman Products - is avoiding the fact that few lenders have settled cases with a payback ratio higher than 60 percent to 70 percent and those payments were not retrospective.
The banking industry could lose up to HK$4.2 billion if the Lehman products' valuation drops to 26 percent of the original price, and up to HK$7.5 billion if they are worth nothing.
Lehman-related products worth HK$12 billion were sold in Hong Kong by 19 banks, according to the Hong Kong Monetary Authority.
Eleven of the banks were found to be involved in misconduct in the sale of those products, the SFC told lawmakers last week.
An SFC spokesman declined to comment on the banks' proposal.
But at last Friday's meeting at the Legislative Council, Wheatley said the SFC welcomed all proposals as long as they deterred misselling practices.
Meanwhile, the SFC said brokerage firms Sun Hung Kai Investment and KGI Asia have both completed their voluntary repurchase of Lehman Brothers minibonds, according to agreements they had with the regulator.
SHKI and KGI separately undertook to repurchase all outstanding Lehman Brothers minibonds subscribed, at a price equal to the principal amount, from eligible clients following the SFC's investigation into their sale of Lehman Brothers minibonds.
These agreements helped 329 clients recover their initial investments in full.
Last month, BOC Hong Kong (2388) - the largest vendor of Lehman minibonds - offered a similar payback ratio of 60 percent to 70 percent to investors plus a top-up for future collateral sales.
Gathering at Speaker's Corner in August (3)
25 people have replied to the survey mentioned in this blog. Each person indicated that they will ask a small number of people to attend. Only 1 person is willing to speak.
I need more speakers. If you wish to share your story (with particulars removed to protect your confidentiality), I can get someone to speak on your behalf.
If you like the gathering to be organised, please give your reply here. You can also indicate if you wish to share your story for someone to speak on your behalf.
I need more speakers. If you wish to share your story (with particulars removed to protect your confidentiality), I can get someone to speak on your behalf.
If you like the gathering to be organised, please give your reply here. You can also indicate if you wish to share your story for someone to speak on your behalf.
Best use for electric car
What is the best use of an electric car? Here are my views. I believe that it will occur within the next 5 years.
Invest in Singapore Government Securities
Hi Mr Tan,
What is your view on the SGS (Singapore Government Securities)? Is it worth buying the bond for retail investors like me?
REPLY
The interest rate paid on SGS is quite low, less than 1% per year, but it is safe.
If you can get a higher interest rate from bank deposits (which is guaranteed by the Government), it is better to put on bank deposit. The foreign banks offer higher interest rate and are still guaranteed by the Singapore Government.
If you wish to have a higher return, it is better to invest in a ETF (exchange traded fund). The return may be volatile in the short term, but it should give an attractive return over 10 years or longer.
What is your view on the SGS (Singapore Government Securities)? Is it worth buying the bond for retail investors like me?
YS
REPLY
The interest rate paid on SGS is quite low, less than 1% per year, but it is safe.
If you can get a higher interest rate from bank deposits (which is guaranteed by the Government), it is better to put on bank deposit. The foreign banks offer higher interest rate and are still guaranteed by the Singapore Government.
If you wish to have a higher return, it is better to invest in a ETF (exchange traded fund). The return may be volatile in the short term, but it should give an attractive return over 10 years or longer.
Politics of Fear
Australia: List the names of underlying securities
Dear Mr. Tan,
The monetary authorities of Singapore and Hong Kong were foolish to approve the toxic products to be sold by financial institution and security firms to retail investor. They both wanted to compete to be financial centre, so they approve these products blindly.
When Australia approved these products to be sold, they insisted that the investment bank list out the names of the underlying securities. If people don't recognized these companies, they will not buy.
The monetary authorities of Singapore and Hong Kong were foolish to approve the toxic products to be sold by financial institution and security firms to retail investor. They both wanted to compete to be financial centre, so they approve these products blindly.
When Australia approved these products to be sold, they insisted that the investment bank list out the names of the underlying securities. If people don't recognized these companies, they will not buy.
ST
Best fixed deposit rates
A reader asked me to post the best fixed deposit rates available in Singapore. As I do not have the time to be doing this research, I have to engage someone to do this research and to pay this person for the time spent.
I hope that FISCA can do this work at a later date. FISCA will also have to pay people to do the work.
I enourage Singaporeans to join FISCA and pay $36 a year as membership fee for FISCA to meet its expenses. Please support FISCA, so that it can take care of your interest. FISCA will be calling for membership in August, when its website is ready.
I hope that FISCA can do this work at a later date. FISCA will also have to pay people to do the work.
I enourage Singaporeans to join FISCA and pay $36 a year as membership fee for FISCA to meet its expenses. Please support FISCA, so that it can take care of your interest. FISCA will be calling for membership in August, when its website is ready.
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