Someone asked me, "What is the purpose of the gathering at Speaker's Corner in August? What is the strategy to get compensation for the investors?"
The purpose is to allow the investors to attend and meet other investors. Many of them have been rejected. They want to express their unhappiness. This is the least that the investors can do, compared to the rallies and demonstrations that have been held in Hong Kong.
Many investors have concluded that they have to take a class action to seek compensation. There are many obstacles to organise this class action. I shall try to explore some avenues.
Tuesday, July 7, 2009
Section 27 of Financial Adviser's Act
I post below, the wordings of section 27 of the Financial Advisers Act. I believe that MAS should consider if the licensee (i.e. distributor) has breached this section and ask them to compensate the investor for the loss or damage as required under sub-section (3). But I am not sure if I have read this section correctly, in respect of the mis-representations to the investor of the credit linked notes. What are your views?
Recommendations by licensees
27. —(1) No licensee shall make a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation if the licensee does not have a reasonable basis for making the recommendation to the person.
(2) For the purposes of subsection (1), a licensee does not have a reasonable basis for making a recommendation to a person unless —
(a) he has, for the purposes of ascertaining that the recommendation is appropriate, having regard to the information possessed by him concerning the investment objectives, financial situation and particular needs of the person, given such consideration to, and conducted such investigation of, the subject-matter of the recommendation as is reasonable in all the circumstances; and
(b) the recommendation is based on the consideration and investigation referred to in paragraph (a).
(3) Where —
(a) a licensee, in making a recommendation to a person, contravenes subsection (1);
(b) the person, in reliance on the recommendation, does a particular act, or refrains from doing a particular act;
(c) it is reasonable, having regard to the recommendation and all other relevant circumstances, for the person to do that act, or to refrain from doing that act, as the case may be, in reliance on the recommendation; and
(d) the person suffers loss or damage as a result of doing that act, or refraining from doing that act, as the case may be,
then, without prejudice to any other remedy available to that person, the licensee is liable to pay damages to that person in respect of that loss or damage.
(4) In this section, a reference to the making of a recommendation is a reference to the making of a recommendation expressly or by implication.
(5) This section shall not apply to any licensee or class of licensees in such circumstances or under such conditions as may be prescribed.
Recommendations by licensees
27. —(1) No licensee shall make a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation if the licensee does not have a reasonable basis for making the recommendation to the person.
(2) For the purposes of subsection (1), a licensee does not have a reasonable basis for making a recommendation to a person unless —
(a) he has, for the purposes of ascertaining that the recommendation is appropriate, having regard to the information possessed by him concerning the investment objectives, financial situation and particular needs of the person, given such consideration to, and conducted such investigation of, the subject-matter of the recommendation as is reasonable in all the circumstances; and
(b) the recommendation is based on the consideration and investigation referred to in paragraph (a).
(3) Where —
(a) a licensee, in making a recommendation to a person, contravenes subsection (1);
(b) the person, in reliance on the recommendation, does a particular act, or refrains from doing a particular act;
(c) it is reasonable, having regard to the recommendation and all other relevant circumstances, for the person to do that act, or to refrain from doing that act, as the case may be, in reliance on the recommendation; and
(d) the person suffers loss or damage as a result of doing that act, or refraining from doing that act, as the case may be,
then, without prejudice to any other remedy available to that person, the licensee is liable to pay damages to that person in respect of that loss or damage.
(4) In this section, a reference to the making of a recommendation is a reference to the making of a recommendation expressly or by implication.
(5) This section shall not apply to any licensee or class of licensees in such circumstances or under such conditions as may be prescribed.
A fair compensation
Since the start of the Minibond crisis, I have suggested that a fair settlement is for the distributor and the investor to share the loss equally. I believe that both parties should share the blame equally for this unfortunate event.
The difficulty is that some of the notes have residual values that may change during the period prior to maturity. They may be worth more than 50% at the time of settlement or at maturity. Other notes may be worth less. How are these different notes to be dealt with?
I have since found a possible solution. The distributor should buy back the note at 50% of the invested sum now (less any interest that have been paid), take over the notes and refund back 50% of the future proceeds. The distributor is in a better position to decide on future actions, e.g. to hold or dispose of the notes prior to maturity.
I hope that some of the distributors will consider this proposal, in the interest of fair treatment of their customers.
Tan Kin Lian
The difficulty is that some of the notes have residual values that may change during the period prior to maturity. They may be worth more than 50% at the time of settlement or at maturity. Other notes may be worth less. How are these different notes to be dealt with?
I have since found a possible solution. The distributor should buy back the note at 50% of the invested sum now (less any interest that have been paid), take over the notes and refund back 50% of the future proceeds. The distributor is in a better position to decide on future actions, e.g. to hold or dispose of the notes prior to maturity.
I hope that some of the distributors will consider this proposal, in the interest of fair treatment of their customers.
Tan Kin Lian
Follow up action on MAS investigation report
The report released by MAS has been disappointing. The financial institutions that were found to be breached the regulation have been banned from selling structured products for 6 to 24 months. This will not affect them financially, as the sale of structured products have virtually disappeared during the past months, and is unlikely to revive over the next two years.
More importantly, the mis-guided investors, who have lost a large sum of savings in these products and were looking for some compensation for their loss, had their hopes dashed. They posted their views strongly in this blog.
There were reports that investors in Hong Kong are likely to get compensation of 60% to 70%. Someone worked out that the compensation paid to Singapore investors to be less than 20% (but this is not verified due to lack of complete information).
During the past two weeks, I have been talking to lawyers and the insurance broker to see if the "after the event" insurance can be obtained for investors who wish to take legal action against the distributor on the legal grounds of mis-representation. They are several obstacles to be overcomed, but I am working on them.
If the obstacles can be overcomed, investors (who are not involved in any existing class action) can consider a new class action to be arranged. The larger investors can consider taking individual legal action. I like to ask you to complete this survey, to see if there is sufficient interest.
A team of volunteers is helping me to plan a gathering of investors at Speaker's Corner in Hong Lim Park on Saturday 22 August 2009 at 5 p.m. Keep the date free. If you wish to help in the organisation, you can join this Google Group.
On a separate matter, I like to ask investors to write your story for publication in a book. Share your experience with the future generation. Write your story to cover how you were misled into investing in the toxic product and the months of agony that you went through in trying to get compensation. You can send them to me at kinlian@gmail.com.
Tan Kin Lian
More importantly, the mis-guided investors, who have lost a large sum of savings in these products and were looking for some compensation for their loss, had their hopes dashed. They posted their views strongly in this blog.
There were reports that investors in Hong Kong are likely to get compensation of 60% to 70%. Someone worked out that the compensation paid to Singapore investors to be less than 20% (but this is not verified due to lack of complete information).
During the past two weeks, I have been talking to lawyers and the insurance broker to see if the "after the event" insurance can be obtained for investors who wish to take legal action against the distributor on the legal grounds of mis-representation. They are several obstacles to be overcomed, but I am working on them.
If the obstacles can be overcomed, investors (who are not involved in any existing class action) can consider a new class action to be arranged. The larger investors can consider taking individual legal action. I like to ask you to complete this survey, to see if there is sufficient interest.
A team of volunteers is helping me to plan a gathering of investors at Speaker's Corner in Hong Lim Park on Saturday 22 August 2009 at 5 p.m. Keep the date free. If you wish to help in the organisation, you can join this Google Group.
On a separate matter, I like to ask investors to write your story for publication in a book. Share your experience with the future generation. Write your story to cover how you were misled into investing in the toxic product and the months of agony that you went through in trying to get compensation. You can send them to me at kinlian@gmail.com.
Tan Kin Lian
The Standard:Illegal Lehman protest targets Tsang home
6 July 2009
Dozens of angry Lehman Brothers minibond investors staged a noisy protest outside Government House yesterday, calling on Chief Executive Donald Tsang Yam-kuen to accept responsibility for their losses and step down.
Holding banners and shouting slogans, the protesters broke through police barriers on Upper Albert Road but returned to the pavement following police persuasion.
More than 50 people took part in the unauthorized demonstration, police said.
The protesters maintained Tsang has failed to supervise the banks and is not doing enough to help them.
Allied Victims of Lehman Products chairman Peter Chan Kwong-yue had initially suggested the protesters would refuse to leave until Tsang talked to them.
Chan, who organized the demonstration, had also expected a turnout of 200 to 300, but traffic diversions and the rain took their toll.
The group will now be applying for permission from the police to stage a protest outside the Legislative Council tomorrow when Tsang arrives for a question and answer session, Chan said. He expects between 400 and 500 people to attend.
Nobody from the government came forward to accept a letter from the group yesterday. And banks involved have not replied to investors even though the group has reached out to them, Chan said.
Upper Albert Road was reopened by early evening yesterday, with all protesters dispersed by 6pm.
A police spokesman said the force had not been informed in advance of the protest so the group violated the Public Order Ordinance. While there were no arrests, an investigation is under way.
Sixteen distributor banks for Lehman Brothers minibonds last Monday met the Securities and Futures Commission to indicate they would pay most investors 60 percent of the principal invested, while investors aged 65 or above would receive 70 percent of their investment. An official proposal was sent to the regulator on Thursday.
SFC chief executive Martin Wheatley said on Friday that the suggestion of paying investors only 60 percent of principal on average was not fair.
A 52-year-old woman linked to Lehman Brothers products reportedly jumped to her death from a Kowloon Bay apartment building on Friday.
Dozens of angry Lehman Brothers minibond investors staged a noisy protest outside Government House yesterday, calling on Chief Executive Donald Tsang Yam-kuen to accept responsibility for their losses and step down.
Holding banners and shouting slogans, the protesters broke through police barriers on Upper Albert Road but returned to the pavement following police persuasion.
More than 50 people took part in the unauthorized demonstration, police said.
The protesters maintained Tsang has failed to supervise the banks and is not doing enough to help them.
Allied Victims of Lehman Products chairman Peter Chan Kwong-yue had initially suggested the protesters would refuse to leave until Tsang talked to them.
Chan, who organized the demonstration, had also expected a turnout of 200 to 300, but traffic diversions and the rain took their toll.
The group will now be applying for permission from the police to stage a protest outside the Legislative Council tomorrow when Tsang arrives for a question and answer session, Chan said. He expects between 400 and 500 people to attend.
Nobody from the government came forward to accept a letter from the group yesterday. And banks involved have not replied to investors even though the group has reached out to them, Chan said.
Upper Albert Road was reopened by early evening yesterday, with all protesters dispersed by 6pm.
A police spokesman said the force had not been informed in advance of the protest so the group violated the Public Order Ordinance. While there were no arrests, an investigation is under way.
Sixteen distributor banks for Lehman Brothers minibonds last Monday met the Securities and Futures Commission to indicate they would pay most investors 60 percent of the principal invested, while investors aged 65 or above would receive 70 percent of their investment. An official proposal was sent to the regulator on Thursday.
SFC chief executive Martin Wheatley said on Friday that the suggestion of paying investors only 60 percent of principal on average was not fair.
A 52-year-old woman linked to Lehman Brothers products reportedly jumped to her death from a Kowloon Bay apartment building on Friday.
Singapore bars 10 firms from selling structured notes
By Lee Siew Hoon, Channel NewsAsia | Posted: 07 July 2009 1728 hrs
SINGAPORE: The Monetary Authority of Singapore (MAS) has, for the first time, imposed bans on the sale of structured notes by 10 financial institutions (FIs) which had distributed toxic structured notes linked to the collapsed US financial institution Lehman Brothers.
The bans took effect on July 1 and will remain in place until MAS is satisfied there are adequate measures to address the findings of its investigation into the sale of the failed structured products last year.
The 10 FIs are ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Philip Securities and UOB Kay Hian.
MAS revealed this as it released the findings of its investigations into the sale of the failed structured products last year.
The regulator found that the 10 FIs had policies, procedures and controls in place for the sale and marketing of the structured notes, but the extent of due diligence and level of internal controls differed among them.
As a result, MAS said there were various forms of non-compliance with its notices and guidelines on the sale and marketing of these investment products.
MAS said some of the specific failings included insufficient steps taken by some FIs to ensure that all their financial advisory representatives were properly trained before marketing and selling these products.
The regulator also noted that some FIs had assigned risk ratings to the products that were inconsistent with risk warnings stated in the prospectus and pricing statement.
According to MAS, there were also weaknesses in how some FIs ensured that their sales representatives were properly equipped with accurate and complete information about the structured notes.
As a preventive measure, the regulator said FIs must rectify all weaknesses identified in the investigations, appoint an external person identified by MAS to review action plans and report on implementation, and appoint senior management staff to oversee compliance with MAS' direction.
MAS said that until it is satisfied with the measures put in place, the FIs will not be able to distribute structured notes.
MAS also gave details about how the FIs have compensated investors who bought structured notes.
Hong Leong Finance paid S$57.6 million to 2,048 investors who bought the structured notes that it distributed. This is the highest amount of compensation paid out to retail investors.
Hong Leong Finance is also barred from selling structured products for two years.
Maybank offered S$25.3 million to 1,100 investors, while ABN Amro paid 262 investors S$14.1 million.
DBS Bank compensated 197 investors S$7.6 million.
The three banks will be banned from selling structured products for six months.
According to MAS, the total settlements for decided cases amounted to S$105 million.
The six brokerage firms, which also sold the structured notes, paid a total of
S$2.74 million to 297 investors.
UOB Kay Hian and DMG & Partners will get a six-month ban, while the others will be barred from selling structured notes for a year each.
http://www.channelnewsasia.com/stories/singaporelocalnews/view/440970/1/.html
SINGAPORE: The Monetary Authority of Singapore (MAS) has, for the first time, imposed bans on the sale of structured notes by 10 financial institutions (FIs) which had distributed toxic structured notes linked to the collapsed US financial institution Lehman Brothers.
The bans took effect on July 1 and will remain in place until MAS is satisfied there are adequate measures to address the findings of its investigation into the sale of the failed structured products last year.
The 10 FIs are ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Philip Securities and UOB Kay Hian.
MAS revealed this as it released the findings of its investigations into the sale of the failed structured products last year.
The regulator found that the 10 FIs had policies, procedures and controls in place for the sale and marketing of the structured notes, but the extent of due diligence and level of internal controls differed among them.
As a result, MAS said there were various forms of non-compliance with its notices and guidelines on the sale and marketing of these investment products.
MAS said some of the specific failings included insufficient steps taken by some FIs to ensure that all their financial advisory representatives were properly trained before marketing and selling these products.
The regulator also noted that some FIs had assigned risk ratings to the products that were inconsistent with risk warnings stated in the prospectus and pricing statement.
According to MAS, there were also weaknesses in how some FIs ensured that their sales representatives were properly equipped with accurate and complete information about the structured notes.
As a preventive measure, the regulator said FIs must rectify all weaknesses identified in the investigations, appoint an external person identified by MAS to review action plans and report on implementation, and appoint senior management staff to oversee compliance with MAS' direction.
MAS said that until it is satisfied with the measures put in place, the FIs will not be able to distribute structured notes.
MAS also gave details about how the FIs have compensated investors who bought structured notes.
Hong Leong Finance paid S$57.6 million to 2,048 investors who bought the structured notes that it distributed. This is the highest amount of compensation paid out to retail investors.
Hong Leong Finance is also barred from selling structured products for two years.
Maybank offered S$25.3 million to 1,100 investors, while ABN Amro paid 262 investors S$14.1 million.
DBS Bank compensated 197 investors S$7.6 million.
The three banks will be banned from selling structured products for six months.
According to MAS, the total settlements for decided cases amounted to S$105 million.
The six brokerage firms, which also sold the structured notes, paid a total of
S$2.74 million to 297 investors.
UOB Kay Hian and DMG & Partners will get a six-month ban, while the others will be barred from selling structured notes for a year each.
http://www.channelnewsasia.com/stories/singaporelocalnews/view/440970/1/.html
MAS Investigation Findings
MAS Releases Investigation Findings on the Sale and Marketing of Structured Notes Linked to Lehman Brothers
100 fun and information personality quizzes
Hi Tan,
We just posted an article, “Know Thyself: 100 Fun and Informative Personality Quizzes”. I thought I'd bring it to your attention in case you think your readers would find it interesting.
Suzane Smith
We just posted an article, “Know Thyself: 100 Fun and Informative Personality Quizzes”. I thought I'd bring it to your attention in case you think your readers would find it interesting.
Suzane Smith
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