Hi Mr. Tan,
I am truly heartened to learn that you are championing a petition to ask the government to investigate into the substantial losses that many investors may face arising from their investments in structured notes sold by financial institutions here.
I think the investigation should not limit to those notes mentioned in your blog. I think the investigation should cover a wider scope to include all other series of those notes such as High Notes 2 and others minibonds and jubilee notes and others. This is because we have been warned that more defaults may surface in the course of the next few interest payment dates.
One thing that I do not quite understand is why there seems to be little voice coming from those who have been vocal in parliamentary debates on issues concerning public interest? Is the potential loss of hundreds of millions of dollars in dubious investment instruments by the public not an issue of concern to them?
REPLY
The Petition covers many structured products, including those that are named in it.
Thursday, September 25, 2008
Update (1) to investors of credit linked securities
I have received more than 800 signatures to my "petition". It is not really a "petition". I used the "petition" software to collect the particulars (i.e. name, telephone number and e-mail address) of the signatories, so that they can contact each other.
I do not wish to send the full list (of more than 800 people) to each of the signatory, as the list could be mis-used by any recipient for other purposes. To reduce the risk of mis-use, I shall be creating smaller lists of 50 signatories. The list will be sent to the people named in the list. This allows the recipients to contact and talk to the other people in the smaller list. I hope that this is suitable as a first step.
I will be arranging for a new Petition to be signed online. This Petition will call on the authority (MAS or Attorney General) to take action on behalf of the investors and bring the financial institutions to court. The aim is to get compensation for the investors for their loss due to mis-selling. The wording of this new Petition is being worked out now.
I am arranging a meeting of the investors. It is expensive to book a large auditorium and to have people to handle the registration and logistics. I am considering to hold smaller meetings of up to 100 people at a time. I shall discuss this matter with my team and update the investors separately.
I do not wish to send the full list (of more than 800 people) to each of the signatory, as the list could be mis-used by any recipient for other purposes. To reduce the risk of mis-use, I shall be creating smaller lists of 50 signatories. The list will be sent to the people named in the list. This allows the recipients to contact and talk to the other people in the smaller list. I hope that this is suitable as a first step.
I will be arranging for a new Petition to be signed online. This Petition will call on the authority (MAS or Attorney General) to take action on behalf of the investors and bring the financial institutions to court. The aim is to get compensation for the investors for their loss due to mis-selling. The wording of this new Petition is being worked out now.
I am arranging a meeting of the investors. It is expensive to book a large auditorium and to have people to handle the registration and logistics. I am considering to hold smaller meetings of up to 100 people at a time. I shall discuss this matter with my team and update the investors separately.
Sample letter of complaint
Here is a sample letter of complaint sent to the CEO of a financial institution. I have removed the name of the financial institution and the financial adviser.
Hi Sir/Mdm,
I have invested in minibond Series 7 in your Y Branch during dec 2007 with the help of your financial adviser, Z. On the evening I met up with Z, I told her I want a risk free product because I cannot afford to lose. At first she suggested I take up another plan which is not the minibond and told me is safe and show me the graph on the investment that it has been making money for the past 10 years. I ask her is there any risk, she told me LOW RISK. I told her I am not a risk taker. She then told me if you don't want risk then go for the minibond.
I ask her what is minibond, she show the statement as attached of page 3 that these are the 6 companies you are investing in. I took a good look at the 6 companies and ask Z to explain to me who are them. She explain to me what are the companies doing and the history of them. She then told me unless any 1 of the 6 companies go bankrupt, it will not affect my investment. I even ask her what if they are not doing well, she told me it doesn't matter, you are not buying their stock. YOU ARE BUYING THEIR BONDS AND LENDING MONEY TO THEM.
She also pointed out to me IT IS APPROVED BY MAS and show me page 1 of the statement. I ask her to show me which part of statement shows the risk, she show me page 4 and told me it is written black and white your full investment amount is at risk should any one of the reference entities experience a credit event. With all her words and the statement she show me on page 4, I understand and accept the risk and I sign on the paper.
Recently, Lehman Brothers experienced a credit event, at that point of time I still do not know I got affected. Until AIG nearly go on a credit event, I called her and I was shock when she told me that was I affected. She told me all my funds are frozen, I ask her why, since AIG is not bankrupt. She then told me Lehman Brothers is the arrangers for the note. I don't even know who is Lehman Brothers and I only remember the 6 companies I invested in. Why is Lehman Brothers in the picture only when things happen and did not tell me EVEN LEHMAN BROTHERS GO BANKRUPT AND NOT JUST THE REFERENCE ENTITIES, my investment will get affected when I bought the ' BONDS '.
After which, I found out what I actually invest in, is not even bonds. It is a synthetic derivative created by lehman to insure against the default of debt to the reference entities, which is totally different from what she told me when I purchase them. She did not call me when my funds go frozen and I have to call her for the updates and all she told me is trustee have not get back to her.
I demand a compensation for being misled on the nature of the notes.
Hi Sir/Mdm,
I have invested in minibond Series 7 in your Y Branch during dec 2007 with the help of your financial adviser, Z. On the evening I met up with Z, I told her I want a risk free product because I cannot afford to lose. At first she suggested I take up another plan which is not the minibond and told me is safe and show me the graph on the investment that it has been making money for the past 10 years. I ask her is there any risk, she told me LOW RISK. I told her I am not a risk taker. She then told me if you don't want risk then go for the minibond.
I ask her what is minibond, she show the statement as attached of page 3 that these are the 6 companies you are investing in. I took a good look at the 6 companies and ask Z to explain to me who are them. She explain to me what are the companies doing and the history of them. She then told me unless any 1 of the 6 companies go bankrupt, it will not affect my investment. I even ask her what if they are not doing well, she told me it doesn't matter, you are not buying their stock. YOU ARE BUYING THEIR BONDS AND LENDING MONEY TO THEM.
She also pointed out to me IT IS APPROVED BY MAS and show me page 1 of the statement. I ask her to show me which part of statement shows the risk, she show me page 4 and told me it is written black and white your full investment amount is at risk should any one of the reference entities experience a credit event. With all her words and the statement she show me on page 4, I understand and accept the risk and I sign on the paper.
Recently, Lehman Brothers experienced a credit event, at that point of time I still do not know I got affected. Until AIG nearly go on a credit event, I called her and I was shock when she told me that was I affected. She told me all my funds are frozen, I ask her why, since AIG is not bankrupt. She then told me Lehman Brothers is the arrangers for the note. I don't even know who is Lehman Brothers and I only remember the 6 companies I invested in. Why is Lehman Brothers in the picture only when things happen and did not tell me EVEN LEHMAN BROTHERS GO BANKRUPT AND NOT JUST THE REFERENCE ENTITIES, my investment will get affected when I bought the ' BONDS '.
After which, I found out what I actually invest in, is not even bonds. It is a synthetic derivative created by lehman to insure against the default of debt to the reference entities, which is totally different from what she told me when I purchase them. She did not call me when my funds go frozen and I have to call her for the updates and all she told me is trustee have not get back to her.
I demand a compensation for being misled on the nature of the notes.
Channel News Asia - Interview of investor
Channel NewsAsia wish to interview some investors of the credit linked securities. If you wish to talk to the journalist, please contact Desmond Wong at Mobile: 96926593 or Email: desmondwong@mediacorp.com.sg
Investing in stocks - online platform
Hi Mr Tan,
My current investment is only through Unit Trust, however I would like to explore in stock.
Understand that in order to buy stock, we will need to have an CDP account? But where do I open one? Also for stock is there any platform like fundsupermart (unit trust) which I can D.I.Y?
REPLY
If you wish to buy stocks, you have to open a CDP account. This can be done by the stock-broker. The brokerage is now quite low, at 0.3%, so it is better to let the stockbroker to handle it for you.
Philps Securities and DBS Vickers Securities have online platforms to allow you to buy the stocks directly. I think that some of the other security firms provide a similar platform also.
My current investment is only through Unit Trust, however I would like to explore in stock.
Understand that in order to buy stock, we will need to have an CDP account? But where do I open one? Also for stock is there any platform like fundsupermart (unit trust) which I can D.I.Y?
REPLY
If you wish to buy stocks, you have to open a CDP account. This can be done by the stock-broker. The brokerage is now quite low, at 0.3%, so it is better to let the stockbroker to handle it for you.
Philps Securities and DBS Vickers Securities have online platforms to allow you to buy the stocks directly. I think that some of the other security firms provide a similar platform also.
Credit Linked Securities - Q&A
1) What is the likelihood that investors can salvage some value from the Minibonds or High Notes?
In my opinion, if the unwinding of the invesment structure is done properly, and the administrator seek the best possible value for the assets, there is the possibility of some salvage value. I cannot imagine that all the investments have no value now. I hope that the regulator will ensure that these unwinding is carried out properly and the interest of the investors are protected.
2) Should the distributors/financial advisers of these products, which include a number of banks and brokerage firms, be held accountable since Lehman has gone bankrupt? Can the investors of these structured products seek compensation from the distributors?
Section 27 of the Financial Advisers Act require the advisers to make appropriate recommendation to the client. They will fail in their duty to recommend a high risk product to an investor who is risk adverse. If the adviser is held to be negligent, the adviser is required to compensate the investor for the loss.
3) What is your advice to investors of Minibonds and DBS High Notes?
Prepare a statement about the advice that you have received from the adviser, even if it is a verbal advice. Look for written evidence, if available. Get together with other investors in similar situation. Lodge a complaint with the financial institution that sold the product to you. Be ready to take it to FiDREC (www.fidrec.org.sg) or the MAS.
4) Any retail products in the market which, in your opinion, are at risk and can go down like the Minibonds and High Notes?
There are several other credit linked notes, similar to Minibonds. They have dropped in value already. An investor fold me that the Pinnacle Notes have depreciated by 65%.
In my opinion, if the unwinding of the invesment structure is done properly, and the administrator seek the best possible value for the assets, there is the possibility of some salvage value. I cannot imagine that all the investments have no value now. I hope that the regulator will ensure that these unwinding is carried out properly and the interest of the investors are protected.
2) Should the distributors/financial advisers of these products, which include a number of banks and brokerage firms, be held accountable since Lehman has gone bankrupt? Can the investors of these structured products seek compensation from the distributors?
Section 27 of the Financial Advisers Act require the advisers to make appropriate recommendation to the client. They will fail in their duty to recommend a high risk product to an investor who is risk adverse. If the adviser is held to be negligent, the adviser is required to compensate the investor for the loss.
3) What is your advice to investors of Minibonds and DBS High Notes?
Prepare a statement about the advice that you have received from the adviser, even if it is a verbal advice. Look for written evidence, if available. Get together with other investors in similar situation. Lodge a complaint with the financial institution that sold the product to you. Be ready to take it to FiDREC (www.fidrec.org.sg) or the MAS.
4) Any retail products in the market which, in your opinion, are at risk and can go down like the Minibonds and High Notes?
There are several other credit linked notes, similar to Minibonds. They have dropped in value already. An investor fold me that the Pinnacle Notes have depreciated by 65%.
Overwhelmed by e-mails and questions
I received more than 100 e-mails. Many contained detailed and difficult questions that I am not able to answer with my limited time. I am now in Dubai, and can only spare some time to reply to your many questions.
I hope that the investors understand the situation. Please read the postings in my blog. And remember that I cannot spend time to attend to your questions individually.
The first step that you have to do is to lodge a formal complaint with the financial institution that sold the product to you. You can state that you were misled about the product, which is actually risky.
My colleague, Peter and Andrew is trying to find a place to hold a meeting. Please be patient and wait for announcement on this blog. We are not able to answer your questions individually.
I have written to a very senior person in MAS to outline the concerns of the investors in these products. Please wait for further development.
I hope that the investors understand the situation. Please read the postings in my blog. And remember that I cannot spend time to attend to your questions individually.
The first step that you have to do is to lodge a formal complaint with the financial institution that sold the product to you. You can state that you were misled about the product, which is actually risky.
My colleague, Peter and Andrew is trying to find a place to hold a meeting. Please be patient and wait for announcement on this blog. We are not able to answer your questions individually.
I have written to a very senior person in MAS to outline the concerns of the investors in these products. Please wait for further development.
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