http://www.straitstimes.com/ST%2BForum/Online%2BStory/STIStory_284367.html
POSTED IN STRAITS TIMES ONLINE FORUM
I REFER to the current market situation of Lehman Brothers' bankruptcy which led to the DBS High Notes burst recently. I am a personal financial consultant in a local bank. There are some factors I feel must be revealed to protect consumers' rights.
First, banks usually state that there is seldom or no misrepresentation of products sold, and products are usually recommended based on consumers' needs. A financial needs analysis and fact find are usually done to ensure consumers have sufficient funds and a real need for the product. The fact is that we often face pressure to sell certain products so as to hit our sales target.
Take me, for instance. I am a fresh graduate from the National University of Singapore. I have a nine-month contract with a local bank, but I was told, if I did not pass probation in six months (hitting sales target), I would be asked to leave and pay the $3,000 bond.
So far, I have sold $500,000 in insurance based on consumers' needs, so why is my sales record so poor? This is due to product discrimination. We have to sell mainly investment-linked insurance products. To sell 10 of these is equivalent to 60 products I have sold. Thus a fresh graduate like me who can't afford to pay the $3,000 bond faces a real dilemma.
Therefore, consumers should understand the immense pressure we are facing. Most of the time, we are trained to promote that particular product and try to think of ways it benefits consumers. Welcome to the real commercial world.
Geraldine Teng (Ms)
Tuesday, September 30, 2008
Fixed deposit with Singapore banks
Hi Mr Tan
With the recent spats of numerous closures and bankrupts, how safe is it to put cash money in Fixed Deposits with local banks? I have retired 10 years ago, and most of my cash have been in fixed deposit.
REPLY
I think that it should be quite safe. You can break up with savings into several banks. There is an insurance scheme that guarantees deposits of up to $20,000 in each bank. It covers full licence banks in Singapore, whether local or foreign owned.
http://www.sdic.org.sg/faq.html#a5
With the recent spats of numerous closures and bankrupts, how safe is it to put cash money in Fixed Deposits with local banks? I have retired 10 years ago, and most of my cash have been in fixed deposit.
REPLY
I think that it should be quite safe. You can break up with savings into several banks. There is an insurance scheme that guarantees deposits of up to $20,000 in each bank. It covers full licence banks in Singapore, whether local or foreign owned.
http://www.sdic.org.sg/faq.html#a5
Saved by sound advice
Dear Mr. Tan,
My friends and I enjoy reading your blog. Just to say thank you for your sound opinions on Financial planning and products.
With your sound opinion in Pinnacle note, I put my money in FD instead of "mislead" by the RM of the bank last year. I save my retirement amount because of a kind hearted person like you.
Thank you.
Mr and Mrs Goh
My friends and I enjoy reading your blog. Just to say thank you for your sound opinions on Financial planning and products.
With your sound opinion in Pinnacle note, I put my money in FD instead of "mislead" by the RM of the bank last year. I save my retirement amount because of a kind hearted person like you.
Thank you.
Mr and Mrs Goh
Pinnacle Series 11
Hi Mr Tan,
Thank you for helping the uncles and aunties in the above matter.
I was so foolish to be attracted by Citibank's fixed deposit offer and went to their branch at Ang Mo Kio. The relationship manager X told me people who invested in Pinnacle made much more in interests and that's why it can run series after series. (He knew I had $70,000 for the FD.)
So he introduced me to Pinnacle Series 11. He showed me the colourful one sheet flyer. I did see the "Important Information" that you must read the prospectus. So I asked for it. The RM went out of his room to look for it and came back saying it has run out of stock. He promised to post to me. He kept repeating "Don't worry." I asked him how can I be sure that I will get back my money. He pointed to the Name of Note "4Y SGD Pinnacle Series 11 Principal Protected Equity Linked Notes" given on the subscription form. He said, here, it says so clearly "Principal Protected." I felt stupid. It was like a redundant question I asked.
Now X is not at Ang Mo Kio Branch anymore. The Branch won't even tell me whether he is still at Citibank. The value of the Note I paid for with $70,000 of family savings has dropped to $50K+ (last month). Another relationship manager at the Branch told me recently if I hold to maturity I will get back $70,000. But I could not understand how they come to the present value of $50K+. If I understand this second relationship manager's explanation correctly, it has to do with the share market.
Now the share market has gone even lower, I don't know whether there is still $50K+ now. What shall I do? This is all the family's saving. And my aged husband and I have to look after a severely ill adult son with this money. I know I was greedy for more interest when I agreed to take X's product. But for the last nine months, I didn't even get a single cent of interest.
I have resigned to accept the punishment for my greed. But I was encouraged when I was introduced to you blog. So I learn how to get to read it and have been updating myself with the info on your blog. I am grateful that your care.
Should I hold the Note to the maturity and hope to get back $70,000 or take out whatever amount of money that's left now. Should I accept that they can use my savings without interest to me for more than nine months and even lose some of it?
Thank you. Wishing you much blessings!
Aunty Esther
REPLY
I am not familiar with Pinnacle Series 11. If I can find some information, I shall tell you later. So sorry, I cannot advise you at this time.
Thank you for helping the uncles and aunties in the above matter.
I was so foolish to be attracted by Citibank's fixed deposit offer and went to their branch at Ang Mo Kio. The relationship manager X told me people who invested in Pinnacle made much more in interests and that's why it can run series after series. (He knew I had $70,000 for the FD.)
So he introduced me to Pinnacle Series 11. He showed me the colourful one sheet flyer. I did see the "Important Information" that you must read the prospectus. So I asked for it. The RM went out of his room to look for it and came back saying it has run out of stock. He promised to post to me. He kept repeating "Don't worry." I asked him how can I be sure that I will get back my money. He pointed to the Name of Note "4Y SGD Pinnacle Series 11 Principal Protected Equity Linked Notes" given on the subscription form. He said, here, it says so clearly "Principal Protected." I felt stupid. It was like a redundant question I asked.
Now X is not at Ang Mo Kio Branch anymore. The Branch won't even tell me whether he is still at Citibank. The value of the Note I paid for with $70,000 of family savings has dropped to $50K+ (last month). Another relationship manager at the Branch told me recently if I hold to maturity I will get back $70,000. But I could not understand how they come to the present value of $50K+. If I understand this second relationship manager's explanation correctly, it has to do with the share market.
Now the share market has gone even lower, I don't know whether there is still $50K+ now. What shall I do? This is all the family's saving. And my aged husband and I have to look after a severely ill adult son with this money. I know I was greedy for more interest when I agreed to take X's product. But for the last nine months, I didn't even get a single cent of interest.
I have resigned to accept the punishment for my greed. But I was encouraged when I was introduced to you blog. So I learn how to get to read it and have been updating myself with the info on your blog. I am grateful that your care.
Should I hold the Note to the maturity and hope to get back $70,000 or take out whatever amount of money that's left now. Should I accept that they can use my savings without interest to me for more than nine months and even lose some of it?
Thank you. Wishing you much blessings!
Aunty Esther
REPLY
I am not familiar with Pinnacle Series 11. If I can find some information, I shall tell you later. So sorry, I cannot advise you at this time.
Tribute to Mr. J B Jeyaretnam
Someone sent an e-mail to me, giving this tribute to Mr. J B Jeyaretnam. I only know Mr. Jeyaretnam briefly - but enough for me to admire what he has done for Singapore.
TRIBUTE
As a kid who hungrily devoured all that the flat media supplied at the time, and ignorant of their propagandistic nature, I thought JBJ had dishonourable intentions - a fool who was always exposed by his powerful nemesis. It took several years before I realised that I was the fool.
By then, I was rooting for his entry into parliament and it was with great joy that I read the headlines "JBJ takes Anson". It was a historic breakthrough not appropriately celebrated by the media. JBJ had achieved the unthinkable!
Once whilst walking down the stairs of the Subordinate Courts to the taxi stand, I noticed that the drivers in the waiting taxis had suddenly almost in synchrony gotten out of their vehicles, shouting and waving greetings towards my direction. I turned my head to see none other than JBJ waving back at them with a big warm smile pasted on his face.
I witnessed how when he reached the taxi stand, all the drivers rushed to shake his hand, many thanking him for his work. It was a genuine and uncontrived demonstration of true admiration and warm respect; quite unlike - in fact in contrast to - the kind shown by members of certain residents' committees towards their elected leaders. I knew then that I was in the presence of a true people's leader.
The first-time when I had the privilege of witnessing first-hand in open court the mesmerising tone of his voice and the fearless manner he fought, it left me in no doubt that standing before me was an extraordinary man of upright constitution. If you had also noticed his poorly-pressed suit and unpolished worn-out brown leather shoes, you would have fathomed the real depth of this man who must have found preening himself just to look good an utterly waste of bloody time!
JBJ was the man amongst men.
Nothing I have said and can say would do justice to the real quality of this man. Today is a very sad day for his family and friends. But, as a country, it was already a very sad day when we allowed him to be mistreated and tormented by his nemesis. We stood by and did nothing.
Knowing JBJ, he has forgiven us. But can we forgive ourselves?
acitizen7
TRIBUTE
As a kid who hungrily devoured all that the flat media supplied at the time, and ignorant of their propagandistic nature, I thought JBJ had dishonourable intentions - a fool who was always exposed by his powerful nemesis. It took several years before I realised that I was the fool.
By then, I was rooting for his entry into parliament and it was with great joy that I read the headlines "JBJ takes Anson". It was a historic breakthrough not appropriately celebrated by the media. JBJ had achieved the unthinkable!
Once whilst walking down the stairs of the Subordinate Courts to the taxi stand, I noticed that the drivers in the waiting taxis had suddenly almost in synchrony gotten out of their vehicles, shouting and waving greetings towards my direction. I turned my head to see none other than JBJ waving back at them with a big warm smile pasted on his face.
I witnessed how when he reached the taxi stand, all the drivers rushed to shake his hand, many thanking him for his work. It was a genuine and uncontrived demonstration of true admiration and warm respect; quite unlike - in fact in contrast to - the kind shown by members of certain residents' committees towards their elected leaders. I knew then that I was in the presence of a true people's leader.
The first-time when I had the privilege of witnessing first-hand in open court the mesmerising tone of his voice and the fearless manner he fought, it left me in no doubt that standing before me was an extraordinary man of upright constitution. If you had also noticed his poorly-pressed suit and unpolished worn-out brown leather shoes, you would have fathomed the real depth of this man who must have found preening himself just to look good an utterly waste of bloody time!
JBJ was the man amongst men.
Nothing I have said and can say would do justice to the real quality of this man. Today is a very sad day for his family and friends. But, as a country, it was already a very sad day when we allowed him to be mistreated and tormented by his nemesis. We stood by and did nothing.
Knowing JBJ, he has forgiven us. But can we forgive ourselves?
acitizen7
Minibond Series 5
PUBLISHED IN STRAITS TIMES ONLINE FORUM
Dear Sir/Madam,
My wife and I are joint account holders of Maybank Singapore. We purchased S$100K of Minibonds Series 5 from Maybank's investment banker around Aug'07. We were under the impression then that these were supposedly very safe bonds. Every few months, I'll even call up Maybank to inquire the well-being of our Minibonds and whether I should still hold on to them. Each time, I was informed that these bonds were still sound, and there wasn't any need to bail out.
Now that Lehman is bankrupt, and the public disclosure that our Minibonds has in fact, nothing at all to do with bonds, but are instead CDO-related derivatives, we are extremely disappointed, distressed and upset with Maybank's lack of professionalism and very poor-product knowledge. The investment advisers are more interested in closing the deal and going through the motion during the investors' risk-analysis.
We believe there are many more thousands of retail investors in Singapore whom are similarly short-changed by the high profile advertisements, aggressive marketing, and misleading sounding products such as "Minibonds", "High notes", etc, which gives a false impression of highly rated bonds or notes. This is compounded by the lack of explanation and product knowledge by the private-bankers/investment advisors. Obviously, no one of sound mind will be willing to accept a 5% return for taking on the risk of CDO-related derivatives!
We fully understand the concept of buyers beware. However in this situation, how is the layman supposed to beware of what they're being sold when the 60-odd pages of prospectus is filled with legalese and technical jargon that even the sellers themselves do not fully comprehend!
We seriously implore MAS and Maybank to investigate and not condone such unethical practices, lest Singapore's hope of becoming a leading fund-management and financial centre is tarnished.
Your faithfully,
Ngo Chee Keong (Mr)
Ng Wee Lay (Ms)
CC: Maybank, ST Forum, MAS, CASE, Mr. Tharman Shanmugaratnam - Minister for Finance, Mrs Lim Hwee Hua - Senior Minister of State for Finance
Dear Sir/Madam,
My wife and I are joint account holders of Maybank Singapore. We purchased S$100K of Minibonds Series 5 from Maybank's investment banker around Aug'07. We were under the impression then that these were supposedly very safe bonds. Every few months, I'll even call up Maybank to inquire the well-being of our Minibonds and whether I should still hold on to them. Each time, I was informed that these bonds were still sound, and there wasn't any need to bail out.
Now that Lehman is bankrupt, and the public disclosure that our Minibonds has in fact, nothing at all to do with bonds, but are instead CDO-related derivatives, we are extremely disappointed, distressed and upset with Maybank's lack of professionalism and very poor-product knowledge. The investment advisers are more interested in closing the deal and going through the motion during the investors' risk-analysis.
We believe there are many more thousands of retail investors in Singapore whom are similarly short-changed by the high profile advertisements, aggressive marketing, and misleading sounding products such as "Minibonds", "High notes", etc, which gives a false impression of highly rated bonds or notes. This is compounded by the lack of explanation and product knowledge by the private-bankers/investment advisors. Obviously, no one of sound mind will be willing to accept a 5% return for taking on the risk of CDO-related derivatives!
We fully understand the concept of buyers beware. However in this situation, how is the layman supposed to beware of what they're being sold when the 60-odd pages of prospectus is filled with legalese and technical jargon that even the sellers themselves do not fully comprehend!
We seriously implore MAS and Maybank to investigate and not condone such unethical practices, lest Singapore's hope of becoming a leading fund-management and financial centre is tarnished.
Your faithfully,
Ngo Chee Keong (Mr)
Ng Wee Lay (Ms)
CC: Maybank, ST Forum, MAS, CASE, Mr. Tharman Shanmugaratnam - Minister for Finance, Mrs Lim Hwee Hua - Senior Minister of State for Finance
Bank staff do not understand financial products
Hi Mr Tan,
I used to be an institutional dealer(equities,bonds & futures) for two local banks but quit many years back because I was very disillusioned with what I was seeing everyday.
Personally, I feel that the local banks (can't comment on the foreign ones) are not out to misrepresent and/or mis-sell their credit link products to retail investors. I think the bank sales people simply do not have the training & background/experience to understand their derivatives themselves.
Perhaps, some incidental encounters of mine would be illuminating.
I am a very conservative investor.
I've only invested in Singapore government bonds (SGS), local bank preference shares & a small portion of my portfolio in REITs.
I regularly purchase SGS through 2 local banks but every time I make a purchase, I have to "teach" the bank's sale staff how to calculate accrued interest (ie. buyer must compensate the seller daily interest earned), help them identify which is the correct SGS series and other matters related to filling up the purchase/sales forms!
It really makes me wonder, if they cannot handle something as simple & direct as Singapore government bonds, then what of more complex derivatives ?
I used to be an institutional dealer(equities,bonds & futures) for two local banks but quit many years back because I was very disillusioned with what I was seeing everyday.
Personally, I feel that the local banks (can't comment on the foreign ones) are not out to misrepresent and/or mis-sell their credit link products to retail investors. I think the bank sales people simply do not have the training & background/experience to understand their derivatives themselves.
Perhaps, some incidental encounters of mine would be illuminating.
I am a very conservative investor.
I've only invested in Singapore government bonds (SGS), local bank preference shares & a small portion of my portfolio in REITs.
I regularly purchase SGS through 2 local banks but every time I make a purchase, I have to "teach" the bank's sale staff how to calculate accrued interest (ie. buyer must compensate the seller daily interest earned), help them identify which is the correct SGS series and other matters related to filling up the purchase/sales forms!
It really makes me wonder, if they cannot handle something as simple & direct as Singapore government bonds, then what of more complex derivatives ?
HSBC Trustee
HSBC Trustee is the trust company for the Minibonds. I am looking for a senior person in this company that handles the bonds. If you know the name and contact person, I wish to talk to this person. Someone has an idea to minimise the losses. Please e-mail to me at kinlian@gmail.com.
High Notes 2
Hi Mr. Tan,
DBS has just sent to HN2 investors a list of names under the so called AA-rated basket of securities held by Constellation, the company owned by DBS and is the counter-party with DBS for various swap contracts.
There are 100 names in the list and I am very surprised that only 25 names are rated AA or better. There are 22 rated BBB+ or below. AA- to A- accounted for the balance 53. How can such a basket of securities rated as AA?
This is akin to call a basket containing a mix of some copper coins, alluminium coins and gold coins a basket of gold cans! This is grossly misleading!
All the while, the bank has been very secretive about this list of names. I think because it does not want to let investors know that the rating of AA for the basket of securities is actually not justifiable. The fact there are some low grade bonds in the basket may cause much discomfort to the investors. The bank as warned that this list is confidential and may not be copied or distributed. What a big secret is it!
The worst thing is after the defaults of 3 names in the basket of securities, the bank informed investors that a further 2 defaults would trigger a credit event. This is very unfair because nowhere in the pricing statement can we find any provision dictating that 5 defaults out of 100 names in the basket will constitute a credit event. The bank has no right to impose such a new default clause now!
On 23.9.08, the basket of securities was re-rated as BBB+. I am not surprised, as it should not have been rated AA in the first place, and the rating agencies have been under a lot of criticism after the subprime problems started because a lot of CDOs in the market were given ridiculously good ratings by such rating agencies.
Mr. Tan, I hope you could post this email in your blog and I would like to call on all interested parties to protest to the bank for being not transparant about the contents in the basket of securities when they launched High Notes 2. We must also object to the bank imposing the new default clause that is not provided for in the pricing statement.
One more thing, the bank proudly stated in the pricing statement that the notes are designed for "defensive investors seeking enhanced yield by providing exposure to a basket of highly rated regional and international banks (the reference banks...." What a misleading statement!
WT
DBS has just sent to HN2 investors a list of names under the so called AA-rated basket of securities held by Constellation, the company owned by DBS and is the counter-party with DBS for various swap contracts.
There are 100 names in the list and I am very surprised that only 25 names are rated AA or better. There are 22 rated BBB+ or below. AA- to A- accounted for the balance 53. How can such a basket of securities rated as AA?
This is akin to call a basket containing a mix of some copper coins, alluminium coins and gold coins a basket of gold cans! This is grossly misleading!
All the while, the bank has been very secretive about this list of names. I think because it does not want to let investors know that the rating of AA for the basket of securities is actually not justifiable. The fact there are some low grade bonds in the basket may cause much discomfort to the investors. The bank as warned that this list is confidential and may not be copied or distributed. What a big secret is it!
The worst thing is after the defaults of 3 names in the basket of securities, the bank informed investors that a further 2 defaults would trigger a credit event. This is very unfair because nowhere in the pricing statement can we find any provision dictating that 5 defaults out of 100 names in the basket will constitute a credit event. The bank has no right to impose such a new default clause now!
On 23.9.08, the basket of securities was re-rated as BBB+. I am not surprised, as it should not have been rated AA in the first place, and the rating agencies have been under a lot of criticism after the subprime problems started because a lot of CDOs in the market were given ridiculously good ratings by such rating agencies.
Mr. Tan, I hope you could post this email in your blog and I would like to call on all interested parties to protest to the bank for being not transparant about the contents in the basket of securities when they launched High Notes 2. We must also object to the bank imposing the new default clause that is not provided for in the pricing statement.
One more thing, the bank proudly stated in the pricing statement that the notes are designed for "defensive investors seeking enhanced yield by providing exposure to a basket of highly rated regional and international banks (the reference banks...." What a misleading statement!
WT
Comments in my blog
If you put up an anonymous comment in my blog, can you sign off with your actual name. This will identify you and give greater weight to your comment. Have courage. Use your real name.
False Signatures at the Petition
Some of the signatures in the Petition were put up by mischeivous people. They enter the particulars of other people who were not involved in the Petition.
I will ask my team to call the Petitioners by telephone to verify that they have signed the Petition. They will also collect your NRIC and other particulars. They will give you a telephone number to call back, so that you have a record of the people that called you.
I will ask my team to call the Petitioners by telephone to verify that they have signed the Petition. They will also collect your NRIC and other particulars. They will give you a telephone number to call back, so that you have a record of the people that called you.
Mr. J B Jeyaretnam
I convey my deepest condolences to the family of the late Mr. J B Jeyaretanam. He had strong beliefs and stood up for what is good for the ordinary people of Singapore. We shall miss him dearly.
Watch a video of the wake of Mr. J B Jeyaretnam. Also, the condolence letter sent by Lee Hsien Loong and Goh Chok Tong:
http://theonlinecitizen.com/2008/10/vivian-balakrishnan-attends-jbjs-wake/
Watch a video of the wake of Mr. J B Jeyaretnam. Also, the condolence letter sent by Lee Hsien Loong and Goh Chok Tong:
http://theonlinecitizen.com/2008/10/vivian-balakrishnan-attends-jbjs-wake/
Complaint of mis-selling by bank
Re: Lehman's MiniBond Series 1 and 2.
1. I am note holder of Lehman's MiniBonds. I purchased these from your Bank through your Bank's Relationship Manager. Y. The details are as follows:
I was referred to Y when my time deposit at your bank matured. I have not heard of Lehman's MiniBond prior to that. Y explained that the MiniBond was a low risk investment giving a little higher yield than fixed deposits and arranged by Lehman Brothers, one of the most respected and AAA rated Investment Bank and that my investment would be invested into the 6 reference entities. These entities are well respected and rated AA and above. Only during the holding period of 5 ½ years to maturity, if anyone of these corporations goes into bankruptcy, then the notes will be terminated and sold. The risks are against such defaults and as we have to hold the notes to maturity, we will be compensated with a return higher than our normal practice of placing savings in time deposits of 2.5 to 3% for 6 months, at that time in early 2006.
There were no mention that our investments will be used to buy underlying portfolio of CDOs and Credit Default Swaps.
What we were told about MiniBonds, how it works and risks associated at time of purchase for Series 1 and 2 , were indeed very different than in reality.
2. For Series 1, I was not shown or given any prospectus. I was given a copy of the prospectus for Series 2 after signing up and payments made. The contents were too technical for any retail investor to understand. After Lehman's bankruptcy, and with explanation from your consultant Z some 2 weeks ago, I then finally realized the complexity and the risks.
3. I bought the MiniBonds based on the creditability of your Bank and that such Bonds were approved and registered through Monetary Authority of Singapore and that SRS accounts, an Government savings scheme designed to enhance savings to be used during retirement, could be used to purchase such notes. Your bank through your relationship manager, Y assured me that the MiniBonds was a low risk, secured investment giving a higher returns than interest for time deposit and that if I have no immediate need for such cash, MiniBond investment will be more suitable.
4. Now that with Lehman Brothers declaring bankrupt, it has created a credit event and with the numerous media coverage, and a face to face discussion held 2 weeks ago with your Relationship Manager and Investment Consultant, I finally realized that the operations of such notes and risks associated were very different from what was told to me previously.
5. It was absolute misrepresentation on the nature of these MiniBonds, its operations and risks which investors have to assume. Had I known that the moneys were not invested in the 6 referenced entities but instead in a portfolio of hundreds of underlying CDOs with high risks of failure, I would never sink in a dollar. Just look at my risks profile. I hardly invest in equities in Singapore Stock Exchange, even for blue chip stocks. I did not participate in any hedge fund or use private bankers to invest my extra cash. I put my surplus cash in time deposit with Singapore Banks and subscribe to SRS and annuities to provide for my retirement.
6. With the crash of financial system and liquidation of MiniBonds Series 1 and 2, I expect to incur substantial losses, being the difference paid for the notes and the net realizable value on redemption. I would like to know how your Bank proposes to compensate me with such substantial losses. Misrepresentation of information about the nature, process and risks of such investment from your organization will cause me potentially huge financial losses. I am not a risk taker nor have greed for higher returns with risky investment. Additionally, your Bank has not exercised proper diligence in your fiduciary responsibility to look after the interest of your customers who have trusted you to handle their hard earned savings for retirement.
7. I look forward to favorable response.
1. I am note holder of Lehman's MiniBonds. I purchased these from your Bank through your Bank's Relationship Manager. Y. The details are as follows:
I was referred to Y when my time deposit at your bank matured. I have not heard of Lehman's MiniBond prior to that. Y explained that the MiniBond was a low risk investment giving a little higher yield than fixed deposits and arranged by Lehman Brothers, one of the most respected and AAA rated Investment Bank and that my investment would be invested into the 6 reference entities. These entities are well respected and rated AA and above. Only during the holding period of 5 ½ years to maturity, if anyone of these corporations goes into bankruptcy, then the notes will be terminated and sold. The risks are against such defaults and as we have to hold the notes to maturity, we will be compensated with a return higher than our normal practice of placing savings in time deposits of 2.5 to 3% for 6 months, at that time in early 2006.
There were no mention that our investments will be used to buy underlying portfolio of CDOs and Credit Default Swaps.
What we were told about MiniBonds, how it works and risks associated at time of purchase for Series 1 and 2 , were indeed very different than in reality.
2. For Series 1, I was not shown or given any prospectus. I was given a copy of the prospectus for Series 2 after signing up and payments made. The contents were too technical for any retail investor to understand. After Lehman's bankruptcy, and with explanation from your consultant Z some 2 weeks ago, I then finally realized the complexity and the risks.
3. I bought the MiniBonds based on the creditability of your Bank and that such Bonds were approved and registered through Monetary Authority of Singapore and that SRS accounts, an Government savings scheme designed to enhance savings to be used during retirement, could be used to purchase such notes. Your bank through your relationship manager, Y assured me that the MiniBonds was a low risk, secured investment giving a higher returns than interest for time deposit and that if I have no immediate need for such cash, MiniBond investment will be more suitable.
4. Now that with Lehman Brothers declaring bankrupt, it has created a credit event and with the numerous media coverage, and a face to face discussion held 2 weeks ago with your Relationship Manager and Investment Consultant, I finally realized that the operations of such notes and risks associated were very different from what was told to me previously.
5. It was absolute misrepresentation on the nature of these MiniBonds, its operations and risks which investors have to assume. Had I known that the moneys were not invested in the 6 referenced entities but instead in a portfolio of hundreds of underlying CDOs with high risks of failure, I would never sink in a dollar. Just look at my risks profile. I hardly invest in equities in Singapore Stock Exchange, even for blue chip stocks. I did not participate in any hedge fund or use private bankers to invest my extra cash. I put my surplus cash in time deposit with Singapore Banks and subscribe to SRS and annuities to provide for my retirement.
6. With the crash of financial system and liquidation of MiniBonds Series 1 and 2, I expect to incur substantial losses, being the difference paid for the notes and the net realizable value on redemption. I would like to know how your Bank proposes to compensate me with such substantial losses. Misrepresentation of information about the nature, process and risks of such investment from your organization will cause me potentially huge financial losses. I am not a risk taker nor have greed for higher returns with risky investment. Additionally, your Bank has not exercised proper diligence in your fiduciary responsibility to look after the interest of your customers who have trusted you to handle their hard earned savings for retirement.
7. I look forward to favorable response.
FAQ on Minibonds
Lehman Brothers Asia Ltd, as arranger of minibonds, posted this two weeks ago in HK
http://www.sfc.hk/sfc/doc/EN/general/general/lehman/faq_pacific_20080917.pdf
Note sfc is the HK Securities and Futures Commission.
http://www.sfc.hk/sfc/doc/EN/general/general/lehman/faq_pacific_20080917.pdf
Note sfc is the HK Securities and Futures Commission.
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