Ask for your risk analysis form from the financial institution that you bought the credit linked notes. You may need it to file your complaint:
http://tankinlian.blogspot.com/2008/11/ask-for-your-risk-analysis-form.html
Friday, November 21, 2008
Misrepresentation about the risk of CDOs
Dear Mr. Tan
After reading the explanations from many financial experts, I realize that the real risk for the minibond is the 150 securities CDO.
Out of the 150 securities, if 11 or more credits events then the investor will loose some of their principal. If 13 or more credit events then investors will lose all of their principal.
The risk for this condition is extremely high because this is equivalent to any 2 credit events out of 23 securities (or any 1 out of 11.5).
Since bank should be much safer than others, it is not unreasonable to assume that on average, the risk of one security is 2 times the risk of one bank Then the risk of 13 or more credit events will be about 23 times (2 x 150/13 = 23.1) the risk of credit event for one bank
Moreover, the pricing statement did not disclose the identities of the 150 securities referenced by the synthetic CDO. This makes it difficult for us to assess the risk. The sales brochures and newspaper advertisements did not even mention the 150 securities CDO.
Can we sue the Financial Institutions for the omitting of these important information in the pricing statement/sales brochures/newspaper advertisements ?
Pang
REPLY
In my view, this omission is material. The investors can sue the financial institution.
It is better for the government to act and take action to enforce the law (i.e. Securities and Futures Act) which requires the seller of securities to provide relevant, reliable and complete information about the securities being sold to the public.
After reading the explanations from many financial experts, I realize that the real risk for the minibond is the 150 securities CDO.
Out of the 150 securities, if 11 or more credits events then the investor will loose some of their principal. If 13 or more credit events then investors will lose all of their principal.
The risk for this condition is extremely high because this is equivalent to any 2 credit events out of 23 securities (or any 1 out of 11.5).
Since bank should be much safer than others, it is not unreasonable to assume that on average, the risk of one security is 2 times the risk of one bank Then the risk of 13 or more credit events will be about 23 times (2 x 150/13 = 23.1) the risk of credit event for one bank
Moreover, the pricing statement did not disclose the identities of the 150 securities referenced by the synthetic CDO. This makes it difficult for us to assess the risk. The sales brochures and newspaper advertisements did not even mention the 150 securities CDO.
Can we sue the Financial Institutions for the omitting of these important information in the pricing statement/sales brochures/newspaper advertisements ?
Pang
REPLY
In my view, this omission is material. The investors can sue the financial institution.
It is better for the government to act and take action to enforce the law (i.e. Securities and Futures Act) which requires the seller of securities to provide relevant, reliable and complete information about the securities being sold to the public.
Complaints in Hong Kong and Taiwan
Dear Mr. Tan,
I have found these links in youtube.com : MiniBond saga in Hong Kong
http://www.youtube.com/watch?v=ICtDCRVqPqI&feature=related (part 1)
http://www.youtube.com/watch?v=j9ykXyDj3zY&feature=related (part 2)
They explain in Cantonese on how difficult it is to understand the products. I think these clips will be helpful to explain some facts to the old folks, and those who still don't know what has happened to cause BIG losses to their investments.
Here is an explanation in English:
http://www.youtube.com/watch?v=iV0YiTl6ea0
After spending many days of searching on Google, Yahoo, Youtube and most importantly reading your blog, I still don't understand the operation and structure behind the product that I bought. I strongly believe that most of the RMs don't know that their products are in fact so risky and the reward is not in the fair proportion to the risk.
To be fair and kind (as all Singaporeans are), I think these RMs are also very stressful now to be involved in all this "mess".
My wife told me that in a Taiwanese news that she watched last night, mentioned that angry, distressed and fustrated investors are crowding around a bank to demand for refund. The Structed Deposits saga in just beginning in Taiwan as more and more Taiwanese investors start to realise about the real truth behind the painted truth.
I take this opportunity to thank you for posting my previous email to you in your blog (RE : Mental health concerns during difficult times). My wife and I are so touch that at least there is a place to air our sadness as it is extremely unhealthy to bottle up these negative emotions.
Of course, I agree with the replies/comments to my post that we should do it in a constructive and sensible way. Life still has to go on. And that is the main reason motivating me to write the post on mental health.
Last but not least, I hope that more people as knowledgeable, righteous and selfless like you will stand out to help the distressed ones. Wishing You Great Health, Strength and Happiness.
GOD BLESS ALL !
FO
Damage to integrity and character
Hi KL Tan,
I felt sorry for u on the outrageous remarks posted in ST by Mr Chua SY. I strongly suggest that you should sue both ST and the latter for the damage to your integrity and character as a result. Otherwise, the general public may really lead to conclude that you have other agendas in mind as what Mr Chua had written. At the very least, a public apology must be sought from them in order to put this matter to a close.
What are your thoughts ?
NSK
REPLY
Thank you. I do not wish to engage in the "suing" activity.
I felt sorry for u on the outrageous remarks posted in ST by Mr Chua SY. I strongly suggest that you should sue both ST and the latter for the damage to your integrity and character as a result. Otherwise, the general public may really lead to conclude that you have other agendas in mind as what Mr Chua had written. At the very least, a public apology must be sought from them in order to put this matter to a close.
What are your thoughts ?
NSK
REPLY
Thank you. I do not wish to engage in the "suing" activity.
Writing to a Government official
If you wish to write to a Government official, including a Minister, you can get the e-mail or telephone number from this website:
http://www.sgdi.gov.sg
For example, if you type Goh Chok Tong, you will get the following:
GOH CHOK TONG SENIOR MINISTER
DID : 62358577
Email: GOH_CHOK_TONG@PMO.GOV.SG
http://www.sgdi.gov.sg
For example, if you type Goh Chok Tong, you will get the following:
GOH CHOK TONG SENIOR MINISTER
DID : 62358577
Email: GOH_CHOK_TONG@PMO.GOV.SG
Writing to your Member of Parliament
You can find the name and contact of your Member of Parliament from this website:
http://www.parliament.gov.sg/
You can meet your MP at the weekly meet-the-people session.
Your MP came forward to be elected to work for the people, and has the duty to represent the people. If you have any problem, you can see your MP. You should expect your MP to carry out his duty in looking after your interest (provided that your interest is legitimate).
If several of your neighbours share a common problem, you should see your MP together.
http://www.parliament.gov.sg/
You can meet your MP at the weekly meet-the-people session.
Your MP came forward to be elected to work for the people, and has the duty to represent the people. If you have any problem, you can see your MP. You should expect your MP to carry out his duty in looking after your interest (provided that your interest is legitimate).
If several of your neighbours share a common problem, you should see your MP together.
Your experience with credit linked notes
Please share your experience on investing in the credit linked notes, i.e. minibond, pinnacle notes, high notes, jubilee notes. Send your article to kinlian1@gmail.com
http://tankinlian.blogspot.com/2008/11/publish-book-on-credit-linked-notes.html
http://tankinlian.blogspot.com/2008/11/publish-book-on-credit-linked-notes.html
Selling toxic CDO products
Hi Mr Tan,
I should think that the FIs cannot be forgiven for miselling the toxic CDO products. Take for instance the pinnacles notes. Various series have been launched during the past two years. Upon the launching of series 1 , the FIs should have been aware of where the money have gone into and the details of the 100 over companies where the money are invested. Is it justifable that if 8 out of the 150 companies went bust then the investor will lose all the money? Is this a high risk or a definite gone case investment? I believe the FIs know the answer.
If it is a high risks investment then it must have a high return. Is it justifable that the town councils invest into these products to get a modest 5% return? In these product the amount receive at the maturity will be equivalent to our initial investment if nothing goes wrong and thus the return is only about 25 percent. Any mature person will definitely know that it is crazy to invest in this high risk product and getting such a low return. The worst thing is that it is not liquid at all and the investor has very little or no control of his investment.
To think that so many series have been launched and sold to general public as a safe bond like investment instrument of negligible risks is really a shame to these FIs.
In recent years, whenever the RM in the bank want to sell me any product he/she will always say ever since the Asian crisis, MAS has put stricker measures on the financial products and if they mis-represent they will get into trouble.The product they sold have to be MAS APPROVED. Many people like me have been led to believe that the MAS has stepped in to protect the people and we are not suspicious of the RMs' advice.
I really hope that the FIs will admit their mistakes and make compensations to all investors . This will definitely benefit them in long run as the customers will have more faith in investing with the FIs. In order for the FIs not to lose their liquidity I suggest that the money compensated to be put back into the FDs at prevailing interest rates and allowing the investors to withdraw a certain % a year.
Jen
REPLY
I suggest that you send your views to Mr Goh Chok Tong and to MAS.
http://www.sgdi.gov.sg/
GOH CHOK TONG
SENIOR MINISTER
DID : 62358577
Email: GOH_CHOK_TONG@PMO.GOV.SG
I should think that the FIs cannot be forgiven for miselling the toxic CDO products. Take for instance the pinnacles notes. Various series have been launched during the past two years. Upon the launching of series 1 , the FIs should have been aware of where the money have gone into and the details of the 100 over companies where the money are invested. Is it justifable that if 8 out of the 150 companies went bust then the investor will lose all the money? Is this a high risk or a definite gone case investment? I believe the FIs know the answer.
If it is a high risks investment then it must have a high return. Is it justifable that the town councils invest into these products to get a modest 5% return? In these product the amount receive at the maturity will be equivalent to our initial investment if nothing goes wrong and thus the return is only about 25 percent. Any mature person will definitely know that it is crazy to invest in this high risk product and getting such a low return. The worst thing is that it is not liquid at all and the investor has very little or no control of his investment.
To think that so many series have been launched and sold to general public as a safe bond like investment instrument of negligible risks is really a shame to these FIs.
In recent years, whenever the RM in the bank want to sell me any product he/she will always say ever since the Asian crisis, MAS has put stricker measures on the financial products and if they mis-represent they will get into trouble.The product they sold have to be MAS APPROVED. Many people like me have been led to believe that the MAS has stepped in to protect the people and we are not suspicious of the RMs' advice.
I really hope that the FIs will admit their mistakes and make compensations to all investors . This will definitely benefit them in long run as the customers will have more faith in investing with the FIs. In order for the FIs not to lose their liquidity I suggest that the money compensated to be put back into the FDs at prevailing interest rates and allowing the investors to withdraw a certain % a year.
Jen
REPLY
I suggest that you send your views to Mr Goh Chok Tong and to MAS.
http://www.sgdi.gov.sg/
GOH CHOK TONG
SENIOR MINISTER
DID : 62358577
Email: GOH_CHOK_TONG@PMO.GOV.SG
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