Pinnacle Notes: Website should be more free with info

Published in Straits Times, Dec 30, 2008

I WAS directed to the Morgan Stanley website for Pinnacles Notes by the Monetary Authority of Singapore (MAS) website. When I entered the Morgan Stanley website, I was welcomed by a long legal disclaimer that required the answer 'yes' before I was granted further access. As a result, I was discouraged from entering the website for more information.

May I ask Morgan Stanley to consider removing this legalistic disclaimer and making access free for the following reasons:

- Pinnacle Notes is of public interest, and basic information such as redemption value should be freely available.For example, a bank website provides information on fixed deposits and exchange rates. In another example, unit trust investments are quoted daily via normal marketing channels.

- Morgan Stanley should not impose such a legalistic disclaimer because it is merely allowing access and not providing professional advice. Its exposure is next to zero. Members of the public who want access are looking for information and not professional advice.

It would be fair for Morgan Stanley to allow public access to general information without agreeing to a disclaimer. However, if professional advice is solicited, it is free to give it.

Leong Kok Ho

HK Standard: Lehman minibond values up in air

30 Dec 2008

The Hong Kong Association of Banks announced yesterday that leftover values of Lehman Brothers minibonds are as much as 78.31 percent.

However, a source from the banking sector said the pricing, set as at November 21, is no longer applicable because of fundamental uncertainties following a legal challenge from Lehman liquidators.

"There have been no attempts to update the valuation," the source said.

The pricing of the minibonds will continue once the legal issue is settled, the source said.

However, "there will be potentially additional costs to be incurred as a result of the legal challenge.''

The banking association also said: ``If this claim [from Lehman's liquidators] is upheld, the value of the minibonds will significantly decrease.''

According to a Legislative Council document submitted by the association's Lehman task force yesterday, prices, as at November 21, of the minibonds ranged from 0.82 percent to 64.03 percent on average.

Series 11, tranche A, was worth the most among all the series and its price was 78.31 percent, after calculating the value of the underlying collateral. Those who bought the product for US$100 (HK$780) would get US$78.31. Remaining values of series five to nine of the minibonds were only 0.82 percent.

The pricing information no longer represents the current market value of the minibonds and the banks cannot assess how much a minibond investor may recover from the proceeds of the collateral underlying the minibonds, the association added.

A Legco meeting relating to the government buyback proposal for the minibonds will be held this morning.

Late last month, the minibond trustee, a US unit of HSBC (0005), received a letter from legal advisers to Lehman in the United States that the proceeds from any sale of the underlying collateral for the minibonds should be paid to the collapsed US investment bank before the issuer of the minibonds and in turn the investors.

The banks are still circulating the documents for the provision of up to HK$100 million to the trustee and expect it will not only be used for paying legal fees.

"The precise terms of the proposed funding have not yet been agreed between the banks and the trustee," the association said.

Hong Kong: Lehman dozen feeling bullied

http://www.thestandard.com.hk/news_detail.asp?pp_cat=11&art_id=76374&con_type=1&d_str=20081230

Tuesday, December 30, 2008

A dozen investors in Lehman Brothers products suffered a further setback yesterday when the Small Claims Tribunal adjourned until March a hearing on their demands for refunds. Adjudicator Anthony Chow Siu- wo told the tribunal that a further 100 claims needed to be processed, while one of the banks being sued, DBS, as well as an employee of Chong Hing Bank, had asked for their cases to be transferred to the District Court since they needed legal representation.
Legal representatives are not permitted at a hearing by the tribunal, which is limited to dealing with claims not exceeding HK$50,000.

Investors suing DBS complained of being bullied, saying they could not afford the fees in the District Court.

Chow told the 12 individual claimants seeking refunds from six banks that they will have to wait for another three months before the hearing can be continued.
Four claimants who bought DBS' Constellation products were told by a representative of the bank at the tribunal that their products had zero value.

Chow said the problem with some of the cases was that no one, including the banks, knew the value of the financial products that had been sold, though they may have been valued at zero for a certain period. Thus, one could not calculate the amount of money lost by investors, Chow said. ADELE WONG

Thought for the day - make an exception of myself

Contributed by Ho Cheow Seng

 

"The essence of immorality is the tendency to make an exception of myself: Jane Addams

(An example is a ruler who passes laws for his people and exempts himself from those very laws)

 

SCMP:Mis-selling of minibonds had 1980s precedent in Britain

http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=20Y5PIVUMQU5&linkid=593eb6f4-f2d5-4fa5-b42a-9ab1cf136f74&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d

29 Dec 2008
Jimmy Chow, Cheung Sha Wan

The controversy over the minibond saga does not only relate to compensation. It is about [alleged] mis-selling.

Instead of paying investors of Lehman’s minibonds back, local banks have come up with a complex way by providing a pool of HK$100 million to help the minibond trustee to perform its duty to protect the “interest of minibond investors” (“Deduction decision in legal fight irks Lehman investors”, December 19).

If a retired taxi driver did not seem to understand the minibond in which he had invested his life savings, he can hardly be expected to grasp this legal game [unfolding in the US]. Neither can I.

So far, only a limited number of people have received compensation from the banks, a small percentage of total claimants.

The mis-selling of securities in Hong Kong, which mostly occurred over the last two years, is reminiscent of the mis-selling in Britain between 1988 and 1994.

In 1988 the British government encouraged people to make private provision for retirement in addition to the state pension by purchasing personal pension plans.

It turned out that fast-talking salesmen misled people into buying retirement pension products they did not really need.

Realising there had been mis-selling on a huge scale, in 1994 the British financial services regulator “instructed” banks and insurers to stop these practices and review all cases.

By 1997 only 5 per cent of the cases were cleared up.

That year, the newly-elected Labour government decided to “name and shame” and to fine the laggards.

Disciplinary action was taken against 349 firms which resulted in fines totalling £11million (HK$126.3 million). Nearly £12 billion was paid in compensation to policyholders.

I hope I am wrong, but if our government remains reluctant to conduct a radical review on both the minibond scandal and the city’s regulatory framework, the saga will drag on indefinitely.