Hello Mr Tan,
Someone said that credit card facilities to consumers need to be tightened up, to prevent situations where a person gets multiple credit lines from many banks. Do you have any ideas on how this can be done?
Journalist
MY REPLY
It is important to educate consumers to avoid borrowing on credit cards. The interest charge on late payments could be as high as 2% per month. This works out to 24% a high. It is extremely high.
Many consumers borrow excessively on credit cards and incur large debts with high interest costs. They are not able to cope with the debts, and have to declare bankrupcy.The number of these cases have been increasing in alarming proportions - according to insiders who are involved in collection of credit card debts.
I suggest that MAS should require all banks to provide data into a central database managed by MAS on the credit cards taken by individual persons. Each person should be limited to a maximum of two credit cards. The total credit limit on these cards should be limited to two months of salary.
Banks should not be allowed to issue credit cards, if an individual already has two cards. Exceptions can be made for high net worth individuals who need more than two credit cards.
Wednesday, October 8, 2008
Petition to Singapore Government - 983 signatures
I will be handing over the Petition tomorrow (9 October) to Dr. Andrew Khoo, Executive Director of Capital Markets of MAS. The Petition is addressed to the Senior Minister and Chairman of MAS, Mr. Goh Chok Tong. Mr. Goh was not able to receive the petition personally and has asked me to pass it to Dr. Khoo.
The wording of the Petition is below. The final Petition has 983 signatures. I have removed signatories with incomplete particulars. The original list has more than 1,000 signatories.
PETITION TO SINGAPORE GOVERNMENT
1. We write to petition the Singapore Government, particularly the Commercial Affairs Department (Singapore Police Force) and/or the Monetary Authority of Singapore, to conduct a full and independent inquiry in relation to the credit linked securities sold by various financial institutions in Singapore. These structured products include, but are not limited to, the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacles Notes and Merrill Lynch Jubilee Notes.
2. Singaporeans, including the persons who have signed this petition, lost their hard-earned savings by investing in these financial products. Such products clearly did not suit the risk profiles of these consumers. The consumers were not made aware of the high risks involved in the financial product when buying the product. They became innocent victims of misrepresentation by the financial institutions that distributed the structured products.
3. We now wish to be assured that those who invested in such financial products have not been victims of negligent and/or dishonest conduct and/or fraud by these financial institutions.
4. The Government has a duty to ensure that investment products are marketed and sold appropriately in our jurisdiction. Such products must be sold in a manner compliant with the laws of Singapore. Financial institutions, including their respective key management, that do not follow the laws or regulations applicable to them must be held accountable for such breaches.
5. Please commence a full and independent inquiry into the sale of structured products by various financial institutions in Singapore. If the inquiry deems necessary, the Attorney-General of Singapore should act against these financial institutions.
6. We also ask the Government to help these investors to claim fair and adequate compensation from these financial institutions for their losses which are caused by the mis-conduct of these financial institutions.
7. We ask the Government to act now and restore the peoples' faith in our financial system.
The wording of the Petition is below. The final Petition has 983 signatures. I have removed signatories with incomplete particulars. The original list has more than 1,000 signatories.
PETITION TO SINGAPORE GOVERNMENT
1. We write to petition the Singapore Government, particularly the Commercial Affairs Department (Singapore Police Force) and/or the Monetary Authority of Singapore, to conduct a full and independent inquiry in relation to the credit linked securities sold by various financial institutions in Singapore. These structured products include, but are not limited to, the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacles Notes and Merrill Lynch Jubilee Notes.
2. Singaporeans, including the persons who have signed this petition, lost their hard-earned savings by investing in these financial products. Such products clearly did not suit the risk profiles of these consumers. The consumers were not made aware of the high risks involved in the financial product when buying the product. They became innocent victims of misrepresentation by the financial institutions that distributed the structured products.
3. We now wish to be assured that those who invested in such financial products have not been victims of negligent and/or dishonest conduct and/or fraud by these financial institutions.
4. The Government has a duty to ensure that investment products are marketed and sold appropriately in our jurisdiction. Such products must be sold in a manner compliant with the laws of Singapore. Financial institutions, including their respective key management, that do not follow the laws or regulations applicable to them must be held accountable for such breaches.
5. Please commence a full and independent inquiry into the sale of structured products by various financial institutions in Singapore. If the inquiry deems necessary, the Attorney-General of Singapore should act against these financial institutions.
6. We also ask the Government to help these investors to claim fair and adequate compensation from these financial institutions for their losses which are caused by the mis-conduct of these financial institutions.
7. We ask the Government to act now and restore the peoples' faith in our financial system.
HKMA investigates complaints of alleged mis-selling of investment products
HKMA investigates complaints of alleged mis-selling of investment products related to Lehman Brothers
The Hong Kong Monetary Authority announced today (Monday) that, up to 3 October 2008, it had received 5,567 complaints from retail investors alleging improper selling of investment products by licensed banks. In 4,205 cases, the HKMA had received the initial complaint and assigned a complaint number to facilitate follow-up action. For a further 1,250 cases, the HKMA was calling back the complainants to obtain further details and confirm the allegations. The HKMA had already assessed 112 cases to determine what further action is required and had opened investigations into 22 of them. In 7 cases, insufficient evidence of mis-selling had been found, while further information was being sought in the remaining 83 cases.
Mr Joseph Yam, Chief Executive of the HKMA, said that the role of the HKMA is to investigate complaints of mis-selling against banks. "The HKMA is dealing with the complaints as quickly as possible. It is, of course, very important that we do this objectively and without pre-judging the issue. If, after investigation, we find cases of mis-selling, we will treat them very seriously.
Mr Yam added "The consideration of complaints entails a heavy workload and is time consuming. We have mobilised about one-third of the staff of from the three banking departments in the HKMA and have employed temporary outside help. We are also making arrangements to bring in additional staff. At a time when the banking system in Hong Kong is under some externally induced stress, requiring much closer attention by banking supervisors, there has obviously been some pressure on resources"
Mr Yam stressed "We sympathise with investors who have been affected by the collapse of Lehman Brothers. Our priority now, is to consider the complaints as quickly as possible. Within the authority of the HKMA, this is the action that will be most helpful to the aggrieved investors. "
The Hong Kong Monetary Authority announced today (Monday) that, up to 3 October 2008, it had received 5,567 complaints from retail investors alleging improper selling of investment products by licensed banks. In 4,205 cases, the HKMA had received the initial complaint and assigned a complaint number to facilitate follow-up action. For a further 1,250 cases, the HKMA was calling back the complainants to obtain further details and confirm the allegations. The HKMA had already assessed 112 cases to determine what further action is required and had opened investigations into 22 of them. In 7 cases, insufficient evidence of mis-selling had been found, while further information was being sought in the remaining 83 cases.
Mr Joseph Yam, Chief Executive of the HKMA, said that the role of the HKMA is to investigate complaints of mis-selling against banks. "The HKMA is dealing with the complaints as quickly as possible. It is, of course, very important that we do this objectively and without pre-judging the issue. If, after investigation, we find cases of mis-selling, we will treat them very seriously.
Mr Yam added "The consideration of complaints entails a heavy workload and is time consuming. We have mobilised about one-third of the staff of from the three banking departments in the HKMA and have employed temporary outside help. We are also making arrangements to bring in additional staff. At a time when the banking system in Hong Kong is under some externally induced stress, requiring much closer attention by banking supervisors, there has obviously been some pressure on resources"
Mr Yam stressed "We sympathise with investors who have been affected by the collapse of Lehman Brothers. Our priority now, is to consider the complaints as quickly as possible. Within the authority of the HKMA, this is the action that will be most helpful to the aggrieved investors. "
Tuesday, October 7, 2008
South China Morning Post: 2003 case sets precedent for action against financial advisers
South China Morning Post (Hong Kong) - October 7, 2008
Financial advisers can be held liable for negligent investment recommendations to clients, a local court ruling in 2003 has established.
In the Field vs Barber Asia Limited (HCA7119/2000) case, plaintiff Susan Field was awarded compensation of GBP219,890 (HK$2.84 million) plus interest and costs that she had lost as a result of changing an investment portfolio on the recommendation of the defendant.
Ms Field had asked for a conservative investment portfolio. It initially made a British sterling-dominated portfolio for her, but later advised her to gear up her portfolio with a Japanese yen loan. A subsequent appreciation of the yen forced her to provide additional cash for the loan, eventually losing the whole investment.
The Court of First Instance ruled that the financial adviser was expected to warn Ms Field of the risks. The ruling was upheld by the Court of Appeal when the defendant appealed.
Citing this case yesterday, Civic Party leader Audrey Eu Yuet-mee said minibond holders were in an even stronger position than Ms Field to claim compensation, as they had signed contracts with the distributors. She has asked the Consumer Council to refer to the case and consider using its consumer legal action fund to help holders claim compensation.
Ms Eu said individual investors might not be willing to launch costly lawsuits.
Fanny W.Y. Fung
Financial advisers can be held liable for negligent investment recommendations to clients, a local court ruling in 2003 has established.
In the Field vs Barber Asia Limited (HCA7119/2000) case, plaintiff Susan Field was awarded compensation of GBP219,890 (HK$2.84 million) plus interest and costs that she had lost as a result of changing an investment portfolio on the recommendation of the defendant.
Ms Field had asked for a conservative investment portfolio. It initially made a British sterling-dominated portfolio for her, but later advised her to gear up her portfolio with a Japanese yen loan. A subsequent appreciation of the yen forced her to provide additional cash for the loan, eventually losing the whole investment.
The Court of First Instance ruled that the financial adviser was expected to warn Ms Field of the risks. The ruling was upheld by the Court of Appeal when the defendant appealed.
Citing this case yesterday, Civic Party leader Audrey Eu Yuet-mee said minibond holders were in an even stronger position than Ms Field to claim compensation, as they had signed contracts with the distributors. She has asked the Consumer Council to refer to the case and consider using its consumer legal action fund to help holders claim compensation.
Ms Eu said individual investors might not be willing to launch costly lawsuits.
Fanny W.Y. Fung
Poor payout on Anticipated Endowment policy
Dear Mr Tan,
My dad has bought a 20 Year Modified Anticipated Endowment Policy in 1988 and his policy matured in August 2008.
After calculating the total amount of 5 yearly and maturity payout by the insurance company, we realize that the total payout of $11,000 is less than the total premium of $15,000 paid over 20 years.
He recalled in the 20 years, he has received payout of bonus every 5 years and the total bonus received is around $11,000 but he has already paid about $15,000 in premium for his endowment policy.
We cannot understand why he is making a loss with this endowment policy. I have writtent to the insurance company to ask for an explanation and have not heard from then yet.
As a layman, we do not understand how it works and I thought with your wealth of knowledge on insurance, you may be able to explain to us why my dad made a loss with this Anticipated Endowment policy. I sincerely hope you can also advise me on the next course of action.
REPLY
You can lodge a compliant with the CEO of the insurance company. In my view, the total payout should be more than the total premiums.
If they do not give you a satisfactory answer, you can file a complaint with FiDREC, www.fidrec.com.sg.
My dad has bought a 20 Year Modified Anticipated Endowment Policy in 1988 and his policy matured in August 2008.
After calculating the total amount of 5 yearly and maturity payout by the insurance company, we realize that the total payout of $11,000 is less than the total premium of $15,000 paid over 20 years.
He recalled in the 20 years, he has received payout of bonus every 5 years and the total bonus received is around $11,000 but he has already paid about $15,000 in premium for his endowment policy.
We cannot understand why he is making a loss with this endowment policy. I have writtent to the insurance company to ask for an explanation and have not heard from then yet.
As a layman, we do not understand how it works and I thought with your wealth of knowledge on insurance, you may be able to explain to us why my dad made a loss with this Anticipated Endowment policy. I sincerely hope you can also advise me on the next course of action.
REPLY
You can lodge a compliant with the CEO of the insurance company. In my view, the total payout should be more than the total premiums.
If they do not give you a satisfactory answer, you can file a complaint with FiDREC, www.fidrec.com.sg.
Is bond fund risky?
Hi Mr. Tan,
How about Bond Funds ? Is it safe ? Its unit price keeps dropping.
I have brought S$x of Bond Fund from Maybank at S$0.99 per unit and it was at S$0.86 now. It dropped by $0.13 dropped within 6 months time.
What shall I do now ? Cut lose or hold ? I was also told by the bank staff it was safe since it was a bond and having very little risk ...
Thanks you in advance for your advice please. I know you are very busy .. a lot of people seeking advice from you ...
REPLY
I am not familiar with this bond. It is all right to keep the investment.
It is also all right to sell the investment, as you are getting the actual value of the underlying bonds. Some of the bonds may have dropped in value due to the credit crisis.
How about Bond Funds ? Is it safe ? Its unit price keeps dropping.
I have brought S$x of Bond Fund from Maybank at S$0.99 per unit and it was at S$0.86 now. It dropped by $0.13 dropped within 6 months time.
What shall I do now ? Cut lose or hold ? I was also told by the bank staff it was safe since it was a bond and having very little risk ...
Thanks you in advance for your advice please. I know you are very busy .. a lot of people seeking advice from you ...
REPLY
I am not familiar with this bond. It is all right to keep the investment.
It is also all right to sell the investment, as you are getting the actual value of the underlying bonds. Some of the bonds may have dropped in value due to the credit crisis.
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