Dear Mr Tan
First, I'd like to THANK and APPLAUD you for being "the voice" of many low/middle-income Singaporeans especially the retirees who have invested large sums of money into high-risk products without realising the consequences.
My reason for writing this is, like these retirees, I am a victim of sorts . When I look into bank's products, my only concern is to invest in 100% CAPITAL GUARANTEED products. When I met up with the Citibank Personal Banker on several occasions, I stressed this primary concern to her. I even elaborated by saying something like "at the end of the tenor, I want 100% of my capital back". However, I was sold the Merrill Lynch Jubilee Series 8 product which had a 100% CAPITAL PROTECTION . I only realised this when I received the prospectus AFTER signing and paying for this investment.
When I brought this up, I received a 3-way telephone call from the PB's head and another person. I related to her my concern and how I was misled into believing that I bought a 100% CAPITAL GUARANTEED product. She assured me that I will get my 100% capital back based on 2 conditions :
1. I have to hold to maturity the principal amount
2. Nothing happens to Merrill Lynch
She said that our conversations are recorded so I should not worry.
REPLY
I advice you to lodge a complaint for mis-selling and to ask for a FULL refund of your money. If the bank does not agree, you should escalate it to Fidrec (www.fidrec.com.sg) or complain to MAS.
Saturday, October 18, 2008
Do not succumb to greed
Dear Mr. Tan,
I have been following your blog for close to a year and from there I have learnt a great deal of things I can never learn from my lecturers or from the textbooks or courses that I take in school.
I attended your talk at NUS earlier today and I would like to thank you for sharing with us so many words of wisdom and financial knowledge that can only be accumulated through many decades of hard work and experience. Being a Computer Science major who spends a great deal of time on my studies, I had struggled even with simple financial terms like “unit trust” and “bonds”, but all thanks to you, I now have better knowledge of what they are.
Even though this is the first time that I have met you and I do not know you personally, you come across as a modest person from humble backgrounds, unlike many of the so-called ‘elites’ in modern Singapore who can never understand the lives of the commoners. What I have also learnt from you is not just about money, but also about life: to stay healthy and lead a good life, to know the limits and not succumb to the sin of greed, to learn to let it go when it is our time to leave this world and not leave a mountain of debt accumulated from medical expenses behind for our family.
Being a Singaporean, I must admit that I feel shameful for a government that focuses all its attention on making money and accumulating wealth, leaving welfare for the disadvantaged and old in society to the hands of the altruistic few.
I wish you all the best in your quest for the rights of the victims in the minibonds crisis, and the very best of health and happy lives for you and your family.
PX
I have been following your blog for close to a year and from there I have learnt a great deal of things I can never learn from my lecturers or from the textbooks or courses that I take in school.
I attended your talk at NUS earlier today and I would like to thank you for sharing with us so many words of wisdom and financial knowledge that can only be accumulated through many decades of hard work and experience. Being a Computer Science major who spends a great deal of time on my studies, I had struggled even with simple financial terms like “unit trust” and “bonds”, but all thanks to you, I now have better knowledge of what they are.
Even though this is the first time that I have met you and I do not know you personally, you come across as a modest person from humble backgrounds, unlike many of the so-called ‘elites’ in modern Singapore who can never understand the lives of the commoners. What I have also learnt from you is not just about money, but also about life: to stay healthy and lead a good life, to know the limits and not succumb to the sin of greed, to learn to let it go when it is our time to leave this world and not leave a mountain of debt accumulated from medical expenses behind for our family.
Being a Singaporean, I must admit that I feel shameful for a government that focuses all its attention on making money and accumulating wealth, leaving welfare for the disadvantaged and old in society to the hands of the altruistic few.
I wish you all the best in your quest for the rights of the victims in the minibonds crisis, and the very best of health and happy lives for you and your family.
PX
Ask MAS for advice to sort out this type of problem
Dear Mr Tan,
I need your advice as I am thoroughly confused as to how and to whom tolodge my complaint. I hold a Minibond Series 7. It was issued by a Personal Financial Manager at Hong Leong Finance, yet the receipt showed DMG & Partners and the Note Trustee to the holders of Minibond Notes is HSBC.
As far as I was concerned, I thought I had simply invested my money with Hong Leong Finance with a quarterly payout of 4.25%. I was told itwas very safe and the worse case scenerio was that the quarterly payout would be less than 4.25% or that the minibond would be recalled andthat the principal sum would be returned. I was surprised to have received the receipt from DMG & Partners, let alone learn that the investment was linked to Lehman Brothers.
REPLY
I suggest that you write to MAS and ask them. You can copy to me.
I need your advice as I am thoroughly confused as to how and to whom tolodge my complaint. I hold a Minibond Series 7. It was issued by a Personal Financial Manager at Hong Leong Finance, yet the receipt showed DMG & Partners and the Note Trustee to the holders of Minibond Notes is HSBC.
As far as I was concerned, I thought I had simply invested my money with Hong Leong Finance with a quarterly payout of 4.25%. I was told itwas very safe and the worse case scenerio was that the quarterly payout would be less than 4.25% or that the minibond would be recalled andthat the principal sum would be returned. I was surprised to have received the receipt from DMG & Partners, let alone learn that the investment was linked to Lehman Brothers.
REPLY
I suggest that you write to MAS and ask them. You can copy to me.
Not an isolated case
Posted in Straits Times Forum
stalingrad
Today, 12:47 PM
I am somewhat amused by MAS’s reaction or the lack thereof recently. MAS asked the victims to complain to the FIs. Isn’t that similar to the police asking the victim in a robbery case to complain to the robber, and the one in a rape case to complain to the rapist? If someone is dealt with by one or two individuals of an FI unfairly and it is just an isolated case, then the approach adopted by MAS would be correct. The FI in this case is not part of the incident, and therefore will probably take actions to deal with the employees involved and take corrective actions such as compensating the victim.
But it seems to me the case involving the minibonds and similar products is not an isolated case and it does not involve just a few employees. Rather, it is probably a systemic problem and involves the banks systematically hiding truths from potential buyers and providing misleading information, and preying on the old, the retired and vulnerable, and the trusting type who does not read every fine print. In other words, the top brass of the FIs themselves are probably involved in the mis-selling. The fact that the reference entities are splashed across the top of the product information sheet in bold print, and even the bond ratings of the entities are shown prominently while hiding the key information like the role of Lehman and the CDS nature of the product in fine print, is prima facie evidence that the issuer and the FIs were out to mislead and to hide the truths about such products. In that case, what use is it for the victims to complain to the FIs? Instead of asking the victims to do that, MAS themselves should play a leading role to seek redress for the victims starting from the beginning.
One may even argue that there is malice involved, and this case should be treated as a fraud case, and call for not only a return of the original investment funds, but also punitive damages, which are only fair given that by investing in these bogus products, the victims have lost returns they could have earned otherwise. Thus, a good lawyer should be able to give the victim not only the full refund, but say 50% more as a compensation for their suffering and opportunity costs.
http://comment.straitstimes.com/showthread.php?t=14126&page=14
stalingrad
Today, 12:47 PM
I am somewhat amused by MAS’s reaction or the lack thereof recently. MAS asked the victims to complain to the FIs. Isn’t that similar to the police asking the victim in a robbery case to complain to the robber, and the one in a rape case to complain to the rapist? If someone is dealt with by one or two individuals of an FI unfairly and it is just an isolated case, then the approach adopted by MAS would be correct. The FI in this case is not part of the incident, and therefore will probably take actions to deal with the employees involved and take corrective actions such as compensating the victim.
But it seems to me the case involving the minibonds and similar products is not an isolated case and it does not involve just a few employees. Rather, it is probably a systemic problem and involves the banks systematically hiding truths from potential buyers and providing misleading information, and preying on the old, the retired and vulnerable, and the trusting type who does not read every fine print. In other words, the top brass of the FIs themselves are probably involved in the mis-selling. The fact that the reference entities are splashed across the top of the product information sheet in bold print, and even the bond ratings of the entities are shown prominently while hiding the key information like the role of Lehman and the CDS nature of the product in fine print, is prima facie evidence that the issuer and the FIs were out to mislead and to hide the truths about such products. In that case, what use is it for the victims to complain to the FIs? Instead of asking the victims to do that, MAS themselves should play a leading role to seek redress for the victims starting from the beginning.
One may even argue that there is malice involved, and this case should be treated as a fraud case, and call for not only a return of the original investment funds, but also punitive damages, which are only fair given that by investing in these bogus products, the victims have lost returns they could have earned otherwise. Thus, a good lawyer should be able to give the victim not only the full refund, but say 50% more as a compensation for their suffering and opportunity costs.
http://comment.straitstimes.com/showthread.php?t=14126&page=14
Lehman Structured notes on Wheat and Milk
If you have invested in the
Lehman Structured notes on Wheat and Milk
please contact:
chee kong wong <ck_wong11@yahoo.com.sg>
Lehman Structured notes on Wheat and Milk
please contact:
chee kong wong <ck_wong11@yahoo.com.sg>
Breach of the law - arguments
983 investors signed a Petition to the Government to carry out a full and independent investigation into whether there was any wrong doing involved in the creation and marketing of the credit linked securities, such as the mini bond, high notes, jubilee notes and pinnacle notes.
In an accompanying letter sent to the Monetary Authority of Singapore, I identified three laws that could have been breached:
1) Securities and Futures Act (section 199)
2) Financial Adviser’s Act (section 27)
3) Trustees Act
Let me explain these points.
Securities and Futures Act
This law requires the seller of a security to provide truthful and reliable information to the buyer. The seller cannot give false or misleading information and cannot withhold any relevant information. Any breach of this law is an offence that can lead to civil or criminal action.
I like to ask MAS to see if the actual nature and risk of the credit linked security has been properly disclosed in the advertisement, sales material or the prospectus.
Are they disclosed in a transparent and clear manner? If not, was the disclosure done in a manner that can be considered to be misleading?
Many investors said that they were misled into thinking that they had invested in the bonds issued by the six or eight reference entities and that all of these entities had to fail before they lose their entire capital
How did this mistaken belief came about?
Financial Advisers Act
This law requires the financial adviser or the representative to understand the needs, risk profile and preference of the investor and to recommend the appropriate products.
Many of the investors wanted to have a safe investment. They are risk adverse.
Did the representative carry out their responsibility properly? Why did they recommend a product that has turned out to be so risky? Did the representative understand the nature and risk of the product?
Trustee Act
This law requires people in a position of trust to look after the best interest of their client. Does this law apply to the trustee and the arranger of the securities?
Did they discharge their duty according to the law? Were the payments made out of the fund in accordance with what has been authorised in the prospectus? Were the dealings made at the correct prices and are fair to the investors? How are conflict of interest resolved?
Should the trustee have to render a full statement of account to the investors?
I hope that the Government looks into these areas, to see if there were any wrong doing that led to such large losses among the investing public.
If there were wrong doing, the Government can take the appropriate action to bring the offenders to Court and to seek suitable compensation for the losses suffered by the investors.
I hope that the Government can play an active role to minimize the losses of the investors and ensure that the underlying securities are NOT un-wound at fire sale prices.
In an accompanying letter sent to the Monetary Authority of Singapore, I identified three laws that could have been breached:
1) Securities and Futures Act (section 199)
2) Financial Adviser’s Act (section 27)
3) Trustees Act
Let me explain these points.
Securities and Futures Act
This law requires the seller of a security to provide truthful and reliable information to the buyer. The seller cannot give false or misleading information and cannot withhold any relevant information. Any breach of this law is an offence that can lead to civil or criminal action.
I like to ask MAS to see if the actual nature and risk of the credit linked security has been properly disclosed in the advertisement, sales material or the prospectus.
Are they disclosed in a transparent and clear manner? If not, was the disclosure done in a manner that can be considered to be misleading?
Many investors said that they were misled into thinking that they had invested in the bonds issued by the six or eight reference entities and that all of these entities had to fail before they lose their entire capital
How did this mistaken belief came about?
Financial Advisers Act
This law requires the financial adviser or the representative to understand the needs, risk profile and preference of the investor and to recommend the appropriate products.
Many of the investors wanted to have a safe investment. They are risk adverse.
Did the representative carry out their responsibility properly? Why did they recommend a product that has turned out to be so risky? Did the representative understand the nature and risk of the product?
Trustee Act
This law requires people in a position of trust to look after the best interest of their client. Does this law apply to the trustee and the arranger of the securities?
Did they discharge their duty according to the law? Were the payments made out of the fund in accordance with what has been authorised in the prospectus? Were the dealings made at the correct prices and are fair to the investors? How are conflict of interest resolved?
Should the trustee have to render a full statement of account to the investors?
I hope that the Government looks into these areas, to see if there were any wrong doing that led to such large losses among the investing public.
If there were wrong doing, the Government can take the appropriate action to bring the offenders to Court and to seek suitable compensation for the losses suffered by the investors.
I hope that the Government can play an active role to minimize the losses of the investors and ensure that the underlying securities are NOT un-wound at fire sale prices.
Speech at Speaker's Corner - 11 Oct 2008
Embargoed, 6 p.m. Saturday 18 October 2008
Yesterday, on 17 October, the Monetary Authority of Singapore held a press conference on the sale of structured products to retail investors.
MAS said in its release:
QUOTE
7. MAS urges any affected investor who has a genuine claim that you were mis-sold the product to make sure you lodge your complaint with your FIs. MAS requires FIs to have a rigorous process to look into every complaint and resolve them fairly, giving due weight to the views of the independent parties.
8. Clearly, there is a range of investors who bought these products. Some are well-educated professionals. Others are sophisticated investors. The group we are most concerned with are the vulnerable customers. We are focussing on cases of mis-selling to vulnerable customers and on cases where the products were clearly inappropriate for them given their circumstances. We have required the FIs to give priority to these cases. They should not take an overly legalistic approach to mis-selling in dealing with these cases.
9. For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor’s profile and circumstances, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility in such cases. We welcome this commitment and expect all FIs that have sold these products to take the same approach. They must do the right thing and ensure a quick and fair resolution for these customers. We have communicated this to their CEOs.
UNQUOTE
Lodge your complain
The first priority is for each investor to lodge a formal complaint with the financial institution indicating how they had been misled into investing in the structured product. MAS has asked the financial institution to deal with the complaint expeditiously and not to take an “overly legalistic approach”. They also advised that is not necessary for the investor’s statement to be made under oath (i.e. no need for statutory declaration).
It is important for the investor to make a truthful statement to outline how they were misled into investing in the product. Many investors told me that they were misled by the advertisement, sales brochure, and/or assurances and explanation by the sales representative (given verbally or by e-mail).
Many investors were told, or had led to believe, in some of all of the following statements:
a) That the funds are invested in the bonds of the reference entitles
b) That all of the reference entitles have to fail, before we lose our entire principal
c) That their principal is protected, if we keep the investment to the maturity date
I wish to give the following guidelines to prepare your statement to support your complaint with the financial institution. You must give a truthful statement, to the best of your knowledge and memory.
Your statement should cover the following points:
1. Your name, NRIC, address, telephone
2. How did you get involved in the investment?
3. Which financial institution, branch, amount invested, date
4. What happened when you purchased the investment?
5. Were you alone or accompanied by another person? Who?
6. What did the representative (who sold the investment to you) tell you about investment?
7. Did the representative tell you about any guarantee on your investment?
8. Did they make you sign any form regarding the investment? Did you understand the content of the form? Was it given to you before or after you agreed to make the investment? Did you read the form? Did you understand the content?
9. Did you rely on the advice of the representative in making the investment? Which were the important aspects of the advice?
10. Do you have any other statements to make regarding this matter?
I will ask the contact person for each group (according to the distributor financial institution) to help the other investors, especially those that were not well educated, to prepare the statement and to help you to lodge it with the financial institution.
Vulnerable investors
MAS has asked the financial institutions to give priority to the vulnerable investors. These are the elderly, low educated and the first time investors. The financial institutions have agreed to take full responsibility for these vulnerable investors who have been mis-sold. The full responsibility includes compensation for part or the full amount that they have lost. This is a an encouraging first step.
I wish to ask the other investors, who do not fall into the “vulnerable group” to be patient and to strong. If you have been equally misled into investing in these structured products, and it seems to be clearly the case, you have a strong case to ask for compensation. But, you have to be reasonable in your expectation and may have to accept partial compensation that is lower than the “vulnerable investors”.
Let us take this at the next step. In the meantime, you should lodge your complaint.
Formal inquiries by MAS
MAS has also said that they have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the financial institutions or poor sales practices by their representatives. They will an announcement on any actions we are taking when our inquiries are completed.
If the laws have been broken or if there were failures in the internal controls and/or sales practices, there is a better chance for the investors to get a higher compensation from the culpable parties. Let us wait for the results of this investigation.
Replacement Manager
The MAS statement said that the trustee for the Lehman Minibond Programme is carefully considers all options and acts in the interests of investors. If a new swap counterparty is available, investors would have the opportunity to vote on this option. To assist investors make an informed decision, MAS will appoint an independent financial adviser. The outcome will be known by the end of next week.
If a replacement manager can be found, it will may the investors to reduce the loss as the underlying assets can be kept until a better time to realise a higher value. I am in contact with one party based in Hong Kong that has expressed interest to take over the management. They are now in touch with the trustees and the regulator.
I hope that other parties, especially the financial institutions based in Singapore, will come forward to make a bid for this contract.
Appeal to the Media
I wish to appeal to the media to convey the message to the other investors of these structured products who have not yet lodge their complaints.
Please inform them that they should lodge their complaints now, if they have been misled into investing in these products.
Tan Kin Lian
Yesterday, on 17 October, the Monetary Authority of Singapore held a press conference on the sale of structured products to retail investors.
MAS said in its release:
QUOTE
7. MAS urges any affected investor who has a genuine claim that you were mis-sold the product to make sure you lodge your complaint with your FIs. MAS requires FIs to have a rigorous process to look into every complaint and resolve them fairly, giving due weight to the views of the independent parties.
8. Clearly, there is a range of investors who bought these products. Some are well-educated professionals. Others are sophisticated investors. The group we are most concerned with are the vulnerable customers. We are focussing on cases of mis-selling to vulnerable customers and on cases where the products were clearly inappropriate for them given their circumstances. We have required the FIs to give priority to these cases. They should not take an overly legalistic approach to mis-selling in dealing with these cases.
9. For cases where there are sufficient indications that the product was mis-sold or that it was clearly inappropriate given the investor’s profile and circumstances, the FI should take responsibility. Several FIs have assured MAS that they will take full responsibility in such cases. We welcome this commitment and expect all FIs that have sold these products to take the same approach. They must do the right thing and ensure a quick and fair resolution for these customers. We have communicated this to their CEOs.
UNQUOTE
Lodge your complain
The first priority is for each investor to lodge a formal complaint with the financial institution indicating how they had been misled into investing in the structured product. MAS has asked the financial institution to deal with the complaint expeditiously and not to take an “overly legalistic approach”. They also advised that is not necessary for the investor’s statement to be made under oath (i.e. no need for statutory declaration).
It is important for the investor to make a truthful statement to outline how they were misled into investing in the product. Many investors told me that they were misled by the advertisement, sales brochure, and/or assurances and explanation by the sales representative (given verbally or by e-mail).
Many investors were told, or had led to believe, in some of all of the following statements:
a) That the funds are invested in the bonds of the reference entitles
b) That all of the reference entitles have to fail, before we lose our entire principal
c) That their principal is protected, if we keep the investment to the maturity date
I wish to give the following guidelines to prepare your statement to support your complaint with the financial institution. You must give a truthful statement, to the best of your knowledge and memory.
Your statement should cover the following points:
1. Your name, NRIC, address, telephone
2. How did you get involved in the investment?
3. Which financial institution, branch, amount invested, date
4. What happened when you purchased the investment?
5. Were you alone or accompanied by another person? Who?
6. What did the representative (who sold the investment to you) tell you about investment?
7. Did the representative tell you about any guarantee on your investment?
8. Did they make you sign any form regarding the investment? Did you understand the content of the form? Was it given to you before or after you agreed to make the investment? Did you read the form? Did you understand the content?
9. Did you rely on the advice of the representative in making the investment? Which were the important aspects of the advice?
10. Do you have any other statements to make regarding this matter?
I will ask the contact person for each group (according to the distributor financial institution) to help the other investors, especially those that were not well educated, to prepare the statement and to help you to lodge it with the financial institution.
Vulnerable investors
MAS has asked the financial institutions to give priority to the vulnerable investors. These are the elderly, low educated and the first time investors. The financial institutions have agreed to take full responsibility for these vulnerable investors who have been mis-sold. The full responsibility includes compensation for part or the full amount that they have lost. This is a an encouraging first step.
I wish to ask the other investors, who do not fall into the “vulnerable group” to be patient and to strong. If you have been equally misled into investing in these structured products, and it seems to be clearly the case, you have a strong case to ask for compensation. But, you have to be reasonable in your expectation and may have to accept partial compensation that is lower than the “vulnerable investors”.
Let us take this at the next step. In the meantime, you should lodge your complaint.
Formal inquiries by MAS
MAS has also said that they have been conducting formal inquiries into allegations of breaches of the law, inadequate internal controls by the financial institutions or poor sales practices by their representatives. They will an announcement on any actions we are taking when our inquiries are completed.
If the laws have been broken or if there were failures in the internal controls and/or sales practices, there is a better chance for the investors to get a higher compensation from the culpable parties. Let us wait for the results of this investigation.
Replacement Manager
The MAS statement said that the trustee for the Lehman Minibond Programme is carefully considers all options and acts in the interests of investors. If a new swap counterparty is available, investors would have the opportunity to vote on this option. To assist investors make an informed decision, MAS will appoint an independent financial adviser. The outcome will be known by the end of next week.
If a replacement manager can be found, it will may the investors to reduce the loss as the underlying assets can be kept until a better time to realise a higher value. I am in contact with one party based in Hong Kong that has expressed interest to take over the management. They are now in touch with the trustees and the regulator.
I hope that other parties, especially the financial institutions based in Singapore, will come forward to make a bid for this contract.
Appeal to the Media
I wish to appeal to the media to convey the message to the other investors of these structured products who have not yet lodge their complaints.
Please inform them that they should lodge their complaints now, if they have been misled into investing in these products.
Tan Kin Lian
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