I want to thank Goh Meng Seng for helping me to translate my speech into Chinese at Speaker's Corner.
Meng Seng has also the key features of the structured products in English and in Chinese in his blog.
I invite you to read them:
http://www.singaporealternatives.blogspot.com/
Sunday, November 2, 2008
Saturday, November 1, 2008
Reply to "Risk listed in bold"
Dear Kin Lian,
This is in response to the article captioned “Risks listed in bold, but ….Investors went ahead despite clear warnings”, by Lorna Tan [The Straits Times, Oct 31].
The nub of the issue here, Lorna, is about misrepresentation of risks, not about the risks stated in the Pricing Statement [PE]. You appear to be someone with a fecund imagination; you imagined all these investors were given the PE in advance or at the point of sale and after reading the PE and despite understanding the risks involved they still went ahead and invested. Right, Lorna, that was what you were saying or trying to project? Have you researched in these areas?
1. How many of these investors are what is now being termed as “vulnerable people” [illiterate people who cannot read or understand English]?
2. How many of these investors are elderly people who may not be illiterate but who nevertheless cannot understand the complexity of the text given in the PE?
3. How many of these investors were actually presented with the PE and asked to read it before the decision to invest or not to invest was even considered?
4. How many of these investors, if any - assuming the PE was not produced during the discussion with the RM - were cautioned by the RM that they would risk losing all their principal?
5. Do you still seriously think that if investors had been specifically told that they would risk losing all their money they would still have parted with their money, which for many was their life’s savings, their retirement kitty?
6. Have you not heard talk that some investors visited their banks wholly ignorant of the sale of these supposedly high-yield structured products but they were persuaded nevertheless by the RM to uplift the funds from their fixed deposits and invest them in these products?
7. Have you considered the possibility of the RM putting the cart before the horse, by performing a risk-tolerance analysis after he and/or his distributor-organization had made misrepresentations about the nature of the product they were flogging, and after the investor had already been persuaded by such misrepresentations [or lies] to invest?
8. Have you wondered whether the risk-tolerance analysis undertaken by the RM can be taken at face value? Some investors can recall that in their case the assessment was done hastily and carelessly by the RM, and they can prove it.
9. And why, despite seeing the investor as having an aversion to risk of loss of capital, the RM still went ahead and closed the deal, instead of telling the investor: “This product is not suitable for you”?
10. Have you taken a look at the advertising materials of the distributors, particularly the one for Minibonds Series 3 with these enticing statements: “Invest on solid foundations” and “With our Minibond Series 3 credit-linked to six major financial institutions, you can enjoy the returns you deserve with peace of mind.”
11. You pointed out the inherent risks of DBS Bank’s High Notes and Lehman’s Minibond series and it is obvious you are equipped with an imaginative mind for understanding such risks and would not have been caught with your pants [maybe, skirt is more appropriate] down through investing in either of these products – but would you argue that it was not irresponsible for any distributor to sell these products to illiterate, hence vulnerable people, let alone distribute misleading advertising materials? Or
12. Would you agree that it was a gross dereliction of responsibility on the part of the distributors or their RMs in failing to make clear to investors that by investing they would be assuming a big risk – of losing their entire principal?
13. Would you agree that the promotion gimmicks employed by distributors were profoundly at odds with the high risks inherent in these structured products? If your answer is yes, then it is regrettable that you have made no mention of this in your article.
14. Would you agree that your article is nothing but half-truths, prejudiced in a certain way, and jarring, and a hindrance to investors, numbering about ten thousand, who are now trying to recover from the distributors?
15. Would you agree that investors who have been mis-sold are now eminently reasonable in seeking restitution from the distributors?
Dear Lorna, please let us have your response to these questions, and without any equivocation, please?
Richard Woo
This is in response to the article captioned “Risks listed in bold, but ….Investors went ahead despite clear warnings”, by Lorna Tan [The Straits Times, Oct 31].
The nub of the issue here, Lorna, is about misrepresentation of risks, not about the risks stated in the Pricing Statement [PE]. You appear to be someone with a fecund imagination; you imagined all these investors were given the PE in advance or at the point of sale and after reading the PE and despite understanding the risks involved they still went ahead and invested. Right, Lorna, that was what you were saying or trying to project? Have you researched in these areas?
1. How many of these investors are what is now being termed as “vulnerable people” [illiterate people who cannot read or understand English]?
2. How many of these investors are elderly people who may not be illiterate but who nevertheless cannot understand the complexity of the text given in the PE?
3. How many of these investors were actually presented with the PE and asked to read it before the decision to invest or not to invest was even considered?
4. How many of these investors, if any - assuming the PE was not produced during the discussion with the RM - were cautioned by the RM that they would risk losing all their principal?
5. Do you still seriously think that if investors had been specifically told that they would risk losing all their money they would still have parted with their money, which for many was their life’s savings, their retirement kitty?
6. Have you not heard talk that some investors visited their banks wholly ignorant of the sale of these supposedly high-yield structured products but they were persuaded nevertheless by the RM to uplift the funds from their fixed deposits and invest them in these products?
7. Have you considered the possibility of the RM putting the cart before the horse, by performing a risk-tolerance analysis after he and/or his distributor-organization had made misrepresentations about the nature of the product they were flogging, and after the investor had already been persuaded by such misrepresentations [or lies] to invest?
8. Have you wondered whether the risk-tolerance analysis undertaken by the RM can be taken at face value? Some investors can recall that in their case the assessment was done hastily and carelessly by the RM, and they can prove it.
9. And why, despite seeing the investor as having an aversion to risk of loss of capital, the RM still went ahead and closed the deal, instead of telling the investor: “This product is not suitable for you”?
10. Have you taken a look at the advertising materials of the distributors, particularly the one for Minibonds Series 3 with these enticing statements: “Invest on solid foundations” and “With our Minibond Series 3 credit-linked to six major financial institutions, you can enjoy the returns you deserve with peace of mind.”
11. You pointed out the inherent risks of DBS Bank’s High Notes and Lehman’s Minibond series and it is obvious you are equipped with an imaginative mind for understanding such risks and would not have been caught with your pants [maybe, skirt is more appropriate] down through investing in either of these products – but would you argue that it was not irresponsible for any distributor to sell these products to illiterate, hence vulnerable people, let alone distribute misleading advertising materials? Or
12. Would you agree that it was a gross dereliction of responsibility on the part of the distributors or their RMs in failing to make clear to investors that by investing they would be assuming a big risk – of losing their entire principal?
13. Would you agree that the promotion gimmicks employed by distributors were profoundly at odds with the high risks inherent in these structured products? If your answer is yes, then it is regrettable that you have made no mention of this in your article.
14. Would you agree that your article is nothing but half-truths, prejudiced in a certain way, and jarring, and a hindrance to investors, numbering about ten thousand, who are now trying to recover from the distributors?
15. Would you agree that investors who have been mis-sold are now eminently reasonable in seeking restitution from the distributors?
Dear Lorna, please let us have your response to these questions, and without any equivocation, please?
Richard Woo
Stolen identity
There are many ways that a thief can steal and use your personal identity to open credit card or access private information.
Some people in the internet pretend to be somebody else. They are also thieves and, if caught, can be prosecuted as thieves.
Some people hide behind a fictitious name and attack other people, including defamation. These people are commiting a crime and a civil offence. I hope that these people are aware about the legal consequences.
Some people in the internet pretend to be somebody else. They are also thieves and, if caught, can be prosecuted as thieves.
Some people hide behind a fictitious name and attack other people, including defamation. These people are commiting a crime and a civil offence. I hope that these people are aware about the legal consequences.
Collective legal action - Leonard Loo
For investors who wish to consider collective legal action, you can attend a briefing by Leonard Loo. Details below:
http://tankinlian.blogspot.com/2008/10/lawyer-no-obligation-no-fee.html
Leonard Loo has proposed that the investors give their intent to take collective action and register their claim. He will explain the strategy to the investors at his briefing. The aim is that actual legal action will be taken only at the last resort and out-of-court settlement will be preferred, in the interest of all parties.
http://tankinlian.blogspot.com/2008/10/lawyer-no-obligation-no-fee.html
Leonard Loo has proposed that the investors give their intent to take collective action and register their claim. He will explain the strategy to the investors at his briefing. The aim is that actual legal action will be taken only at the last resort and out-of-court settlement will be preferred, in the interest of all parties.
Reply to SP Services: Don't shoot the messenger
Posted at request of Vincent Sear
Editor
Today paper
I refer to the article November 1-2, 2008: "SP Services" Don't Shoot The Messenger."
The essence of the matter is, even if SP Services is just the middleman or "messenger" as it now calls itself, how can electricity tariffs be based on US$155 per barrel of oil as announced by SP Services itself it September 2008, to justify a 22% price hike based on "forward pricing"?
Now, SP Services is claiming "average price." Whatever, be it forward pricing or average price, how come Singapore households and businesses are billed based on a much higher price? Oil price hit a peak of US$147 per barrel in July 2008 and has been falling thereafter.
How come Singapore consumers are billed based on US$155 per barrel for the quarter of October to Decemeber 2008 when oil price never hit that high? What's going on between the power generating companies (gencos) and SP Services and the Energy Market Authority (EMA)?
Oil price is now about US$70 per barrel or below. Can Singaporeans expect a corresponding 55% cut in tariffs and bills?
Vincent Sear
Editor
Today paper
I refer to the article November 1-2, 2008: "SP Services" Don't Shoot The Messenger."
The essence of the matter is, even if SP Services is just the middleman or "messenger" as it now calls itself, how can electricity tariffs be based on US$155 per barrel of oil as announced by SP Services itself it September 2008, to justify a 22% price hike based on "forward pricing"?
Now, SP Services is claiming "average price." Whatever, be it forward pricing or average price, how come Singapore households and businesses are billed based on a much higher price? Oil price hit a peak of US$147 per barrel in July 2008 and has been falling thereafter.
How come Singapore consumers are billed based on US$155 per barrel for the quarter of October to Decemeber 2008 when oil price never hit that high? What's going on between the power generating companies (gencos) and SP Services and the Energy Market Authority (EMA)?
Oil price is now about US$70 per barrel or below. Can Singaporeans expect a corresponding 55% cut in tariffs and bills?
Vincent Sear
Compare toxic financial product with melamine
Dear Mr. Tan,
A hypothetical case:
A woman walked into a famous drug stall and asked for advice from the pharmacist to recommend a milk product for the new born baby. Due to the commission for various type of milk product, the pharmacyst introduced one brand with the milamine. When asked what is a milamine, the answered was it was some sort of vitamin that is very safe and will help your child grow more intellegent.
The baby consume the product and seriously ill and the reason for sickness is due to consumption of melamine. Now the mother take up the case with the drug stall to claim compensation.
Various things happened. The drug store says:
> The name melamine is clearly stated as component of the milk. If you do not know what is the melamine, find out first before you bought. It is the life of the baby you know, how can you just trust the word of the pharmacist? So it is your faults for not doing the research, rather than the pharmacist who uttered nonsense.
> What if your child really grow up without any problem and grow more intelligent, will you complain? So common, be sporting, it is your faults for buying the milk. By the way, did anybody put the knife on your neck to buy the milk? you do it on your free will right, even though you know melamine is one of the substance used for the milk. It is your faults and you donot have the right to claim.
> Any proof that the pharmacist tell you that melamine is a vitamin? If you could prove it, we will definitely compensate you.
Obviously, the story refers to the current situation and you should be able to link them to the toxic financial product. After this fact, will anybody argue that the mother will not be eligible for compensation because of the unrecorded wrong advice given??
What do you think will happen to the drug store ??
HS
A hypothetical case:
A woman walked into a famous drug stall and asked for advice from the pharmacist to recommend a milk product for the new born baby. Due to the commission for various type of milk product, the pharmacyst introduced one brand with the milamine. When asked what is a milamine, the answered was it was some sort of vitamin that is very safe and will help your child grow more intellegent.
The baby consume the product and seriously ill and the reason for sickness is due to consumption of melamine. Now the mother take up the case with the drug stall to claim compensation.
Various things happened. The drug store says:
> The name melamine is clearly stated as component of the milk. If you do not know what is the melamine, find out first before you bought. It is the life of the baby you know, how can you just trust the word of the pharmacist? So it is your faults for not doing the research, rather than the pharmacist who uttered nonsense.
> What if your child really grow up without any problem and grow more intelligent, will you complain? So common, be sporting, it is your faults for buying the milk. By the way, did anybody put the knife on your neck to buy the milk? you do it on your free will right, even though you know melamine is one of the substance used for the milk. It is your faults and you donot have the right to claim.
> Any proof that the pharmacist tell you that melamine is a vitamin? If you could prove it, we will definitely compensate you.
Obviously, the story refers to the current situation and you should be able to link them to the toxic financial product. After this fact, will anybody argue that the mother will not be eligible for compensation because of the unrecorded wrong advice given??
What do you think will happen to the drug store ??
HS
Why are banks allowed to sell structured products that give poor value?
Mr Tan,
If there is a silver lining that comes out of this minibond/high note/jubilee fiasco, I would hope that its some serious soul searching by all stakeholders, investors, FIs & the government.
Investors have to ask themselves, what is their investment objective, really.
Structure deposits have been around for some time. I have never purchased any but each time I am at any bank, without fail, bank staff would try to promote them to me.
Over the years, I've seen the way they are structured becoming more and more complex & arcane.
My point is, if the general public has been losing money or making unsatisfactory returns, why have the banks been able to launch series after series of the same products ?
Regulators, are they really out to build a "world class" financial centre in Singapore ?
Efforts to develop a vibrant corporate bond market has fizzled out. Look at the corporate bonds listed on SGX, lacking both depth, breath & also market liquidity.
If the recently launched OCBC NCPS preference shares can yield 5 percent, then any good quality corporate can float coporate bonds at around 5 percent, which at 150 basis point spread to 15 year SGS govt bonds, seems about right.
So, if these alternatives are available, would investors need to even consider the structured deposit nonsense the FIs are putting out ??
Lastly, correct me if I am wrong. SGX, along with the KLSE, I think are the only 2 exchanges left in the whole wide world that allow contra trades, ie. allowing investors to sell shares that they have purchased within 3 days, before they are settled, without paying up first. All other exchanges require some sort of margin or deposit. Is this prudent risk management ? I rest my case.
Regards
If there is a silver lining that comes out of this minibond/high note/jubilee fiasco, I would hope that its some serious soul searching by all stakeholders, investors, FIs & the government.
Investors have to ask themselves, what is their investment objective, really.
Structure deposits have been around for some time. I have never purchased any but each time I am at any bank, without fail, bank staff would try to promote them to me.
Over the years, I've seen the way they are structured becoming more and more complex & arcane.
My point is, if the general public has been losing money or making unsatisfactory returns, why have the banks been able to launch series after series of the same products ?
Regulators, are they really out to build a "world class" financial centre in Singapore ?
Efforts to develop a vibrant corporate bond market has fizzled out. Look at the corporate bonds listed on SGX, lacking both depth, breath & also market liquidity.
If the recently launched OCBC NCPS preference shares can yield 5 percent, then any good quality corporate can float coporate bonds at around 5 percent, which at 150 basis point spread to 15 year SGS govt bonds, seems about right.
So, if these alternatives are available, would investors need to even consider the structured deposit nonsense the FIs are putting out ??
Lastly, correct me if I am wrong. SGX, along with the KLSE, I think are the only 2 exchanges left in the whole wide world that allow contra trades, ie. allowing investors to sell shares that they have purchased within 3 days, before they are settled, without paying up first. All other exchanges require some sort of margin or deposit. Is this prudent risk management ? I rest my case.
Regards
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