Hi Mr. Tan
I see that the International Panel of MAS include the CEOs of Morgan Stanley and Merrill Lynch, who are responsible for creating the Pinnacle Notes and the Jubilee Notes. DBS, which is subsidary of Temasek, creates the High Notes.
Is this the reason why MAS is reluctant to go after these investment banks that created these toxic products?
REPLY
We still do not know if MAS is investing the investment banks that created these structured products. So far, we have not heard of any news from this angle.
The only news is that the distributors are encouraged by the MAS to compensate the "vulnerable" investors in full, and to seek a "fair settlement" with the other investors. It appears that the claims of the non-vulnerable investors are being rejected on the grounds that there were "no mis-selling".
Sunday, November 9, 2008
Decisions of FiDREC
I wish to ask investors who have lodged a complaint with FiDREC and received their decision to share your experience. Do you feel that your side of the issue has been fairly considered by FiDREC?
This will help other investors to decide if they wish to submit their case to FiDREC or to take legal action.
This will help other investors to decide if they wish to submit their case to FiDREC or to take legal action.
Investors should be aware about the risk: MM
Hi Mr. Tan,
I am quite discouraged by the lack of action by MAS. Even MM said that the investor should be aware that they are taking risk by going for 5%, instead of 1%.
Many investors could have received 2% as they are investing a large sum of money. We thought that the higher interest rate of 5% is due to locking up our money for 5 years, which we are prepared to accept. I was not aware that the product is so highly risky. Why should I risk my total principal just to get 3% more? Does MM know the facts?
What is the best course of action now?
REPLY
I think MM should know the facts as they are contained in several petitions submitted to MAS. They are also well covered in the newspapers.
Although the lack of progress is discouraging for the investors, my suggestions are:
1. Spend $120 to make a statutory declaration to state honestly how you were misled into making this investment.
2. Submit your claim again to the financial institution with the statutory declaration
3. If it is rejected by the financial institution (or rejected again, if you have been rejected earlier), you can submit your claim to FiDREC.
4. If many cases were by other investors were rejected by FiDREC, you can take a collective legal action.
The investors can still hope that the government in Hong Kong or USA can take legal action against on the financial institution. If the financial institution are found to be acted wrongfully, then our government may have to take similar action.
I am quite discouraged by the lack of action by MAS. Even MM said that the investor should be aware that they are taking risk by going for 5%, instead of 1%.
Many investors could have received 2% as they are investing a large sum of money. We thought that the higher interest rate of 5% is due to locking up our money for 5 years, which we are prepared to accept. I was not aware that the product is so highly risky. Why should I risk my total principal just to get 3% more? Does MM know the facts?
What is the best course of action now?
REPLY
I think MM should know the facts as they are contained in several petitions submitted to MAS. They are also well covered in the newspapers.
Although the lack of progress is discouraging for the investors, my suggestions are:
1. Spend $120 to make a statutory declaration to state honestly how you were misled into making this investment.
2. Submit your claim again to the financial institution with the statutory declaration
3. If it is rejected by the financial institution (or rejected again, if you have been rejected earlier), you can submit your claim to FiDREC.
4. If many cases were by other investors were rejected by FiDREC, you can take a collective legal action.
The investors can still hope that the government in Hong Kong or USA can take legal action against on the financial institution. If the financial institution are found to be acted wrongfully, then our government may have to take similar action.
HK: Probe into minibonds bankers wins support
Bonnie ChenandAdele Wong
Monday, November 10, 2008
The chances of bankers being summoned to explain the Lehman Brothers minibond fiasco grew stronger yesterday after the largest party in the Legislative Council indicated support for such a motion.
The move comes despite a warning by Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung that the concern raised by foreign banks over a legislative inquiry may have an adverse effect on the business environment.
Chan said he believes the banks involved would probably buy back the minibonds next month.
The motion to summon bankers can only be passed if it gets majority support from lawmakers representing both the geographical and functional constituencies.
Thirteen of the functional constituency lawmakers are expected to support the motion but they will still need at least three votes from the Democratic Alliance for the Betterment and Progress of Hong Kong.
DAB chairman Tam Yiu-chung said the party will decide tomorrow whether a Legco investigation will affect the time of compensation and Hong Kong's status as an international financial center.
But another DAB member, Wong Tin-kwong representing the import and export sector, said he was inclined to support the motion.
"If the issue is to be investigated, it has to be tackled in the right direction," he said.
Only three former Liberal Party members and David Li Kwok-po of the finance sector have said they will vote against the motion. However, the pan-democrats said Li should not vote since he is chairman of the Bank of East Asia.
Civic party chairwoman Audrey Eu Yuet-mee said an open investigation by Legco would be fair to all sides. A source said the government is trying to get the DAB and some functional constituency independent legislators to vote against the motion.
Monday, November 10, 2008
The chances of bankers being summoned to explain the Lehman Brothers minibond fiasco grew stronger yesterday after the largest party in the Legislative Council indicated support for such a motion.
The move comes despite a warning by Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung that the concern raised by foreign banks over a legislative inquiry may have an adverse effect on the business environment.
Chan said he believes the banks involved would probably buy back the minibonds next month.
The motion to summon bankers can only be passed if it gets majority support from lawmakers representing both the geographical and functional constituencies.
Thirteen of the functional constituency lawmakers are expected to support the motion but they will still need at least three votes from the Democratic Alliance for the Betterment and Progress of Hong Kong.
DAB chairman Tam Yiu-chung said the party will decide tomorrow whether a Legco investigation will affect the time of compensation and Hong Kong's status as an international financial center.
But another DAB member, Wong Tin-kwong representing the import and export sector, said he was inclined to support the motion.
"If the issue is to be investigated, it has to be tackled in the right direction," he said.
Only three former Liberal Party members and David Li Kwok-po of the finance sector have said they will vote against the motion. However, the pan-democrats said Li should not vote since he is chairman of the Bank of East Asia.
Civic party chairwoman Audrey Eu Yuet-mee said an open investigation by Legco would be fair to all sides. A source said the government is trying to get the DAB and some functional constituency independent legislators to vote against the motion.
Credit default of Pinnacle Notes Series 9
Dear Mr. Tan,
We were notified by Elgin Ting of OCBC securities that redemption event may shortly occur for Pinnacle Notes Series 9 as a result of credit events. This is urgent and of paramount importance for those who are exposed to it.
Before allowing the redemption to happen, can MAS, SIAS or other professional bodies help look into the matter instead of letting the arranger (Morgan Stanley) call the shot? Can it be saved?
I'm befuddled by the horrendous risk factors stated in the letter relating to Synthetic CDO Securities, CDO Squared Securities, Credit Commodity linked Securities and Asset Backed Securities. Please help post this in your blog.
S8Neo
REPLY
You can oranise a collective letter to be sent to MAS, if you wish.
Before you do so, you can check the facts. I believe that a credit event occurs when a certain number of the underlying assets have failed - in accordance with a key term of the structured product.
When this happens, the total amount invested is used to pay the counter-party of the credit default swap. This is like paying an insurance claim - when the insured event occurs. In this case, the investors of the structured product is the insurer of the event and the swap counter-party is the recipient of the payment.
Many investors are shocked that they are exposed to this type of risk - which they were not propertly informed at the time of their investment. In additional, they were also exposed to the risk of default of any of several reference entity.
These types of risks apply to all the other "credit linked notes" as well. Some have failed now. The others may face the same outcome later. If they are likely, they may avoid a credit event.
We were notified by Elgin Ting of OCBC securities that redemption event may shortly occur for Pinnacle Notes Series 9 as a result of credit events. This is urgent and of paramount importance for those who are exposed to it.
Before allowing the redemption to happen, can MAS, SIAS or other professional bodies help look into the matter instead of letting the arranger (Morgan Stanley) call the shot? Can it be saved?
I'm befuddled by the horrendous risk factors stated in the letter relating to Synthetic CDO Securities, CDO Squared Securities, Credit Commodity linked Securities and Asset Backed Securities. Please help post this in your blog.
S8Neo
REPLY
You can oranise a collective letter to be sent to MAS, if you wish.
Before you do so, you can check the facts. I believe that a credit event occurs when a certain number of the underlying assets have failed - in accordance with a key term of the structured product.
When this happens, the total amount invested is used to pay the counter-party of the credit default swap. This is like paying an insurance claim - when the insured event occurs. In this case, the investors of the structured product is the insurer of the event and the swap counter-party is the recipient of the payment.
Many investors are shocked that they are exposed to this type of risk - which they were not propertly informed at the time of their investment. In additional, they were also exposed to the risk of default of any of several reference entity.
These types of risks apply to all the other "credit linked notes" as well. Some have failed now. The others may face the same outcome later. If they are likely, they may avoid a credit event.
Loss in the Singapore reserves
Dear Mr. Tan Kin Lian
I am getting worried about the financial crisis that Singapore is facing. MM said that Singapore has strong reserves. I am not sure if the reserves are still there.
How much has Singapore invested in the banks like UBS, Merrill Lynch, Citigroup and other banks? How much is Singapore guaranteeing in the IR project by Sands? Why should Singapore invest in the global banks when they are in deep trouble? Are we trying to bail them out?
REPLY
I do not know how much has been invested in these global banks and also the terms of the investments. Perhaps, someone can do some research and share the information here.
I recall that, in some cases, the investments were made in bonds, so the actual loss may not be that large - although the share price may have dropped a lot. In the case of Merrill Lynch, there was an arrangement for a compensation in case the share price dropped during a certain period. This helped to reduce the loss. In fact, it turned out to be profitable for us.
At the time of the investment, I personally thought that it was a good opportunity to invest in these banks at the knocked down price. I was not aware about the extent of the leverage and risks carried in their books. With the benefit of hindsight, we should not have have made these investments, but these facts were not known at that time - at least to the general public.
I do not recall any mention about guaranteeing the loan by Sands. But, I think that something should be done to keep the project from being a white elephant. The global financial crisis was unexpected when the project was approved two years ago. How the world has changed in a short time!
I am getting worried about the financial crisis that Singapore is facing. MM said that Singapore has strong reserves. I am not sure if the reserves are still there.
How much has Singapore invested in the banks like UBS, Merrill Lynch, Citigroup and other banks? How much is Singapore guaranteeing in the IR project by Sands? Why should Singapore invest in the global banks when they are in deep trouble? Are we trying to bail them out?
REPLY
I do not know how much has been invested in these global banks and also the terms of the investments. Perhaps, someone can do some research and share the information here.
I recall that, in some cases, the investments were made in bonds, so the actual loss may not be that large - although the share price may have dropped a lot. In the case of Merrill Lynch, there was an arrangement for a compensation in case the share price dropped during a certain period. This helped to reduce the loss. In fact, it turned out to be profitable for us.
At the time of the investment, I personally thought that it was a good opportunity to invest in these banks at the knocked down price. I was not aware about the extent of the leverage and risks carried in their books. With the benefit of hindsight, we should not have have made these investments, but these facts were not known at that time - at least to the general public.
I do not recall any mention about guaranteeing the loan by Sands. But, I think that something should be done to keep the project from being a white elephant. The global financial crisis was unexpected when the project was approved two years ago. How the world has changed in a short time!
Obama's Day
YES. WE CAN. This is our moment. This is our time ... that out of many, we are one; that while we breathe, we hope, and where we are met with cynicism and doubt, and those who tell us that we can't, we will respond ... Yes, we can.
CHANGE. It's been a long time coming, but tonight, because of what we did on this day, in this election, at this defining moment, change has come to America.
LEADERSHIP. To all those watching tonight from beyond our shores ... our stories are singular, but our destiny is shared, and a new dawn of American leadership is at hand.
I HEAR YOU. To those Americans whose support I have yet to earn ... I may not have won your vote, but I hear your voices, I need your help, and I will be your president too.
UNITY. Let us summon a new spirit of patrotism, of service and responsibility, where each of us resolves to pitch in and work harder and look after not only ourselves, but each other ... in this country, we rise and fall as a nation, and one people.
VICTOR. Above all, I will never forget who this victory truly belongs to - it belongs to you.
CHALLENGES. The road ahead will be long. our climb will be steep. We may not get there in one year or one term, but America, I have never been more hopeful that I am tonight that we will get there. I promise you - we as a people will get there.
CHANGE. It's been a long time coming, but tonight, because of what we did on this day, in this election, at this defining moment, change has come to America.
LEADERSHIP. To all those watching tonight from beyond our shores ... our stories are singular, but our destiny is shared, and a new dawn of American leadership is at hand.
I HEAR YOU. To those Americans whose support I have yet to earn ... I may not have won your vote, but I hear your voices, I need your help, and I will be your president too.
UNITY. Let us summon a new spirit of patrotism, of service and responsibility, where each of us resolves to pitch in and work harder and look after not only ourselves, but each other ... in this country, we rise and fall as a nation, and one people.
VICTOR. Above all, I will never forget who this victory truly belongs to - it belongs to you.
CHALLENGES. The road ahead will be long. our climb will be steep. We may not get there in one year or one term, but America, I have never been more hopeful that I am tonight that we will get there. I promise you - we as a people will get there.
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