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12 Nov 2008
Financial Secretary John Tsang Chun-wah and Secretary for Financial Services and the Treasury Chan Ka-keung, key officials handling policies relating to the financial meltdown and the Lehman Brothers minibonds saga, have both suffered significant falls in their approval ratings. In the latest University of Hong Kong survey on the popularity of top government officials Professor Chan’s approval rate fell by 8 percentage points last week, down from 33 per cent early last month, the most significant drop in approval ratings when compared with the other 11 ministers. Mr Tsang’s approval rating dropped by 5 percentage points, down from 41per cent early last month.
Wednesday, November 12, 2008
Rebuttal to "invest with your eyes open"
Dear Mr. Tan
Thank you for your invitation and organizing the petition.
In case you are addressing the audience and making rebuttal to the statement by our leader on the remarks “with their eyes open” I would like to point out that if an investor is prepared to take such a risk, i.e. to lose their entire principal sum they would opt for so many other investment that pay much higher then 5%. I myself has been led to believe that my only risk is not getting the coupon if the said companies is in default.
J
REPLY
It will be more effective if you write directly to the government leader who made the remark, or write to the newspaper who reported this remark.
Thank you for your invitation and organizing the petition.
In case you are addressing the audience and making rebuttal to the statement by our leader on the remarks “with their eyes open” I would like to point out that if an investor is prepared to take such a risk, i.e. to lose their entire principal sum they would opt for so many other investment that pay much higher then 5%. I myself has been led to believe that my only risk is not getting the coupon if the said companies is in default.
J
REPLY
It will be more effective if you write directly to the government leader who made the remark, or write to the newspaper who reported this remark.
SCMP:Legco probe best hope for minibond mess
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12 Nov 2008
Chris Yeung is the Post’s editor-at-large. chris.yeung@scmp.com
Two days ago, before the scheduled Legislative Council vote today on whether to invoke special powers to investigate the Lehman Brothers minibonds saga, local banks mounted a counter-lobbying drive. In full-page newspaper advertisements on Monday, they stressed their commitment to “offering practical, transparent and fair solutions” to address the difficulties faced by more than 40,000 Hong Kong investors affected by Lehman’s demise.
It did not mention the Legco vote, but the writing is on the wall: the last thing they want is to be summoned to the legislature to give evidence on the Lehman case.
Also on Monday, finance functional constituency legislator David Li Kwok-po urged members to vote down the motion. He warned that, if it were passed, it would allow Legco to exercise “unlimited” powers over banks. It would set a bad precedent and might undermine the status of Hong Kong as an international financial centre, he added.
Banks, he said, would also have to stretch their resources for the Legco hearings at the expense of handling the buy-back efforts.
Privately, senior government officials have cautioned that a Legco inquiry would “put banks on public trial”.
If an inquiry goes ahead, banks might put the buy-back process on hold, according to one official. Banks fear they would be under pressure at the public hearings to divulge details of their business strategies and practices, the official said.
In view of the quasi-judicial nature of an independent inquiry and the style of Legco politics, their fears may be justified.
There is no denying that such an inquiry would further complicate matters and raise more uncertainties about the minibonds row. It may create tension that is not conducive to mediation and arbitration.
But, while the arguments against an inquiry carry some weight, the case for an investigation should not be dismissed lightly.
From a broader perspective, a full Legco probe could arguably help the banking industry, whose image has been tarnished by allegations of fraud, at worst, and misselling, at best, over the sale of Lehmanrelated products.
It would also allow the Monetary Authority and the Securities and Futures Commission, as well as the relevant policy bureau, to give detailed accounts of their respective roles and responsibilities.
Doing so would help set out a full picture for the affected investors and the general public so they could judge who, if anyone, should take the blame. More importantly, the investigation process would help identify faults in the regulatory system and make recommendations for improvement.
With their reputations at stake, there is no reason to believe banks would deliberately stall resolving this dispute because of a Legco inquiry.
Now that independent experts are tasked with assessing the value of the products, investors should feel assured that the findings would not be affected.
In view of the demise of Lehman and the plunge in the value of its investment products, a considerable number of the 40,000plus affected investors might not get what they want from the buy- back exercise. A feeling of injustice may prevail. If left unattended, their grievances could turn to anger and feelings of betrayal.
Undoubtedly, an early settlement between banks and investors is important. But, as the row has already damaged the authority and credibility of political and financial institutions, failing to seek a solution through a fair and open inquiry would be unjust.
The media and the public should ensure that Legco’s investigative powers do not go unchecked, to minimise any unintended consequences – such as probing too deeply into the operation of banks, or damaging business confidence.
12 Nov 2008
Chris Yeung is the Post’s editor-at-large. chris.yeung@scmp.com
Two days ago, before the scheduled Legislative Council vote today on whether to invoke special powers to investigate the Lehman Brothers minibonds saga, local banks mounted a counter-lobbying drive. In full-page newspaper advertisements on Monday, they stressed their commitment to “offering practical, transparent and fair solutions” to address the difficulties faced by more than 40,000 Hong Kong investors affected by Lehman’s demise.
It did not mention the Legco vote, but the writing is on the wall: the last thing they want is to be summoned to the legislature to give evidence on the Lehman case.
Also on Monday, finance functional constituency legislator David Li Kwok-po urged members to vote down the motion. He warned that, if it were passed, it would allow Legco to exercise “unlimited” powers over banks. It would set a bad precedent and might undermine the status of Hong Kong as an international financial centre, he added.
Banks, he said, would also have to stretch their resources for the Legco hearings at the expense of handling the buy-back efforts.
Privately, senior government officials have cautioned that a Legco inquiry would “put banks on public trial”.
If an inquiry goes ahead, banks might put the buy-back process on hold, according to one official. Banks fear they would be under pressure at the public hearings to divulge details of their business strategies and practices, the official said.
In view of the quasi-judicial nature of an independent inquiry and the style of Legco politics, their fears may be justified.
There is no denying that such an inquiry would further complicate matters and raise more uncertainties about the minibonds row. It may create tension that is not conducive to mediation and arbitration.
But, while the arguments against an inquiry carry some weight, the case for an investigation should not be dismissed lightly.
From a broader perspective, a full Legco probe could arguably help the banking industry, whose image has been tarnished by allegations of fraud, at worst, and misselling, at best, over the sale of Lehmanrelated products.
It would also allow the Monetary Authority and the Securities and Futures Commission, as well as the relevant policy bureau, to give detailed accounts of their respective roles and responsibilities.
Doing so would help set out a full picture for the affected investors and the general public so they could judge who, if anyone, should take the blame. More importantly, the investigation process would help identify faults in the regulatory system and make recommendations for improvement.
With their reputations at stake, there is no reason to believe banks would deliberately stall resolving this dispute because of a Legco inquiry.
Now that independent experts are tasked with assessing the value of the products, investors should feel assured that the findings would not be affected.
In view of the demise of Lehman and the plunge in the value of its investment products, a considerable number of the 40,000plus affected investors might not get what they want from the buy- back exercise. A feeling of injustice may prevail. If left unattended, their grievances could turn to anger and feelings of betrayal.
Undoubtedly, an early settlement between banks and investors is important. But, as the row has already damaged the authority and credibility of political and financial institutions, failing to seek a solution through a fair and open inquiry would be unjust.
The media and the public should ensure that Legco’s investigative powers do not go unchecked, to minimise any unintended consequences – such as probing too deeply into the operation of banks, or damaging business confidence.
Tuesday, November 11, 2008
Morgan Stanley hotline for Pinnacle notes
Dear Mr Tan,
I called my distributor OCBC secruities many times to check the reason about Pinnacle Note for the distressful price, but the only thing they can tell me is to wait for the Q& A, and I never get it until now after many weeks chasing.
I have to make many calls and finally I found Morgan Stantly has set up two hot lines for Pinnacle Note holders. I asked MS people why they didn't tell us the hot lines which can address our concerns. They should understand how flucstrated their holders are facing now, but they just to say they are waiting for us to find these hotlines. Is it make sense? If they did not publish it or inform their distributors the hot lines but wait the investors to find it by ourselves. What kind of service it is?
The hotlines for Pinnacle Note holders are : 68346510/68346512, and it only open from 9:00am to 12:00am.
A desperated investor
I called my distributor OCBC secruities many times to check the reason about Pinnacle Note for the distressful price, but the only thing they can tell me is to wait for the Q& A, and I never get it until now after many weeks chasing.
I have to make many calls and finally I found Morgan Stantly has set up two hot lines for Pinnacle Note holders. I asked MS people why they didn't tell us the hot lines which can address our concerns. They should understand how flucstrated their holders are facing now, but they just to say they are waiting for us to find these hotlines. Is it make sense? If they did not publish it or inform their distributors the hot lines but wait the investors to find it by ourselves. What kind of service it is?
The hotlines for Pinnacle Note holders are : 68346510/68346512, and it only open from 9:00am to 12:00am.
A desperated investor
Accountabiliy, transparency and social justice
Mr. Goh Chok Tong gave the keynote address at the Asia Society Hong Kong Center's annual dinner. He listed four main attributes of a political system to enable a country to flourish:
1. accountability and transparency
2. long term planning and execution
3. social justice and harmony
4. a culture of identifying and glooming talent for public service.
Accountability and transparency
I wish to reflect on whether MAS has acted with accountability and transparency in the handling of the credit linked notes. I submitted three petitions to MAS signed by 2,300 people. I request for a meeting to discuss these petitions. They were declined.
MAS said that they cannot meet with representative groups. But I suspect that they must have met with the representatives of the financial institutions.
I do not know how MAS can find a solution without listening to the views of the many thousand of people who have lost their hard earned savings.
Social justice
10,000 people have lost their hard earned or lifetime savings. A small percentage of people identified as "vulnerable" are being compensated. The remainder are left to deal on their own, on a case by case basis, against the large financial institutions. These institutions have the moral support of our leaders who labelled the investors as "greedy" and invested "with their eyes open".
I wonder if this can be called social justice?
Your views
What are your views?
1. accountability and transparency
2. long term planning and execution
3. social justice and harmony
4. a culture of identifying and glooming talent for public service.
Accountability and transparency
I wish to reflect on whether MAS has acted with accountability and transparency in the handling of the credit linked notes. I submitted three petitions to MAS signed by 2,300 people. I request for a meeting to discuss these petitions. They were declined.
MAS said that they cannot meet with representative groups. But I suspect that they must have met with the representatives of the financial institutions.
I do not know how MAS can find a solution without listening to the views of the many thousand of people who have lost their hard earned savings.
Social justice
10,000 people have lost their hard earned or lifetime savings. A small percentage of people identified as "vulnerable" are being compensated. The remainder are left to deal on their own, on a case by case basis, against the large financial institutions. These institutions have the moral support of our leaders who labelled the investors as "greedy" and invested "with their eyes open".
I wonder if this can be called social justice?
Your views
What are your views?
Reply from MAS on the 3 petitions
Dear Mr Tan,
I refer to your emails dated 7 November and 10 November to MAS, and your email to the Prime Minister dated 10 November.
MAS understands the anxiety that investors in structured notes are feeling. We have devoted substantial resources to looking into the issues, with teams of officers working on formal inquiries as well as on ensuring that there is a fair, serious and impartial resolution process for affected investors. Independent persons have also been appointed.
MAS takes feedback seriously, and reviews all feedback received. In deciding on the courses of action, we are guided by our regulatory approach and assessment of the situation. As MAS has to be fair and transparent to everyone, MAS has to communicate to all investors at the same time through public press statements. You would appreciate that MAS therefore cannot reply to particular groups of individuals or individuals writing to MAS on our intended course of action.
Our approach and our advice to investors are set out clearly in the various public comments and press statements. You may wish to refer to our earlier press statements dated 22 September, 10 October, 17 October and 20 October. We will continue to communicate with investors through public press statements when appropriate.
Dr. Andrew Khoo
REPLY
Dear Dr. Andrew Khoo
Can you indicate where your press statements can be located, and if they have addressed the points contained in the three petitions that were signed by a total of more than 2,300 people. If there are outstanding points that have not been addressed, can you reply if they will be specifically covered in future press releases?
The mode of communication adopted by MAS has added to the concern and anxiety of several thousand people. I suggest that MAS review its approach and be ready to engage in a dialogue with representative groups of the investors.
I refer to your emails dated 7 November and 10 November to MAS, and your email to the Prime Minister dated 10 November.
MAS understands the anxiety that investors in structured notes are feeling. We have devoted substantial resources to looking into the issues, with teams of officers working on formal inquiries as well as on ensuring that there is a fair, serious and impartial resolution process for affected investors. Independent persons have also been appointed.
MAS takes feedback seriously, and reviews all feedback received. In deciding on the courses of action, we are guided by our regulatory approach and assessment of the situation. As MAS has to be fair and transparent to everyone, MAS has to communicate to all investors at the same time through public press statements. You would appreciate that MAS therefore cannot reply to particular groups of individuals or individuals writing to MAS on our intended course of action.
Our approach and our advice to investors are set out clearly in the various public comments and press statements. You may wish to refer to our earlier press statements dated 22 September, 10 October, 17 October and 20 October. We will continue to communicate with investors through public press statements when appropriate.
Dr. Andrew Khoo
REPLY
Dear Dr. Andrew Khoo
Can you indicate where your press statements can be located, and if they have addressed the points contained in the three petitions that were signed by a total of more than 2,300 people. If there are outstanding points that have not been addressed, can you reply if they will be specifically covered in future press releases?
The mode of communication adopted by MAS has added to the concern and anxiety of several thousand people. I suggest that MAS review its approach and be ready to engage in a dialogue with representative groups of the investors.
Letter to Prime Minister on Credit Linked Notes
10 November 2008
Mr. Lee Hsien Loong
Prime Minister
Republic of Singapore
Dear Prime Minister
1. I appeal to you to look into the plight and financial losses suffered by about 10,000 investors from the Mini-bonds, High notes, Pinnacle Notes, Jubilee Notes and other credit-linked notes that have been sold to them by the financial institutions.
2. This appeal is made in accordance with the following statements made by you as chairman of the Monetary Authority of Singapore at a staff seminar held on 29 October 2002 on the topic of “Market Discipline and Caveat Emptor”:
QUOTE
22. Our efforts to promote market discipline and a caveat emptor regime have focussed on enhancing the amount, quality and timeliness of information disclosed by institutions. We have shifted from a merit-based supervisory approach to a disclosure-based approach that emphasises market discipline to incentivise financial institutions to conduct their business in a sound, efficient, and professional manner. The local banks in particular have significantly improved their disclosure practices.
23. We must continue to update our disclosure standards in line with industry developments and international best practice. Furthermore, the mindset change is not yet complete. The public still expects to be protected from downside risks, for example when playing the stock market, but more so when depositing their money in banks. Hence one major motivation for introducing deposit insurance is to change this mindset, and get people to understand that only a limited first tranche of their deposits with a bank is protected should the bank run into trouble.
24. But disclosure by itself is not enough. It must be accompanied by investor education. Investors have to understand and use the information provided to them. They must learn to make sense of this information and use it to look after their own interests. We also need a pool of knowledgeable analysts and journalists who will shine the spotlight on any obscure fine print that the lay investor fails to notice. A more informed and sophisticated investor base will reinforce market discipline and form the basis for a more vibrant and mature financial sector. In all these respects, we have a long way to go.
25. Market discipline also requires an effective enforcement regime. To preserve investor confidence, penalties for transgressions must be swift and appropriate. MAS now has the power to investigate and bring a court action for market misconduct under the new civil penalty regime. This will complement the existing criminal penalty regime administered by CAD.”
UNQUOTE
3. On 10 October 2008, I submitted a Petition signed by 983 people addressed to the Singapore Government. It was handed over to Dr. Andrew Khoo, Executive Director of the Monetary Authority of Singapore, who received it on behalf of the chairman, Mr. Goh Chok Tong. This Petition said:
QUOTE
We, the undersigned, 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 the Lehman Minibonds, DBS High Notes, Morgan
Stanley Pinnacle Notes and Merrill Lynch Jubilee Notes.
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.
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.
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.
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.
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 misconduct of these financial institutions.
We ask the Government to act now and restore the peoples' faith in our financial
System.
UNQUOTE
4. In a supporting letter to the Monetary Authority of Singapore, I have mentioned some of the possible areas where the laws of Singapore might have been breached. They are set out in annex 1.
5. I have received an acknowledgement from MAS of the Petition. Nearly one month has passed. I have not heard from MAS if they intend to act on the requests contained in the Petition, namely to commence a full and independent inquiry into the sale of structured products by various financial institutions in Singapore and, if the inquiry deems necessary, to act against these financial institutions.
6. I appeal to you, Prime Minister, to ask the MAS to act more swiftly and appropriately, in line with this vision:
QUOTE
Market discipline also requires an effective enforcement regime. To preserve investor confidence, penalties for transgressions must be swift and appropriate. MAS now has the power to investigate and bring a court action for market misconduct under the new civil penalty regime. This will complement the existing criminal penalty regime administered by CAD.”
UNQUOTE
7. Annex 2 contains an article written from the perspective of an investor.
8. Thank you.
Tan Kin Lian
RESPONSE FROM MAS
MAS has replied to my letter to the Prime Minister. They said that MAS will give its reply in press statements. They are not able to talk to any individual investor or group of investors.
Mr. Lee Hsien Loong
Prime Minister
Republic of Singapore
Dear Prime Minister
1. I appeal to you to look into the plight and financial losses suffered by about 10,000 investors from the Mini-bonds, High notes, Pinnacle Notes, Jubilee Notes and other credit-linked notes that have been sold to them by the financial institutions.
2. This appeal is made in accordance with the following statements made by you as chairman of the Monetary Authority of Singapore at a staff seminar held on 29 October 2002 on the topic of “Market Discipline and Caveat Emptor”:
QUOTE
22. Our efforts to promote market discipline and a caveat emptor regime have focussed on enhancing the amount, quality and timeliness of information disclosed by institutions. We have shifted from a merit-based supervisory approach to a disclosure-based approach that emphasises market discipline to incentivise financial institutions to conduct their business in a sound, efficient, and professional manner. The local banks in particular have significantly improved their disclosure practices.
23. We must continue to update our disclosure standards in line with industry developments and international best practice. Furthermore, the mindset change is not yet complete. The public still expects to be protected from downside risks, for example when playing the stock market, but more so when depositing their money in banks. Hence one major motivation for introducing deposit insurance is to change this mindset, and get people to understand that only a limited first tranche of their deposits with a bank is protected should the bank run into trouble.
24. But disclosure by itself is not enough. It must be accompanied by investor education. Investors have to understand and use the information provided to them. They must learn to make sense of this information and use it to look after their own interests. We also need a pool of knowledgeable analysts and journalists who will shine the spotlight on any obscure fine print that the lay investor fails to notice. A more informed and sophisticated investor base will reinforce market discipline and form the basis for a more vibrant and mature financial sector. In all these respects, we have a long way to go.
25. Market discipline also requires an effective enforcement regime. To preserve investor confidence, penalties for transgressions must be swift and appropriate. MAS now has the power to investigate and bring a court action for market misconduct under the new civil penalty regime. This will complement the existing criminal penalty regime administered by CAD.”
UNQUOTE
3. On 10 October 2008, I submitted a Petition signed by 983 people addressed to the Singapore Government. It was handed over to Dr. Andrew Khoo, Executive Director of the Monetary Authority of Singapore, who received it on behalf of the chairman, Mr. Goh Chok Tong. This Petition said:
QUOTE
We, the undersigned, 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 the Lehman Minibonds, DBS High Notes, Morgan
Stanley Pinnacle Notes and Merrill Lynch Jubilee Notes.
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.
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.
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.
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.
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 misconduct of these financial institutions.
We ask the Government to act now and restore the peoples' faith in our financial
System.
UNQUOTE
4. In a supporting letter to the Monetary Authority of Singapore, I have mentioned some of the possible areas where the laws of Singapore might have been breached. They are set out in annex 1.
5. I have received an acknowledgement from MAS of the Petition. Nearly one month has passed. I have not heard from MAS if they intend to act on the requests contained in the Petition, namely to commence a full and independent inquiry into the sale of structured products by various financial institutions in Singapore and, if the inquiry deems necessary, to act against these financial institutions.
6. I appeal to you, Prime Minister, to ask the MAS to act more swiftly and appropriately, in line with this vision:
QUOTE
Market discipline also requires an effective enforcement regime. To preserve investor confidence, penalties for transgressions must be swift and appropriate. MAS now has the power to investigate and bring a court action for market misconduct under the new civil penalty regime. This will complement the existing criminal penalty regime administered by CAD.”
UNQUOTE
7. Annex 2 contains an article written from the perspective of an investor.
8. Thank you.
Tan Kin Lian
RESPONSE FROM MAS
MAS has replied to my letter to the Prime Minister. They said that MAS will give its reply in press statements. They are not able to talk to any individual investor or group of investors.
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