Contributed by Richard Woo
Let us recap the salient points and the parties involved, and issues/questions of relevance that appear vague and for which we need clarification and further information:
[1] Monetary Authority of Singapore [MAS]
MAS is the party at the top of the rung and it was MAS which gave approval, wittingly or unwittingly, for the sale of these toxic products to the public. And since MAS gave approval for their sale, MAS cannot now accuse the distributors for selling them.
The Prime Minister in an interview he gave to journalists on Oct 26 is reported to have said, inter alia, .. "In this case the Lehman Minibond Notes or DBS High Notes or ML Jubilee Notes were clearly not low-risk products." …
If they were not low-risk products, can they be considered as high-risk products, then, or, more appropriately, products with risks of robbing the investor of his capital, risks that were evidently sky-high and inappropriate, and absolutely incompatible with a meager return of a paltry 5% pa coupled with freezing of principal over a long period of five to six years?
MAS, it seems, can only point the finger at any distributor that has "mis-sold" or committed a legal breach. However, ten thousand investors have lost in total about half a billion dollars – and that's a lot of money; some of this money came from their retirement kitty, and for some it was their life-long savings.
In at least one product, there is clear evidence of mis-selling or making misrepresentations of the risks. If a distributor has misrepresented or lied to the investors, then there can be no justice in saying that investors did not enter with their eyes open; it would be an act of prejudice to blame investors by saying they should have invested with their eyes open; caveat emptor can in no way be introduced as a principle of fair play if one party has lied or misrepresented.
It is indeed strange that MAS has had no qualms telling investors poisoned by these toxic products: You were greedy. MAS is still investigating and exploring and that's laudable, but the comment about investors being greedy has no basis in fact and must be openly refuted or repeatedly refuted if necessary. If concerned MAS officials have a conscience, they would do well to examine it.
[2] "Vulnerable" group of investors – question for MAS/distributors
Would MAS or distributors please define the terms "vulnerable" and "non-vulnerable" and provide details of the criteria for distinguishing vulnerable from non-vulnerable?
Questions for MAS:
[a] Is it fair to leave it to each distributor to make the initial decision to compensate or not to compensate?
[b] Would it be fairer to consider, based on availability of evidence including but not limited to, advertising materials, internal procedures, risk-profiling of individual investors, as to whether any distributor was clearly guilty of mis-selling, or misrepresenting the risks involved?
[c] Would it be rational to think that distributors would admit liability to an investor who in their opinion is not among the group classified as "vulnerable"?
[d] Would it be unreasonable to say that if a distributor had mis-sold to Ms A or B it had in all probability also mis-sold to Mr X or Y?
[e] Would it be fairer to hold any distributor fully accountable to all their investors if they have mis-sold or misrepresented?
[3] Risk-profiling or analysis
Questions for distributors:
[a] What was the point of performing a risk-analysis?
[b] Was the risk-analysis performed in an objective manner?
[c] Would you agree that the risk-analysis was never used to determine whether an investor was suitable for the product concerned?
[d] Would you agree that you were selling a highly toxic product?
[e] Would you agree that any claim that you were merely acting as "order-executioner" cannot be meaningfully supported if you were uttering lies with abandon relative to the product, via print advert or otherwise?
[4] RMs
Can any of the RMs selling these structured products be said to be non-bilingual? To find out we need to see their CVs or ask their friends or family members. To be sure, many people in Singapore, especially the younger set, are bi-lingual.
Can it be rational to argue that an investor conversing in Mandarin, or in a vernacular other than English, with the RM is "vulnerable" but another investor discussing in English is not? But the crucial thing is: Did the RMs explain the risks of the product they were selling to the investor? Did they perform the risk-analysis diligently? Did they ask the questions concerning the risk-profile of the investor upfront, at the commencement of the discussion? Did they point out the risks spelt out in the so-called Pricing Statement?
Was a copy of the Pricing Statement handed out to the investor? Some investors have no hesitation making the claim they were not given a copy and that they did not even know what it was all about. According to some investors I spoke to, the RMs who attended to them spoke mainly about the merits of the product, for example, the interest yield, the quarterly interest payment, the link to highly rated financial institutions, the names of these institutions, and misrepresented by saying the investor would get all his/her money back if the investment were to be held to maturity.
Some investors have reviewed the risk-analysis form completed, in a hasty and careless manner, by their RM and noticed that although they were categorized as a low to mid-range risk investor, the RM did not tell them that the product was not suitable for them. I can see from the "tick-marks" completed for two investors that the information given in some areas was inconsistent or contradictory.
How many of the RMs, if any, really understood the contents of the Pricing Statement? It is obvious that people like MM are looking only at a small area of the picture. A complete analysis needs to take into account all the factors involved. Has any distributor or their RMs contravened a legal enactment, for example, the Financial Advisers Act? Any investigator seeking truth cannot avoid looking into this area. In the context of the scenario before us, would MM or MAS consider the use of the term "minibonds" as something innocuous, coincidental, or as something more than that, as part of a carefully hatched-up scheme, a scam perhaps, to fleece members of the public?
[5] Questions for Fidrec:
[a] What are your standards or criteria for making judgment on cases referred to you?
[b] The number of Fidrec staff involved in reviewing each case?
[6] Plausible entry of new swap counterparty to replace Lehman Brothers [Minibonds].
Distributors who have advertised "invest on solid foundations" and/or "invest with peace of mind" ought to take over as the new owner of the investment, with or without the new swap counterparty arrangement. Since they have misrepresented, through print advert and, plausibly, via verbal input from their RMs, they can be seen as having mis-sold or misrepresented, hence they should not shirk from their mistakes or responsibility; they should act honorably by returning investors their principal minus what the investors have received in terms of interest payment.
[7] Statistics – Request to MAS:
For the benefit of the investing public, please publish in the newspapers statistics covering data [in table form] linking information as follows:
Type or name of structured product, Name of Distributor, Total amount invested, Total number of investors, Number of "vulnerable" investors, Number of vulnerable investors if any who have been compensated and Number of "non-vulnerable" investors if any who have been compensated
[8] Future/present
It's all very well to think about the future by talking about revamping the industry, introducing tighter control measures, overhauling sales tactics etc but there is no future when the present is not taken care of. We all need to be mindful of the present; we need to be aware of the dire situation in front of us: an "explosion" has occurred and injured people are lying everywhere. Let's take care of all the injured before planning our next move.
Richard Woo
Friday, November 14, 2008
Why You Need to be at Hong Lim Park Tomorrow (15 November)
Message from betsybug
It's coming to five weeks after our first rally at Hong Lim Park. In that time, much has been achieved by us all - we have come together and we are now more organised as a group, and we know better some of the true nature of this perverse product DBS has sold us. Some have gotten a form of redress from DBS; the bank has been forced to make some grudging admissions, and they have relented by holding dialogue sessions with us.
But for the vast majority of us, we are no nearer a resolution. Much has been achieved, but much more needs to be done.
We must see this contest between us and the bank as a marathon race. We must see that it is a not dash of a hundred meters, for we cannot finish a marathon if we try to sustain the speed of a sprint race. So, we must learn to live our everyday lives, do our work, spend time with our families, take care of our minds and bodies, and go on with the framing of our plans even as we tussle with DBS. However painful the loss, despair must not debilitate us, slow our pace, or weaken our resolve.
Some of you will remember the actor Gregory Peck who carried very memorably the role of Atticus Finch in "To Kill a Mockingbird". He quotes Churchill to illustrate the code that Atticus lives by: "Withhold no sacrifice; grudge no toil; seek no sordid gain; fear no foe: all will be well".
We have asked all of you to be truthful in your letters and interviews. We must not claim what has not happened and what was not said. If the bank will not do the right thing, then we must be the ones who will set the example for them. Be truthful, not fearful. Be not afraid for it is not us who have carried out a wrongful deed - it is not us who must fear.
Some of us may weary from the fight when the end is not easily seen. But the end may be around the corner, and we could have stopped just short. Can we later justify our inactions to ourselves or to our families? DBS has said they are responsible to their shareholders for compensations they make, but are our families not our shareholders, and are we not answerable to our own stakeholders?
"All will be well". If each of us just do our little share, pull our small portion of the weight, push back our part of the wall, then together, big as DBS may be, and small as each one of us is, together we can shame even such a behemoth onto a proper and correct path of action. Because, in the end, we know that we are right, and on their side, they will know they have done wrong.
We hope to see you at Hong Lim Park tomorrow.
Betsybug
It's coming to five weeks after our first rally at Hong Lim Park. In that time, much has been achieved by us all - we have come together and we are now more organised as a group, and we know better some of the true nature of this perverse product DBS has sold us. Some have gotten a form of redress from DBS; the bank has been forced to make some grudging admissions, and they have relented by holding dialogue sessions with us.
But for the vast majority of us, we are no nearer a resolution. Much has been achieved, but much more needs to be done.
We must see this contest between us and the bank as a marathon race. We must see that it is a not dash of a hundred meters, for we cannot finish a marathon if we try to sustain the speed of a sprint race. So, we must learn to live our everyday lives, do our work, spend time with our families, take care of our minds and bodies, and go on with the framing of our plans even as we tussle with DBS. However painful the loss, despair must not debilitate us, slow our pace, or weaken our resolve.
Some of you will remember the actor Gregory Peck who carried very memorably the role of Atticus Finch in "To Kill a Mockingbird". He quotes Churchill to illustrate the code that Atticus lives by: "Withhold no sacrifice; grudge no toil; seek no sordid gain; fear no foe: all will be well".
We have asked all of you to be truthful in your letters and interviews. We must not claim what has not happened and what was not said. If the bank will not do the right thing, then we must be the ones who will set the example for them. Be truthful, not fearful. Be not afraid for it is not us who have carried out a wrongful deed - it is not us who must fear.
Some of us may weary from the fight when the end is not easily seen. But the end may be around the corner, and we could have stopped just short. Can we later justify our inactions to ourselves or to our families? DBS has said they are responsible to their shareholders for compensations they make, but are our families not our shareholders, and are we not answerable to our own stakeholders?
"All will be well". If each of us just do our little share, pull our small portion of the weight, push back our part of the wall, then together, big as DBS may be, and small as each one of us is, together we can shame even such a behemoth onto a proper and correct path of action. Because, in the end, we know that we are right, and on their side, they will know they have done wrong.
We hope to see you at Hong Lim Park tomorrow.
Betsybug
Thursday, November 13, 2008
Retrenchment and its impact on Singaporeans
In bad times, businesses have to retrench their employers to cut costs and stop losses. This approach is adopted around the world. Singapore also follows this approach.
I hope that our government leaders realise that the impact of retrenchment on Singaporeans is greater, for the following reasons:
1. In the developed countries, there is unemployment benefit for one or two years to help the laid off workers to adjust to the new situation
2. Many Singaporeans have heavy mortgages and debts to pay. After being retrenched, they will be hounded by the lenders.
3. In the less developed countries, they can survive in the countryside with a lower cost of living. This option is not available in Singapore.
Our government leaders have been proud that Singapore does not have an unemployment insurance system, as it stops people from being lazy and living off the work of others. But this is only one side of the coin. The other side said that there are many hardworking people who lost their jobs due to no fault of their own, and now have to suffer the heavy penalty.
If the company is doing well, the retrenched workers are able to get a fairly generous retrenchment benefit that can tide them over for some time. If not, we need some other measures.
In the absence of unemployment benefit, our laid off workers should be allowed to make modest withdrawals from the Central Provident Fund savings, or have access to interest free loan provided by the government. This are just some suggestions.
I hope that our government leaders realise that the impact of retrenchment on Singaporeans is greater, for the following reasons:
1. In the developed countries, there is unemployment benefit for one or two years to help the laid off workers to adjust to the new situation
2. Many Singaporeans have heavy mortgages and debts to pay. After being retrenched, they will be hounded by the lenders.
3. In the less developed countries, they can survive in the countryside with a lower cost of living. This option is not available in Singapore.
Our government leaders have been proud that Singapore does not have an unemployment insurance system, as it stops people from being lazy and living off the work of others. But this is only one side of the coin. The other side said that there are many hardworking people who lost their jobs due to no fault of their own, and now have to suffer the heavy penalty.
If the company is doing well, the retrenched workers are able to get a fairly generous retrenchment benefit that can tide them over for some time. If not, we need some other measures.
In the absence of unemployment benefit, our laid off workers should be allowed to make modest withdrawals from the Central Provident Fund savings, or have access to interest free loan provided by the government. This are just some suggestions.
SCMP:Divine intervention in Legco debate
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=VQ3WMGRX5VB7&linkid=cdcb3fed-5cbb-4790-942f-08df6461fb86&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
13 Nov 2008
The light of heaven was shining in the legislature yesterday when those who opposed a move to empower a Legco subcommittee to probe whether officials and bankers were wrongdoers in the Lehman Brothers minibonds affair turned green on camera in a live broadcast of the meeting.
Immediately after Regina Ip Lau Suk-yee – the only directly elected lawmaker opposing the motion – started her speech, a strong ray of sunshine broke through the top window of the usually gloomy Legco chamber, directly falling on Mrs Ip’s position and engulfing her in an eerie greenish aura. The same happened to David Li Kwok-po, who strongly defended his banking sector’s interest by speaking to oppose the vote.
“Gosh, the light of heaven has revealed their true nature,” one observer said while watching the live broadcast in the Legco corridors of power.
13 Nov 2008
The light of heaven was shining in the legislature yesterday when those who opposed a move to empower a Legco subcommittee to probe whether officials and bankers were wrongdoers in the Lehman Brothers minibonds affair turned green on camera in a live broadcast of the meeting.
Immediately after Regina Ip Lau Suk-yee – the only directly elected lawmaker opposing the motion – started her speech, a strong ray of sunshine broke through the top window of the usually gloomy Legco chamber, directly falling on Mrs Ip’s position and engulfing her in an eerie greenish aura. The same happened to David Li Kwok-po, who strongly defended his banking sector’s interest by speaking to oppose the vote.
“Gosh, the light of heaven has revealed their true nature,” one observer said while watching the live broadcast in the Legco corridors of power.
Adequate saving for retirement
Are you making adequate saving for your retirement? Are you investing the savings wisely?
Read the following tips:
http://www.tankinlian.com/articles/savings.html
Read the following tips:
http://www.tankinlian.com/articles/savings.html
Wednesday, November 12, 2008
Financial Advice for Young People
I wish to give some advice for young people, especially those who have just started work.
You should budget your monthly earnings for the following:
> repayment of study or other loan committed previously
> contribute towards the household expenses (if you are staying with your parents)
> your monthly expenses for travel, meals and clothes (be frugal)
> put aside 15% of your earnings as savings
If there is a balance, you can use it for travel, entertainment or other luxury.
Most importantly - set aside 15% for your savings. You may need to draw down on your savings if you lose your job, or you change your job, or you need cash to meet an emergency. Keep the savings in flexible form.
Avoid investing in a life insurance policy, as the savings are locked up and inflexible. If you need protection, buy term insurance.
Avoid borrowing on your credit card. The interest charges is very high. It can cost you a lot of money.
Read this FAQ:
http://www.tankinlian.com/faq/fptips.html
You should budget your monthly earnings for the following:
> repayment of study or other loan committed previously
> contribute towards the household expenses (if you are staying with your parents)
> your monthly expenses for travel, meals and clothes (be frugal)
> put aside 15% of your earnings as savings
If there is a balance, you can use it for travel, entertainment or other luxury.
Most importantly - set aside 15% for your savings. You may need to draw down on your savings if you lose your job, or you change your job, or you need cash to meet an emergency. Keep the savings in flexible form.
Avoid investing in a life insurance policy, as the savings are locked up and inflexible. If you need protection, buy term insurance.
Avoid borrowing on your credit card. The interest charges is very high. It can cost you a lot of money.
Read this FAQ:
http://www.tankinlian.com/faq/fptips.html
Reuters: Financial crisis politically awakens Singapore investors
Fri Nov 7, 2008 6:01am EST
By Melanie Lee
SINGAPORE (Reuters) - Cancer patient Lim Qing Si was one of thousands of hard-working Singaporeans who lost their savings in the financial crisis, especially when Lehman Brothers collapsed and its secured products became virtually worthless.
"All this money is my husband and my retirement savings," said Lim, a 54-year-old retiree, who must now scramble together what's left of her savings to pay for cancer treatment after a malignant tumor was found in her leg.
In all, nearly 10,000 people in Singapore stand to lose over S$500 million ($338 million) due to the collapse of Lehman Brothers Holdings Inc, the central bank says.
The incident left many financially scarred but politically awakened in a city-state where protests are rare and street gatherings of five or more people require a permit.
Lim and others have taken advantage of a recent government move to create a forum for public protest, a "Speakers Corner," modeled on the Hyde Park bastion of free speech.
Since the financial crisis struck, hundreds of ordinary working-class people who have lost money have gathered each Saturday to air their grievances and call on the government to help recoup their losses.
"I hope the authorities, who are supposed to protect ordinary people, should be much more proactive," said Tan Kin Lian, the protest organizer and a former chief executive of a large Singapore insurer.
Following the weekly protests, the central bank said it would investigate alleged mis-selling of Lehman-linked products, such as DBS Group's "High Note 5" and Lehman Brothers mini-bonds sold by banks across the island state.
Singapore's biggest bank, the DBS Group, was among the banks that sold Lehman products to its customers, many of whom were simple, working-class people looking for safe investments for their retirement savings in a country without state pensions.
DBS has said it will pay up to S$80 million to compensate some investors. Maybank also said it has identified mini-bond investors for compensation, while smaller financial institution Hong Leong Finance said it will buy back Lehman-linked mini-bonds from elderly and less-educated customers.
These offers may ease public pressure, but the discontent Singaporeans feel has shaken their faith in a government that espoused a pro-investment culture, analysts said.
Singapore, which has been ruled by one party, the Peoples' Action Party, since its independence in 1965, has always been a promoter of investment, encouraging foreign firms to invest in the country and its compliant citizens to invest in their future by putting their savings in financial products.
Eugene Tan, a law lecturer at Singapore Management University, said the fiasco "puts the government's credibility at risk" and the government had to be seen to do more.
"The Lehman bonds incident affected a very vulnerable segment of Singapore's population," said Tan.
The involvement of the largest bank DBS "made the issue very germane and very alive," Tan added. DBS is partly owned by Temasek Holdings, which is a government linked company.
GOVERNMENT STEPS IN
While the country's marginalized opposition parties hope to take inspiration from neighboring Malaysia, where a resurgent opposition says it can win power after slashing the government's majority in March elections, analysts said the chance this incident will snowball into a larger political rift is slim.
The turnout at the Lehman protests is a far cry from previous protests led by political opposition party leaders, such as a demonstration of about 20 people in March against rising prices, for which 19 people have been charged for illegal assembly.
"There is this very sharp contrast. When you have someone trying to draw Singaporeans attention to the politics of human rights, people are generally apathetic," said Alan Chong, political scientist at the National University of Singapore.
"Singapore's political culture tends toward pragmatism -- this is largely a material pragmatism," Chong said.
The government, which relies on domestic stability to help attract foreign direct investment and to develop high-value sectors such as financial services and biomedical engineering, has told the banks to resolve the matter fairly.
"Where there has been mis-selling, it has to be put right," Singapore's Prime Minister Lee Hsien Loong was quoted as saying in the Straits Times newspaper.
However, not everyone is satisfied by the response and the protests will continue, according to Tan's blog: tankinlian.blogspot.com
"Singaporeans are being treated like sheep," said Jojobeach, the online monikor of someone who posted comments on local discussion forum sgforums.com.
By Melanie Lee
SINGAPORE (Reuters) - Cancer patient Lim Qing Si was one of thousands of hard-working Singaporeans who lost their savings in the financial crisis, especially when Lehman Brothers collapsed and its secured products became virtually worthless.
"All this money is my husband and my retirement savings," said Lim, a 54-year-old retiree, who must now scramble together what's left of her savings to pay for cancer treatment after a malignant tumor was found in her leg.
In all, nearly 10,000 people in Singapore stand to lose over S$500 million ($338 million) due to the collapse of Lehman Brothers Holdings Inc, the central bank says.
The incident left many financially scarred but politically awakened in a city-state where protests are rare and street gatherings of five or more people require a permit.
Lim and others have taken advantage of a recent government move to create a forum for public protest, a "Speakers Corner," modeled on the Hyde Park bastion of free speech.
Since the financial crisis struck, hundreds of ordinary working-class people who have lost money have gathered each Saturday to air their grievances and call on the government to help recoup their losses.
"I hope the authorities, who are supposed to protect ordinary people, should be much more proactive," said Tan Kin Lian, the protest organizer and a former chief executive of a large Singapore insurer.
Following the weekly protests, the central bank said it would investigate alleged mis-selling of Lehman-linked products, such as DBS Group's "High Note 5" and Lehman Brothers mini-bonds sold by banks across the island state.
Singapore's biggest bank, the DBS Group, was among the banks that sold Lehman products to its customers, many of whom were simple, working-class people looking for safe investments for their retirement savings in a country without state pensions.
DBS has said it will pay up to S$80 million to compensate some investors. Maybank also said it has identified mini-bond investors for compensation, while smaller financial institution Hong Leong Finance said it will buy back Lehman-linked mini-bonds from elderly and less-educated customers.
These offers may ease public pressure, but the discontent Singaporeans feel has shaken their faith in a government that espoused a pro-investment culture, analysts said.
Singapore, which has been ruled by one party, the Peoples' Action Party, since its independence in 1965, has always been a promoter of investment, encouraging foreign firms to invest in the country and its compliant citizens to invest in their future by putting their savings in financial products.
Eugene Tan, a law lecturer at Singapore Management University, said the fiasco "puts the government's credibility at risk" and the government had to be seen to do more.
"The Lehman bonds incident affected a very vulnerable segment of Singapore's population," said Tan.
The involvement of the largest bank DBS "made the issue very germane and very alive," Tan added. DBS is partly owned by Temasek Holdings, which is a government linked company.
GOVERNMENT STEPS IN
While the country's marginalized opposition parties hope to take inspiration from neighboring Malaysia, where a resurgent opposition says it can win power after slashing the government's majority in March elections, analysts said the chance this incident will snowball into a larger political rift is slim.
The turnout at the Lehman protests is a far cry from previous protests led by political opposition party leaders, such as a demonstration of about 20 people in March against rising prices, for which 19 people have been charged for illegal assembly.
"There is this very sharp contrast. When you have someone trying to draw Singaporeans attention to the politics of human rights, people are generally apathetic," said Alan Chong, political scientist at the National University of Singapore.
"Singapore's political culture tends toward pragmatism -- this is largely a material pragmatism," Chong said.
The government, which relies on domestic stability to help attract foreign direct investment and to develop high-value sectors such as financial services and biomedical engineering, has told the banks to resolve the matter fairly.
"Where there has been mis-selling, it has to be put right," Singapore's Prime Minister Lee Hsien Loong was quoted as saying in the Straits Times newspaper.
However, not everyone is satisfied by the response and the protests will continue, according to Tan's blog: tankinlian.blogspot.com
"Singaporeans are being treated like sheep," said Jojobeach, the online monikor of someone who posted comments on local discussion forum sgforums.com.
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