30 July 2009
The legal sector is bracing for a flood of litigation as a growing number of investors take their bankers to court in efforts to recover huge losses resulting from high-risk financial products.
On Tuesday, 77-year-old Chan Wai-yee filed a writ and statement of claim against Swiss-based investment bank UBS for allegedly advising her to buy an equity accumulator package which resulted in her losing HK$260 million.
Solicitor Bonita Chan Bow-ye of Hastings & Co, the law firm which represents the elderly Chan, said yesterday the company is also handling several other similar cases, and that it was likely more investors will follow suit.
``After seeing some investors taking their cases to court, others who are in a similar situation may consider doing the same, so it's very likely we will see more lawsuits concerning these high- risk financial products,'' Bonita Chan said.
A senior partner of ONC Lawyers, Ludwig Ng Siu-wing, told The Standard he is now handling several cases involving mainland investors who claim they had been advised by their Hong Kong bankers to buy equity accumulators months before last year's market crunch, resulting in losses totaling tens of millions of dollars.
However, Ng said not many law firms were willing to handle such cases, as they not only involved the novelty of financial products but also the potential conflict of interest between the banks and the law firms.
``Equity accumulators have become common only in the past few years, and the subject is still quite new to some lawyers,'' Ng said. ``In addition, several major law firms have close business ties with the banks, such as preparing legal documents for mortgages, and such firms may be reluctant to take up such cases.''
Ng said minibond investors were a different matter.
``Equity accumulators are for experienced investors, and where the transaction is through private bankers who normally serve only the very rich. It also means their investments in the accumulator would be huge, running into tens of millions of dollars. So those investors are a completely different group from those who subscribed to minibonds,'' Ng explained.
Last week, the Securities and Futures Commission announced a settlement with 16 banks for them to buy back all outstanding Lehman Brothers minibonds at 60 to 70 percent of their original value. The deal reached put an end to a 10-month saga.
Solicitor Henry Chiu Tuen-ting of Henry Chiu & Partners said the key element in such disputes would be whether the banks clearly explained and honestly disclosed the possible upside and downside of the stock market.
Friday, July 31, 2009
Features of life insurance policies
Hi Mr Tan,
Can you tell me what are the features for these insurance policies?
1) Limited pyament whole life insurance
2) Regular prenium investment-linked policies
3) Anticipated Endowment Insurance
REPLY
I will only give a brief explanation here. Please search Google for a more detailed explanation.
A limited payment whole life policy requires you to pay premium for a certain number of years and be insured for the whole of life. If you pay premium for a shorter period, the annual premium is higher.
A regular premium investment linked policy requires you to pay a regular premium over many years. The premium is invested in an investment fund. You will get the value of the invested units.
An anticipated endowment policy pays the maturity benefit in installments during the term. For example, if you insure for 50,000 over 20 years under an anticipated endowment policy, the $50,000 is paid to you in installments over the 20 years. The annual premium for an anticipated endowment policy is much higher than an ordinary endowment policy.
A life insurance policy may take away as much as two years of your premium to pay commission to the agent. This is too much to be taken away. If you pay a premium of $300 a month, two years of premium amount to $7,200. This is the money taken away from you to pay the agent.
Can you tell me what are the features for these insurance policies?
1) Limited pyament whole life insurance
2) Regular prenium investment-linked policies
3) Anticipated Endowment Insurance
REPLY
I will only give a brief explanation here. Please search Google for a more detailed explanation.
A limited payment whole life policy requires you to pay premium for a certain number of years and be insured for the whole of life. If you pay premium for a shorter period, the annual premium is higher.
A regular premium investment linked policy requires you to pay a regular premium over many years. The premium is invested in an investment fund. You will get the value of the invested units.
An anticipated endowment policy pays the maturity benefit in installments during the term. For example, if you insure for 50,000 over 20 years under an anticipated endowment policy, the $50,000 is paid to you in installments over the 20 years. The annual premium for an anticipated endowment policy is much higher than an ordinary endowment policy.
A life insurance policy may take away as much as two years of your premium to pay commission to the agent. This is too much to be taken away. If you pay a premium of $300 a month, two years of premium amount to $7,200. This is the money taken away from you to pay the agent.
I advise people not to buy all of these types of insurance policies, including critical illness policy, which pays high commission. It is all right to buy term insurance policy (where the premium is low) or a single premium policy, where the commisison is less than 3%.
All the best.
All the best.
Health care realities
Article in New York Times
Quote: ... private markets for health insurance, left to their own devices, work very badly: insurers deny as many claims as possible, and they also try to avoid covering people who are likely to need care. Horror stories are legion: the insurance company that refused to pay for urgently needed cancer surgery because of questions about the patient’s acne treatment; the healthy young woman denied coverage because she briefly saw a psychologist after breaking up with her boyfriend.
Quote: ... private markets for health insurance, left to their own devices, work very badly: insurers deny as many claims as possible, and they also try to avoid covering people who are likely to need care. Horror stories are legion: the insurance company that refused to pay for urgently needed cancer surgery because of questions about the patient’s acne treatment; the healthy young woman denied coverage because she briefly saw a psychologist after breaking up with her boyfriend.
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