Credit Linked Securities - Q&A

1) What is the likelihood that investors can salvage some value from the Minibonds or High Notes?

In my opinion, if the unwinding of the invesment structure is done properly, and the administrator seek the best possible value for the assets, there is the possibility of some salvage value. I cannot imagine that all the investments have no value now. I hope that the regulator will ensure that these unwinding is carried out properly and the interest of the investors are protected.

2) Should the distributors/financial advisers of these products, which include a number of banks and brokerage firms, be held accountable since Lehman has gone bankrupt? Can the investors of these structured products seek compensation from the distributors?

Section 27 of the Financial Advisers Act require the advisers to make appropriate recommendation to the client. They will fail in their duty to recommend a high risk product to an investor who is risk adverse. If the adviser is held to be negligent, the adviser is required to compensate the investor for the loss.

3) What is your advice to investors of Minibonds and DBS High Notes?

Prepare a statement about the advice that you have received from the adviser, even if it is a verbal advice. Look for written evidence, if available. Get together with other investors in similar situation. Lodge a complaint with the financial institution that sold the product to you. Be ready to take it to FiDREC (www.fidrec.org.sg) or the MAS.

4) Any retail products in the market which, in your opinion, are at risk and can go down like the Minibonds and High Notes?

There are several other credit linked notes, similar to Minibonds. They have dropped in value already. An investor fold me that the Pinnacle Notes have depreciated by 65%.