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Tuesday, October 28, 2008

Regulator should disallow the sale of bad products

The CEO of a large government owned organisation told me,

"Kin Lian, you are opening a pandora's box. By speaking for the investors who were misled into buying the structured products, you allow other sophisticated investors to claim that they were also misled and to claim compensation. How can you differentiate between the two group?"

I showed this blog to him on my notebook computer: http://tankinlian.blogspot.com/2008/10/nature-and-risk-of-structured-product.html

After reading it, he changed his mind. He did not realise that the product could be so toxic and was surprised that it was allowed to be sold. Nobody would have bought the product, if it was properly described to them.

I showed to him another potential time bomb, concerning the leveraged dual currency investment:
http://tankinlian.blogspot.com/2008/10/leveraged-dual-currency-investments.html

He was again surprised. He wanted to check if his wife also invested in these dual currency investment. It is so easy for the unsavvy to be fooled.

He suggested to me on how the message of these bad products could be disseminated more widely to inform the investors. I replied that, by naming the products, I stand the risk of being sued by the creators of these products. In my view, it is the job of the regulator to ensure that bad products cannot be sold.

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