Speech at Speaker's Corner, 29 Nov 2008

Speaker’s Corner – 29 November 2008

Speech by Tan Kin Lian

1. Investors should see their Member of Parliament
I suggest that you should see your Member of Parliament, together with other investors living in your area. If you aleady saw your MP before, you can see the MP again. This time, ask the MP to do the "right thing" as the leader that represents you. You can ask your MP to ask MAS:

1. What is the outcome of petition #1 which ask MAS to investigate if there were any wrong doings by the financial institutions that created and marketed these credit linked notes? Did these financial institutions breach the Securities and Futures Act and the Financial Advisers Act?
2. How many investors had their cases resolved by the financial institutions? How many cases were rejected by the financial institutions or have made offers that were rejected by the investors? How many cases are still "waiting for decision"? How long does it take for the financial institutions to make their decision?

3. How many complaints have been lodged with FIDREC. How many cases have been decided by FIDREC? How many are still pending? How long does it take for FIDREC to handle these complaints?

It is the duty of the MP to ask these questions on your behalf. Your MP can also raise them in Parliament.

2. Material facts should be disclosed in Prospectus
Investors have been told that they the prospectus contained a warning ‘you could lose all or a substantial part of your investment’ in bold print, on the page 1 or 2”. But what if the prospectus did not disclose material facts?

The New Paper’s Doctor Money wrote on 4 November 2008:

“A feature common to ALL linked notes is that investors never see the charges. They include:
> costs embedded in the initial pricing;
> counter-party returns in the product’s risk/return structure;
> commissions from buying and selling the options, swaps and underlying bonds;
> market-making and surrender fees; and
> annual management fees, including trailer fees kicked back to distributors.

They are deducted directly from the yield. Investors are likely to attribute the low return to market conditions rather than unseen costs.

Most importantly, unit trusts and investment-linked products (ILPs) routinely publish their charges. Linked notes never do.”

You can ask a lawyer whether the failures to disclose the above amounts to a breach of section 243 (1)(a) of the Securities & Futures Act. This section reads, “A prospectus for an offer of securities shall contain all the information that investors and their professional advisers would reasonably require to make an informed assessment of the matters specified in subsection (3).

Doctor Money wrote, “The question of the day is: ‘Should non-disclosure of embedded charges invalidate linked-note sales contracts and require a refund from issuers and distributors?’”

3. Ask for information in writing
The investors had approached the relationship manager who sold the notes to them. The RM was not able to give them a satisfactory answer. These investors then approached me for the answer.

I am not able to give you the answer. I do not have the answers, as there are many series and each series is different from the other series.

You should send the questions in writing (by letter or e-mail) and ask the relationship manager to give you the reply in writing. If you do not get a satisfactory reply, you should lodge a written complaint with MAS. If the RM does not know, it is the RM’s duty to get from the product issuer.

As an investor, you have the right to get relevant information on the product that you were sold. You are also entitled to be informed by the trustee or arranger, whenever they are significant changes that affect your product.

Act to safeguard your interest. Do not accept slipshod answers. Lodge your complaint.

4. Experience with FIDREC
If you have gone through FIDREC, please send the outcome to me, so that your experience can be shared with other investors.

Although you are covered under a confidentiality agreement, it should be all right to give general information – did you accept the adjudication, how many interviews did you attend, how long did it take you to present your case, how long does FIDREC take to give an answer.

This information will be helpful to other investors who are waiting for FIDREC adjudication.

I have asked the media to find out from FIDREC and give an update of the number of cases cleared through FIDREC and the summary of the outcome. I believe that this information is necessary for the public to know.

So far, the replies given were discouraging. Many complaints have been lodged to FIDREC. It takes a long time to settle a case.

5. Mental health concerns during difficult times
I wish to read to you a letter sent by an investor, with the initial FO:

Dear Mr. Tan,
First of all, thank you for all the help and information that you provided in your blog and in Hong Lim Park.

With the recent saga over the structured products and mini-bonds, most of the affected investors are going through emotional stress as well as financial stress.

Sad to say, I am also exposed to one of the products and have to go through emotional “struggle” everyday.

On one side of my mind, I have to stay alert to handle the daily routine, the other side worrying on what will be the outcome of my hard-earned money …

I believe that all investors are affected will be going through the followings : before taking every steps, during the process and while waiting for more info, you have to go through the stressful grinding of you brain (and heart) again and again.

> Complaining to the FIs …..
> Waiting for reply ….
> Going to FiDrec ….
> Waiting for more info from the news ….
> Will I get back my hard-earned money … how much … when …

It is like, going forward, but dragging your feet in a muddy field.
It is like, when you are taking a break, you mind is still spinning.
It is like, when your child gives you a smile, you have to put in extra effort to move your facial muscles to reply his greeting.
It is like, you want to shut down the computer, but the hard disk refuses to stop and keeps spinning.
It is like, you want to sleep, but you are worried about the outcomes.
It is like, you want to sleep, but you are also worried about other investment on hand that may have “toxic ingredients” in them.

BUT don’t know how to check, don’t know whether you should believe you RMs or insurance agents (or friends that you have bought from). Not saying that they are lying but they may not have the knowledge to “detect” the “toxic ingredients”

This list will go on and on and on and on … …

My wife and I are so stressed that we have to seek medical help so that on top of our busy daily routine, we will not neglect our toddler son and of course our health.

This is in fact the main message I would like to get across to all the distressed and worried ones out there. While fighting for what we believe is right, we still have to take good care of ourselves and our loved ones.

FO

6. Class action
The various groups are still talking to several lawyers to find out about their approach towards a class action. They are still not clear about the estimated legal fees and the chance of success.

I am now talking to a few senior lawyers to see if there are any misrepresentations in the prospectus, pricing statements, sales brochures and advertisements.

If necessary, we will arrange for a Queens Council in the UK to give a written opinion. We will find out the cost and how to finance it.

7. Special meeting for next Saturday, 6 December, 5 p.m.
This will be a special day to commemorate the second anniversary of The Online Citizen. I will be speaking at this event. I shall be talking on a matter that is relevant to the investors of the credit linked notes.

If you are free, do come to this special event and give your support.

Tan Kin Lian