1 August 2009
A group of mainlanders who said they had lost up to HK$500 million in accumulator investments complained to the Hong Kong banking regulator yesterday about banks in the city allegedly misleading them.
"We were misled by Hong Kong banks into purchasing stock accumulators. We were not warned about the risk of the products," the convenor of the Alliance of Hong Kong Private Banking Victims' - who said he preferred to be known as Jacky Jin Liang - said. With legislator Chan Kam-lam, Mr Jin and six other mainlanders met Hong Kong Monetary Authority executive director Raymond Li Ling-cheung yesterday.
Mr Jin said the alliance's 12 members bought the high-risk accumulator stock derivatives from five banks - HSBC, Hang Seng Bank, Citibank, DBS Bank and ABN Amro Private Banking. They had suffered losses of between HK$400 million and HK$500 million.
He said some were told that the products were "shares with discounted prices" rather than high-risk products. "And some of us believed the stock market would plunge but [the banks] still asked us to buy accumulators that led to severe losses."
Mr Chan said the authority had promised to investigate the alliance's complaint. The lawmaker said the HKMA promised to look into the cases in the coming three months.
An accumulator is a term-limited contract that allows investors to buy shares or foreign currency regularly at a fixed price below the market price when the contract begins. If the value of shares or currency rise, they can make a substantial profit. If the value falls to below the purchase price, there is no limit to potential losses.
At least two of the group made police reports to the Commercial Crime Bureau yesterday.
One, lawyer James Lai Jian-ping, said ABN Amro Private Banking had sent a staff member to Beijing two years ago to ask him to open a Hong Kong account. He said he was then "cheated" 15 times into investing more than HK$100 million.
DBS Bank (HK) and ABN Amro Private Banking said they had stringent sales procedures conforming to regulatory requirements. The Hong Kong Association of Banks and Citibank said they did not have enough information to comment.
Separately, legislator Kam Nai-wai said 18 Lehman Brothers "professional" minibond investors also met Mr Li. They wanted to be covered by the latest repurchase agreement but were told they were not eligible. They would be asked if they wanted the authority to continue investigations into their cases.
Friday, July 31, 2009
The Asian Banker:SFC, HKMA and 16 banks reach agreement on Minibonds
31 July 2009
The Securities and Futures Commission (SFC), the Hong Kong Monetary Authority (HKMA) and 16 distributing banks (the Banks) (Note 1) have jointly announce that they have reached an agreement in relation to the repurchase of Lehman Brothers Minibonds from eligible customers (Note 2).
The Banks have agreed with the SFC and the HKMA without admission of liability that (Note 3):
each of the Banks will make an offer to repurchase from each eligible customer all outstanding Minibonds (Note 4) at a price equal to 60% of the nominal value of the original investment for customers below the age of 65 or at 70% of the nominal value for customers aged 65 or above as at 1 July 2009. Customers will be entitled to retain any coupon payments received to date;
once the underlying collateral is recovered and paid to the Banks, each of them will make a further payment of initially up to 10% (depending on recoveries) of the nominal value of the Minibonds to eligible customers below the age of 65 and, if recoveries exceed 70%, the Banks will pay the entire excess amount to eligible customers who have accepted the repurchase offer (Notes 5 and 6);
each Bank will make available an amount equivalent to the amount of commission income received by it as a distributor of the outstanding Minibonds to the trustee of the Minibonds to assist in the recovery of the underlying collateral for each outstanding series of Minibonds;
each of the Banks will immediately implement special enhanced complaints handling procedures to resolve, in a fair and reasonable manner, all complaints in relation to the sale and distribution of other structured products (Note 7); and
to demonstrate their commitment in serving the investing public with the highest standards of conduct, each of the Banks: (i) will engage an independent reviewer, to be approved by the SFC and the HKMA, to review its systems and processes relating to the sale of structured products, to report to the SFC and the HKMA and will commit to the implementation of all recommendations by the independent reviewer; and (ii) will engage a qualified third party, as approved by the SFC and the HKMA, to review and enhance complaints handling procedures, and will commit to the implementation of all recommendations by such third party.
People who have previously reached settlement with the Banks in relation to Minibonds will not qualify for the repurchase offer. However, the Banks have undertaken to the HKMA to make ex gratia payments to those customers that have already entered into settlements with the Banks and who would have been eligible to receive the repurchase offer where those customers have received settlement amounts less than they would have received under this agreement. The intention is to bring those customers in line with eligible customers under this agreement.
In consideration of the agreement, the SFC will discontinue its investigations into the sale and distribution of Minibonds by the Banks. The HKMA has also informed the Banks that as the agreement contains detailed arrangements for the settlement of claims and the implementation of robust systems for selling unlisted structured products and dealing with related customer complaints in future, it is not its intention to take any enforcement action against the Banks in relation to Minibond cases that involve eligible customers who accept the offer.
The SFC considers that this agreement meets the SFC's criteria for resolution under section 201 of the Securities and Futures Ordinance for the following reasons:
The repurchase scheme should ensure that eligible customers who accept the repurchase offer will, subject to the recovery and distribution of the underlying collateral, receive a total amount that is equal to or greater than what they would otherwise recover if they were simply paid the current market value of the collateral.
The agreement takes into account that the recoverable value of the collateral is not certain. Even if the recoverable value of the collateral is below the values estimated by experts engaged by the Hong Kong Association of Banks in late 2008, the proposal will still deliver a return for the eligible customers that is equal to or exceeds 60% of their investment (or 70% for customers aged 65 or above).
The agreement includes a commitment by the Banks, as noteholders, to take reasonable steps to expedite the return of the collateral. It is important that any claim on the collateral that might reduce its recoverable value is negotiated robustly.
The agreement represents an opportunity to resolve outstanding investigations involving 16 banks in a way that will bring benefits to nearly all holders of outstanding Minibonds.
The agreement includes special measures in which the Banks will investigate and resolve in a fair and reasonable manner all complaints involving the sale and distribution of other structured products.
The agreement also remediates the Banks' systems and processes to meet the highest standards that will provide enhanced protection to the investing public in the future and give the investing public an assurance that the parties are determined to ensure these events are not repeated.
The SFC and the HKMA believe that the repurchase offer by the Banks is a reasonable one and is in the public interest.
"Strong markets, like Hong Kong's, need strong regulations. This agreement will provide substantial benefits for the vast majority of customers holding Minibonds that would not otherwise be received by them and, given the number of Banks and customers involved, the agreement is a watershed in the regulation of financial services in Hong Kong," said the SFC's Chief Executive Officer, Mr Martin Wheatley.
"Specifically, the agreement paves the way for customers who hold Minibonds to receive a substantial return of their capital. Secondly, the financial support of the Banks, using the commission income received in the sale of Minibonds, will expedite the return of the underlying collateral to Hong Kong Minibond holders. This aligns the interests of the Banks and customers holding Minibonds. Thirdly the agreement provides the framework for the Banks to develop higher standards of practice in the future and to resolve complaints in relation to other structured products. For these reasons, the SFC firmly believes it is an appropriate resolution of the Minibond issue with these banks," remarked Mr Wheatley.
Mr Y K Choi, Deputy Chief Executive of the HKMA, said: "The HKMA welcomes and supports the repurchase scheme and considers it to be practical, reasonable and in the interests of the great majority of Minibond investors. The HKMA encourages eligible customers to consider the repurchase offer by the Banks."
Dr The Hon Sir David Li Kwok Po, Chairman and Chief Executive of The Bank of East Asia, Ltd, said on behalf of the Banks: "The Banks are pleased to have reached this agreement with the SFC and the HKMA which we believe will benefit Hong Kong as an international financial centre. It evidences our joint effort to assist the Minibond investors in Hong Kong who have been impacted by the sudden collapse of the Lehman Brothers Group, and to reinforce public confidence in Hong Kong’s banking, financial and regulatory systems. This agreement demonstrates our unwavering commitment to the good of Hong Kong and the welfare of our customers. We will continue to work with the SFC and the HKMA to maximise the confidence of our customers in Hong Kong’s banks, and to ensure that the standards maintained by Hong Kong’s banks will be in line with international best practice."
The SFC acknowledges the substantial assistance of the HKMA in the investigation of these cases.
The Securities and Futures Commission (SFC), the Hong Kong Monetary Authority (HKMA) and 16 distributing banks (the Banks) (Note 1) have jointly announce that they have reached an agreement in relation to the repurchase of Lehman Brothers Minibonds from eligible customers (Note 2).
The Banks have agreed with the SFC and the HKMA without admission of liability that (Note 3):
each of the Banks will make an offer to repurchase from each eligible customer all outstanding Minibonds (Note 4) at a price equal to 60% of the nominal value of the original investment for customers below the age of 65 or at 70% of the nominal value for customers aged 65 or above as at 1 July 2009. Customers will be entitled to retain any coupon payments received to date;
once the underlying collateral is recovered and paid to the Banks, each of them will make a further payment of initially up to 10% (depending on recoveries) of the nominal value of the Minibonds to eligible customers below the age of 65 and, if recoveries exceed 70%, the Banks will pay the entire excess amount to eligible customers who have accepted the repurchase offer (Notes 5 and 6);
each Bank will make available an amount equivalent to the amount of commission income received by it as a distributor of the outstanding Minibonds to the trustee of the Minibonds to assist in the recovery of the underlying collateral for each outstanding series of Minibonds;
each of the Banks will immediately implement special enhanced complaints handling procedures to resolve, in a fair and reasonable manner, all complaints in relation to the sale and distribution of other structured products (Note 7); and
to demonstrate their commitment in serving the investing public with the highest standards of conduct, each of the Banks: (i) will engage an independent reviewer, to be approved by the SFC and the HKMA, to review its systems and processes relating to the sale of structured products, to report to the SFC and the HKMA and will commit to the implementation of all recommendations by the independent reviewer; and (ii) will engage a qualified third party, as approved by the SFC and the HKMA, to review and enhance complaints handling procedures, and will commit to the implementation of all recommendations by such third party.
People who have previously reached settlement with the Banks in relation to Minibonds will not qualify for the repurchase offer. However, the Banks have undertaken to the HKMA to make ex gratia payments to those customers that have already entered into settlements with the Banks and who would have been eligible to receive the repurchase offer where those customers have received settlement amounts less than they would have received under this agreement. The intention is to bring those customers in line with eligible customers under this agreement.
In consideration of the agreement, the SFC will discontinue its investigations into the sale and distribution of Minibonds by the Banks. The HKMA has also informed the Banks that as the agreement contains detailed arrangements for the settlement of claims and the implementation of robust systems for selling unlisted structured products and dealing with related customer complaints in future, it is not its intention to take any enforcement action against the Banks in relation to Minibond cases that involve eligible customers who accept the offer.
The SFC considers that this agreement meets the SFC's criteria for resolution under section 201 of the Securities and Futures Ordinance for the following reasons:
The repurchase scheme should ensure that eligible customers who accept the repurchase offer will, subject to the recovery and distribution of the underlying collateral, receive a total amount that is equal to or greater than what they would otherwise recover if they were simply paid the current market value of the collateral.
The agreement takes into account that the recoverable value of the collateral is not certain. Even if the recoverable value of the collateral is below the values estimated by experts engaged by the Hong Kong Association of Banks in late 2008, the proposal will still deliver a return for the eligible customers that is equal to or exceeds 60% of their investment (or 70% for customers aged 65 or above).
The agreement includes a commitment by the Banks, as noteholders, to take reasonable steps to expedite the return of the collateral. It is important that any claim on the collateral that might reduce its recoverable value is negotiated robustly.
The agreement represents an opportunity to resolve outstanding investigations involving 16 banks in a way that will bring benefits to nearly all holders of outstanding Minibonds.
The agreement includes special measures in which the Banks will investigate and resolve in a fair and reasonable manner all complaints involving the sale and distribution of other structured products.
The agreement also remediates the Banks' systems and processes to meet the highest standards that will provide enhanced protection to the investing public in the future and give the investing public an assurance that the parties are determined to ensure these events are not repeated.
The SFC and the HKMA believe that the repurchase offer by the Banks is a reasonable one and is in the public interest.
"Strong markets, like Hong Kong's, need strong regulations. This agreement will provide substantial benefits for the vast majority of customers holding Minibonds that would not otherwise be received by them and, given the number of Banks and customers involved, the agreement is a watershed in the regulation of financial services in Hong Kong," said the SFC's Chief Executive Officer, Mr Martin Wheatley.
"Specifically, the agreement paves the way for customers who hold Minibonds to receive a substantial return of their capital. Secondly, the financial support of the Banks, using the commission income received in the sale of Minibonds, will expedite the return of the underlying collateral to Hong Kong Minibond holders. This aligns the interests of the Banks and customers holding Minibonds. Thirdly the agreement provides the framework for the Banks to develop higher standards of practice in the future and to resolve complaints in relation to other structured products. For these reasons, the SFC firmly believes it is an appropriate resolution of the Minibond issue with these banks," remarked Mr Wheatley.
Mr Y K Choi, Deputy Chief Executive of the HKMA, said: "The HKMA welcomes and supports the repurchase scheme and considers it to be practical, reasonable and in the interests of the great majority of Minibond investors. The HKMA encourages eligible customers to consider the repurchase offer by the Banks."
Dr The Hon Sir David Li Kwok Po, Chairman and Chief Executive of The Bank of East Asia, Ltd, said on behalf of the Banks: "The Banks are pleased to have reached this agreement with the SFC and the HKMA which we believe will benefit Hong Kong as an international financial centre. It evidences our joint effort to assist the Minibond investors in Hong Kong who have been impacted by the sudden collapse of the Lehman Brothers Group, and to reinforce public confidence in Hong Kong’s banking, financial and regulatory systems. This agreement demonstrates our unwavering commitment to the good of Hong Kong and the welfare of our customers. We will continue to work with the SFC and the HKMA to maximise the confidence of our customers in Hong Kong’s banks, and to ensure that the standards maintained by Hong Kong’s banks will be in line with international best practice."
The SFC acknowledges the substantial assistance of the HKMA in the investigation of these cases.
FISCA Website
First posted on 26 July 2009
I wish to introduce you to the FISCA website.
It will be officially launched in 1 month's time through a media conference. Prior to the official launch, we welcome visitors and feedback. We are also able to take membership at an annual fee of $36 per year.
I invite you to be member of FISCA. At this time, we are providing information free to all vistors. So, as a member you are not getting anything extra benefit, except that it is an opportunity to show your support for this effort to raise the financial awareness, literacy and competency of consumers in Singapore.
At a later date, members will be entitled to discounts in participating in the educational and other activities of FISCA.
Do join now, to show your support and encouragement for the small handful of volunteers who are spending time to give a start to FISCA. We welcome more volunteers to come forward.
I wish to introduce you to the FISCA website.
It will be officially launched in 1 month's time through a media conference. Prior to the official launch, we welcome visitors and feedback. We are also able to take membership at an annual fee of $36 per year.
I invite you to be member of FISCA. At this time, we are providing information free to all vistors. So, as a member you are not getting anything extra benefit, except that it is an opportunity to show your support for this effort to raise the financial awareness, literacy and competency of consumers in Singapore.
At a later date, members will be entitled to discounts in participating in the educational and other activities of FISCA.
Do join now, to show your support and encouragement for the small handful of volunteers who are spending time to give a start to FISCA. We welcome more volunteers to come forward.
NYT: In search of competent (and honest) advisers
Read this article in New York Times. It is relevant to Singapore.
Great Eastern Life shows the way
Great Eastern Life has decided to give a full refund to purchasers of its GreatLink Choice policies. The refund is for the full invested sum, less any payments received by the policyholders. The total loss from the buy back is estimated to be $250 million.
Great Link Choice is a structured product that guaranteed against the failure of a certain number of collaterialised debt obligations (CDO). Due to the financial crisis, several CDOs have defaulted and the value of the structured product (GLC) had dropped considerably.
Great Eastern Life probably took this decision to buy back the product, following complaints by policyholders that they were badly or wrongly advised by the insurance advisers.
I congratulate Great Eastern Life and its parent company, OCBC Bank, for taking this bold decision. This will give relief to 18,000 the policyholders, who must have agonised over the loss of their savings during the past year.
On hearing the news yesterday, I wondered whether the loss would be borne by the policyholders in general (out of the surplus used to pay their bonuses) or by the shareholders. From the Straits Times report, it appears that the loss will be borne by the shareholders, including the parent company. This is a fair and correct approach, and I congratulate Great Eastern Life and OCBC for this decision as well.
I hope that Great Eastern Life will enhance its reputation by offering life insurance products (for savings and protection) that give good value to consumers, while making a reasonable profit for its shareholders. This require the products to be kept simple, described transparently and for the commission, marketing and other expenses to be kept at a modest level.
Being the oldest local life insurance company with 100 years of history, Great Easter Life can set a lead in this new direction to serve the people of Singapore.
I hope that this decision by Great Eastern Life will encourage the banks and stock-broking firms in Singapore, who have sold similar products to their customers, including the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacle Notes and the Merill Lynch Jubilee Notes, to make a similar buy back offer to their customers who were badly or wrongly advised on these structured products.
Even if the financial institutions do not adopt the buy back arrangement similar to Great Eastern Life, a settlement similar to the one adopted in Hong Kong will be appreciated by the investors of these credit linked notes in Singapore.
I hope that the Monetary Authority of Singapore will encourage these financial institutions to consider such a settlement.
Tan Kin Lian
Great Link Choice is a structured product that guaranteed against the failure of a certain number of collaterialised debt obligations (CDO). Due to the financial crisis, several CDOs have defaulted and the value of the structured product (GLC) had dropped considerably.
Great Eastern Life probably took this decision to buy back the product, following complaints by policyholders that they were badly or wrongly advised by the insurance advisers.
I congratulate Great Eastern Life and its parent company, OCBC Bank, for taking this bold decision. This will give relief to 18,000 the policyholders, who must have agonised over the loss of their savings during the past year.
On hearing the news yesterday, I wondered whether the loss would be borne by the policyholders in general (out of the surplus used to pay their bonuses) or by the shareholders. From the Straits Times report, it appears that the loss will be borne by the shareholders, including the parent company. This is a fair and correct approach, and I congratulate Great Eastern Life and OCBC for this decision as well.
I hope that Great Eastern Life will enhance its reputation by offering life insurance products (for savings and protection) that give good value to consumers, while making a reasonable profit for its shareholders. This require the products to be kept simple, described transparently and for the commission, marketing and other expenses to be kept at a modest level.
Being the oldest local life insurance company with 100 years of history, Great Easter Life can set a lead in this new direction to serve the people of Singapore.
I hope that this decision by Great Eastern Life will encourage the banks and stock-broking firms in Singapore, who have sold similar products to their customers, including the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacle Notes and the Merill Lynch Jubilee Notes, to make a similar buy back offer to their customers who were badly or wrongly advised on these structured products.
Even if the financial institutions do not adopt the buy back arrangement similar to Great Eastern Life, a settlement similar to the one adopted in Hong Kong will be appreciated by the investors of these credit linked notes in Singapore.
I hope that the Monetary Authority of Singapore will encourage these financial institutions to consider such a settlement.
Tan Kin Lian
SCMP:Investors set for legal fight over lost millions
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.
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.
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.
Permits required to appeal to the public for funds
Source: http://www.guidemesingapore.com/business/c656-singapore-non-profit-organization-part2.htm
For fund-raising appeal through door-to-door collection or soliciting in public places, the House to House and Street Collection Permit must be obtained from the Police. A licence is not needed if it is a private collection that is confined to friends or relatives, appeals made through the telephone or the media such as the Internet and newspapers, appeal letters by post or approaching individual donors.
For fund-raising appeal through door-to-door collection or soliciting in public places, the House to House and Street Collection Permit must be obtained from the Police. A licence is not needed if it is a private collection that is confined to friends or relatives, appeals made through the telephone or the media such as the Internet and newspapers, appeal letters by post or approaching individual donors.
Petition to PM on credit linked note (6)
Petition.
Update: 522 signatures as at 10 PM on 24 July. On the way to target of 1,000 signatures.
Update: 590 signatures as at midnight of 27 July. The pace of signatures has slowed down. Please pass the word around for more signatures to reach the target.
Update: 522 signatures as at 10 PM on 24 July. On the way to target of 1,000 signatures.
Update: 590 signatures as at midnight of 27 July. The pace of signatures has slowed down. Please pass the word around for more signatures to reach the target.
Thursday, July 30, 2009
Pelosi lashes out against insurance companies
WASHINGTON (Reuters) - U.S. House of Representatives Speaker Nancy Pelosi on Thursday ramped up her criticism of insurance companies, accusing them of unethical behavior and working to kill a plan to create a new government-run health plan.
"It's almost immoral what they are doing," Pelosi said to reporters, referring to insurance companies. "Of course they've been immoral all along in how they have treated the people that they insure," she said, adding, "They are the villains. They have been part of the problem in a major way. They are doing everything in their power to stop a public option from happening."
(Reporting by Richard Cowan, Editing by Sandra Maler)
"It's almost immoral what they are doing," Pelosi said to reporters, referring to insurance companies. "Of course they've been immoral all along in how they have treated the people that they insure," she said, adding, "They are the villains. They have been part of the problem in a major way. They are doing everything in their power to stop a public option from happening."
(Reporting by Richard Cowan, Editing by Sandra Maler)
Promote the use of car sharing
Car sharing can give you the same convenience of private use of a car, but at a fraction of the cost. Read how it works here.
No parking space in HDB estates
Have you wondered why HDB estates are congested with cars, and it is difficult to find a parking space when you visit someone in HDB during the day? Find the answer here.
Online Donation towards Gathering on 22 August
If you wish to meet an online donation towards the expenses of the Gathering of 22 August, please make an internet banking or fund transfer to this account:
POSB Saving 508-01812-6
For internet banking, please give the reference "22 AUG". For funds transfer, please send an e-mail to kinlian@gmail.com giving details of your payment.
POSB Saving 508-01812-6
For internet banking, please give the reference "22 AUG". For funds transfer, please send an e-mail to kinlian@gmail.com giving details of your payment.
Waiting for the stockmarket to bottom
A few months ago, when the ST index was around 1,500, some people commented that they will buy when it reached 1,200. That was their target for the stockmarket to bottom out.
But, it did not reach that level. Instead, the ST index had recovered 1,100 points (more than 70%) over the past few months. Those who waited for the stockmarket to reach 1,200 missed the boat.
Lesson 1: Do not be greedy. If you find the stocks to be of good value, you should buy and keep for the long term.
I bought my shares when the stockmarket was around 2,500. I did not sell the shares when they lost nearly half of its value. I kept them for the long term. These shares have since recovered in value (nearly).
Lesson 2: Avoid trying to catch the right time to sell or buy. If you are not sure, keep the shares for the long term, provided that they are blue chip shares. Do not sell, when the share price is depressed due to liquidity or fear.
But, it did not reach that level. Instead, the ST index had recovered 1,100 points (more than 70%) over the past few months. Those who waited for the stockmarket to reach 1,200 missed the boat.
Lesson 1: Do not be greedy. If you find the stocks to be of good value, you should buy and keep for the long term.
I bought my shares when the stockmarket was around 2,500. I did not sell the shares when they lost nearly half of its value. I kept them for the long term. These shares have since recovered in value (nearly).
Lesson 2: Avoid trying to catch the right time to sell or buy. If you are not sure, keep the shares for the long term, provided that they are blue chip shares. Do not sell, when the share price is depressed due to liquidity or fear.
Wednesday, July 29, 2009
50% compensation for Minibond
Hi Mr. Tan
Thank you very much for helping the CLN victims. Your Blog has been my lifeline for the past few months. I have signed your petition to PM Lee.
I invested $X in Minibond. I have filed my case with FIDREC. Upon mediation, FI offerred 20%. I rejected and went for adjudication. FI then offered 35%. I submitted additional documents.
Later, the FIDREC case manager informed me that the FI offerred 50%, the amount I initially asked for. The final offer of 50% made me shocked, very angry and felt very bullied again. I wanted to go ahead with the adjudication. Can I ask for 100% compensation? Can I accept the compensation, as I already signed the Petition?
REPLY
It is all right for you to accept the compensation, although you signed the Petition. I suggest that you should ask for compensation of 50% and any balance on maturity (in case the matuirty sum exceeds 50%). Some of the Minibond actually has value more than 50%.
Lesson: It is quite bad for the financial institution to make it so difficult and stressful for the customer to get fair compensation.
Thank you very much for helping the CLN victims. Your Blog has been my lifeline for the past few months. I have signed your petition to PM Lee.
I invested $X in Minibond. I have filed my case with FIDREC. Upon mediation, FI offerred 20%. I rejected and went for adjudication. FI then offered 35%. I submitted additional documents.
Later, the FIDREC case manager informed me that the FI offerred 50%, the amount I initially asked for. The final offer of 50% made me shocked, very angry and felt very bullied again. I wanted to go ahead with the adjudication. Can I ask for 100% compensation? Can I accept the compensation, as I already signed the Petition?
REPLY
It is all right for you to accept the compensation, although you signed the Petition. I suggest that you should ask for compensation of 50% and any balance on maturity (in case the matuirty sum exceeds 50%). Some of the Minibond actually has value more than 50%.
Lesson: It is quite bad for the financial institution to make it so difficult and stressful for the customer to get fair compensation.
Company Y not wanting to pay out my insurance claims
Dear Mr. Tan,
I was diagnosed and operated upon for my brain cancer. The cancer is classified as terminal. With the doctor's recommendations & letters, CPF paid all my savings into my bank account. Company X initially refused to allow me to claim my DPS but after I send them the CPF statement - they paid me as well.
I did a similar claim with Company Y for 3 policies. For more than a year, they have been giving excuses after excuses in not wanting to pay me by saying the requirement for us to pay a claim for Total & Permanent Disability is:-
"totally & permanently disability so that life assured cannot engage in any occupation, business or activity which pays any income"
OR
"suffers total and irrecoverable loss of effective use of
- both eyes; or
- any 2 limbs at or above the wrist or ankle;
- or one eye and any one limb at or above the wrist or ankle"
Company Y is adamant in not wanting to pay me - I even got a letter from my last employer as to why they could not hire me back and they verbally told me they need more proof of further rejection letters. I had paid my insurance premiums monthly for the last 23 years without any default to date.
I hope you can take advise me on how best to approach Company Y.
REPLY
You can lodge a complaint with the Insurance Commissioner's Office in MAS. Show them evidence of payment by CPF and Company X. MAS will ask Company Y to justify their delay.
You can also make a complaint to Fidrec, www.fidrec.com.sg. As your claim exceed $100,000, you can select one or two policies that fall within this limit to lodge your complaint.
Lesson: Insurance companies usually make it difficult for the customer to claim under its permanent disability of critical illness cover, especially for large sums. This is why I recommend against insuring for large sums under critical illness. There is no point in paying so much premium and to face difficulty in making a claim.
I was diagnosed and operated upon for my brain cancer. The cancer is classified as terminal. With the doctor's recommendations & letters, CPF paid all my savings into my bank account. Company X initially refused to allow me to claim my DPS but after I send them the CPF statement - they paid me as well.
I did a similar claim with Company Y for 3 policies. For more than a year, they have been giving excuses after excuses in not wanting to pay me by saying the requirement for us to pay a claim for Total & Permanent Disability is:-
"totally & permanently disability so that life assured cannot engage in any occupation, business or activity which pays any income"
OR
"suffers total and irrecoverable loss of effective use of
- both eyes; or
- any 2 limbs at or above the wrist or ankle;
- or one eye and any one limb at or above the wrist or ankle"
Company Y is adamant in not wanting to pay me - I even got a letter from my last employer as to why they could not hire me back and they verbally told me they need more proof of further rejection letters. I had paid my insurance premiums monthly for the last 23 years without any default to date.
I hope you can take advise me on how best to approach Company Y.
REPLY
You can lodge a complaint with the Insurance Commissioner's Office in MAS. Show them evidence of payment by CPF and Company X. MAS will ask Company Y to justify their delay.
You can also make a complaint to Fidrec, www.fidrec.com.sg. As your claim exceed $100,000, you can select one or two policies that fall within this limit to lodge your complaint.
Lesson: Insurance companies usually make it difficult for the customer to claim under its permanent disability of critical illness cover, especially for large sums. This is why I recommend against insuring for large sums under critical illness. There is no point in paying so much premium and to face difficulty in making a claim.
Gathering on 22 August at Hong Lim Park (2)
The gathering of investors of the credit-linked notes will be held as follows:
Venue: Hong Lim Park
Date: Saturday 22 Aug 09
Time: 5 pm to 6.30 pm.
There will be signing of the Petition asking the help of the Prime Minister to get a settlement similar to Hong Kong for investors of the credit-linked notes. The online Petition has gathered 600 signatures. The physical signing is for investors who were not able to sign the online Petition.
There will be a donation box for investors to make a contribution towards the expenses of the Gathering. Any excess will be used towards an advertisement on the Petition (if there are sufficient money) or contributed to the newly formed Financial Services Consumer Association (FISCA). Any deficit will be underwritten by some well-wishers.
Venue: Hong Lim Park
Date: Saturday 22 Aug 09
Time: 5 pm to 6.30 pm.
There will be signing of the Petition asking the help of the Prime Minister to get a settlement similar to Hong Kong for investors of the credit-linked notes. The online Petition has gathered 600 signatures. The physical signing is for investors who were not able to sign the online Petition.
There will be a donation box for investors to make a contribution towards the expenses of the Gathering. Any excess will be used towards an advertisement on the Petition (if there are sufficient money) or contributed to the newly formed Financial Services Consumer Association (FISCA). Any deficit will be underwritten by some well-wishers.
Books and puzzles
I like to introduce you to my books and puzzles. They are good for children, adults and seniors. They develop logic, intelligence and exercise the mind. Have hours of fun and enjoyment.
More details are found here:
www.easyapps.sg/ishop
More details are found here:
www.easyapps.sg/ishop
Tuesday, July 28, 2009
The Standard:Bank wiped out my $260m
29 July 2009
An elderly woman who claims to have lost nearly HK$260 million on high-risk financial products is taking a Swiss- based investment bank to court.
Chan Wai-yee, 77, says UBS advisers talked her into buying an equity accumulator package just months before last year's market crunch.
The High Court writ filed by Chan comes less than a week after 16 Hong Kong banks agreed to buy back Lehman Brothers minibonds at 60-70 percent of their original value.
She claims she did not understand the documents she signed because they were in English, and no one from UBS informed her of the risks and nature of the investments.
The writ states that Chan was a client of Hang Seng Bank for four decades, and she opened a Prestige account there in January 2003. She was advised on investments by managers Wong Mei- lun and Shirley Cheng.
Chan says her nest egg was accumulated through hard work, and she had limited experience in stock investments. As she did not understand English, she relied on advice from Wong and Cheng.
She was only interested in low-risk investments because she wanted to preserve her capital, Chan says.
So she never went into any risky investments while her money was with Hang Seng Bank.
Then, during the market boom in mid-2007, Wong and Cheng left Hang Seng Bank to work for UBS.
Chan claims that Wong then approached her and invited her to move her assets to UBS.
She signed various documents from time to time to open an account at UBS, but never indicated to Wong, Cheng or any staff member at UBS that she was interested in changing her investment strategy.
In June 2007, Chan signed different documents, all in English, that included a client acknowledgement form, an "acceptance to be treated as a professional investor" and a "request for subscription of equity-linked notes and blocs."
Chan then transferred shares and cash from her Hang Seng account to UBS, totaling HK$260 million.
In September 2007, Chan says, Wong telephoned and persuaded her to buy a financial product known as an UBS OTC Equity Accumulator.
She claims to have been "induced" into 25 equity accumulator transactions between September 2007 and February 2008.
Last October, a total of nine equity accumulators had not been knocked out, meaning that the stock-price ceiling set in the contract with the bank had not been breached.
After taking losses of more than HK$200 million, she told UBS she wanted to terminate all investments.
As of July 23 this year, her UBS account balance was only HK$1.6 million.
Besides recovering the money, she is seeking interest, damages and costs.
An elderly woman who claims to have lost nearly HK$260 million on high-risk financial products is taking a Swiss- based investment bank to court.
Chan Wai-yee, 77, says UBS advisers talked her into buying an equity accumulator package just months before last year's market crunch.
The High Court writ filed by Chan comes less than a week after 16 Hong Kong banks agreed to buy back Lehman Brothers minibonds at 60-70 percent of their original value.
She claims she did not understand the documents she signed because they were in English, and no one from UBS informed her of the risks and nature of the investments.
The writ states that Chan was a client of Hang Seng Bank for four decades, and she opened a Prestige account there in January 2003. She was advised on investments by managers Wong Mei- lun and Shirley Cheng.
Chan says her nest egg was accumulated through hard work, and she had limited experience in stock investments. As she did not understand English, she relied on advice from Wong and Cheng.
She was only interested in low-risk investments because she wanted to preserve her capital, Chan says.
So she never went into any risky investments while her money was with Hang Seng Bank.
Then, during the market boom in mid-2007, Wong and Cheng left Hang Seng Bank to work for UBS.
Chan claims that Wong then approached her and invited her to move her assets to UBS.
She signed various documents from time to time to open an account at UBS, but never indicated to Wong, Cheng or any staff member at UBS that she was interested in changing her investment strategy.
In June 2007, Chan signed different documents, all in English, that included a client acknowledgement form, an "acceptance to be treated as a professional investor" and a "request for subscription of equity-linked notes and blocs."
Chan then transferred shares and cash from her Hang Seng account to UBS, totaling HK$260 million.
In September 2007, Chan says, Wong telephoned and persuaded her to buy a financial product known as an UBS OTC Equity Accumulator.
She claims to have been "induced" into 25 equity accumulator transactions between September 2007 and February 2008.
Last October, a total of nine equity accumulators had not been knocked out, meaning that the stock-price ceiling set in the contract with the bank had not been breached.
After taking losses of more than HK$200 million, she told UBS she wanted to terminate all investments.
As of July 23 this year, her UBS account balance was only HK$1.6 million.
Besides recovering the money, she is seeking interest, damages and costs.
NJ sues Merrill Lynch over $300 mln stock purchase
NEW YORK, July 28 (Reuters) - New Jersey sued Merrill Lynch for selling its pensions $300 million of preferred stock in January 2008 "based on misleading information" about the brokerage's finances, the state attorney general said on Tuesday.
Anne Milgram, the state attorney general, said in a statement that the lawsuit, filed in the Law Division of state Superior Court in Hudson County, also names Bank of America Corpas a defendant.
Bank of America acquired Merrill Lynch last year and is named as "a successor entity," Milgram said.
Anne Milgram, the state attorney general, said in a statement that the lawsuit, filed in the Law Division of state Superior Court in Hudson County, also names Bank of America Corp
Bank of America acquired Merrill Lynch last year and is named as "a successor entity," Milgram said.
Monday, July 27, 2009
For the benefit and welfare of the people
In his talk and the answers to questions from the floor, Dr. Boediono (Vice President Designate of Indonesia) said that decisions will be taken for the benefit and welfare of the people.
When asked about the policy on privatisation and the use of natural resources, he said that the key criteria is to improve efficiency and ensure that the outcome will be for the benefit of the ordinary people.
He also said that Indonesia has been transformed into a democratic country and that the recent general election has been completed peacefuly and fairly. The test of democracy is its ability to improve the lives of the people.
Indonesia has gone a long way in improving its governance structure to reflect the will of the people. Watch out for a printed copy of his talk, when it is reported in the mainstream newspapers.
When asked about the policy on privatisation and the use of natural resources, he said that the key criteria is to improve efficiency and ensure that the outcome will be for the benefit of the ordinary people.
He also said that Indonesia has been transformed into a democratic country and that the recent general election has been completed peacefuly and fairly. The test of democracy is its ability to improve the lives of the people.
Indonesia has gone a long way in improving its governance structure to reflect the will of the people. Watch out for a printed copy of his talk, when it is reported in the mainstream newspapers.
Honesty in Politics
I attended a talk given by Professor Dr. Boediono, Vice President Designate of Indonesia arranged by the Rajaratnam School of International Studies in Singapore.
One Singapore minister asked the question to Dr. Boediono, "What is your experience during the election campaign? How much of your success is due to hard politics and how much do to soft politics?" He used an Indonesian term to describe soft politics, which appealled to human emotions.
Dr. Boediono replied, "I do not know what is hard politics and what is soft politics. I only know what is correct politics, and that is being honest."
I like this answer. It confirms that politics does not have to be manipulating public opinion or the election process. It is possible to be honest and sincere and win over the trust of the people.
One Singapore minister asked the question to Dr. Boediono, "What is your experience during the election campaign? How much of your success is due to hard politics and how much do to soft politics?" He used an Indonesian term to describe soft politics, which appealled to human emotions.
Dr. Boediono replied, "I do not know what is hard politics and what is soft politics. I only know what is correct politics, and that is being honest."
I like this answer. It confirms that politics does not have to be manipulating public opinion or the election process. It is possible to be honest and sincere and win over the trust of the people.
What is the future for this country?
QUOTE:
If you, MAS people, the best educated and smartest people in Singapore, allowed such unfair things to continue, I won't cry for my money, but cry for your future. If the best educated, smartest people are not looking for justice, what is the future for this country?
GD
Read this letter.
If you, MAS people, the best educated and smartest people in Singapore, allowed such unfair things to continue, I won't cry for my money, but cry for your future. If the best educated, smartest people are not looking for justice, what is the future for this country?
GD
Read this letter.
Free market - success and failure
The free market works for certain products which are physical, transparent and easy to understand. It has produced better quality products at lower prices.
The free market has failed to work well for many services, such as financial, medical and legal services. The consumers require an expert to advise on these matters. If the experts are allowed to charge any fee and define their own standard, it is likely to lead to exploitation of consumers.
These services need to be regulated to protect the interest of consumers. It also needs a strong consumer association to help the consumers to understand and exercise their rights, and to ensure fair treatment of consumers.
In the past years, these professional services are regulated by the authority and self-regulated by the professional bodies.
The standards of regulation and self-regulation has dropped in recent years during the era of the free market. The authority believed that consumers can take care of themselves and choose the advisers who can serve them best. This view goes against empircal evidence. Many consumers are fleeced by some unscrupulous so-called experts.
The role of government is to govern. It cannot be delegated to the "free market". The government has to ensure honest and fair behaviour for the benefit of society. It has to set the example for businesses and the people to follow. It is time to re-think the role of the free market.
Tan Kin Lian
The free market has failed to work well for many services, such as financial, medical and legal services. The consumers require an expert to advise on these matters. If the experts are allowed to charge any fee and define their own standard, it is likely to lead to exploitation of consumers.
These services need to be regulated to protect the interest of consumers. It also needs a strong consumer association to help the consumers to understand and exercise their rights, and to ensure fair treatment of consumers.
In the past years, these professional services are regulated by the authority and self-regulated by the professional bodies.
The standards of regulation and self-regulation has dropped in recent years during the era of the free market. The authority believed that consumers can take care of themselves and choose the advisers who can serve them best. This view goes against empircal evidence. Many consumers are fleeced by some unscrupulous so-called experts.
The role of government is to govern. It cannot be delegated to the "free market". The government has to ensure honest and fair behaviour for the benefit of society. It has to set the example for businesses and the people to follow. It is time to re-think the role of the free market.
Tan Kin Lian
Reuters: Investors dump brokers to go it alone online
Article.
Quote: "I will never again trust anyone who is commission-driven to manage my portfolio," said Mallah. "If they're not making money off you, they have no use for you."
Quote: "I will never again trust anyone who is commission-driven to manage my portfolio," said Mallah. "If they're not making money off you, they have no use for you."
Lehman victims international/ planning for Sep. 15
Planning for the protests on the Lehman anniversary on Sep. 15 is progressing in Germany. We are actively discussing activities and locations in our forum here: http://lehmanschaden.19.forumer.com/viewtopic.php?t=2170 (all in German, sorry about that...)
We want to stage one or two larger events in Frankfurt (that's the banking center in Germany and that's where Lehman had their offices) and/or Düsseldorf (that's where Citibank Germany is headquartered, they sold 75% of all Lehman bonds to individual investors over here). Other cities may stage small events or vigils on that day, especially for people who cannot/will not travel. Many of the victims are elderly...
I would like to find out which other cities/countries are willing to co-ordinate a joint protest on Sep. 15. The aim is to maximize our joint press coverage and make clear that our fate is a global phenomenon and not just a local/regional aberration. The banks (and Lehman) screwed little people everywhere!!!
Please state which city/country you represent and how many people you could mobilize. Any city/country would do their own planning, we would just co-ordinate stuff like press releases and maybe some big banners.
Please forward this e-mail to anyone you know that represents Lehman victims in other places. As far as I know, we now have the following cities/countries on this distribution list:
- Hong Kong SAR
- Taiwan (?)
- Singapore
- Spain
- Switzerland
- UK
- Germany
I'm looking forward to hearing from you!
LS from Germany
Web: http://www.lehman-zertifikateschaden..biz
Forum: http://forum.lehman-zertifikateschaden.biz
We want to stage one or two larger events in Frankfurt (that's the banking center in Germany and that's where Lehman had their offices) and/or Düsseldorf (that's where Citibank Germany is headquartered, they sold 75% of all Lehman bonds to individual investors over here). Other cities may stage small events or vigils on that day, especially for people who cannot/will not travel. Many of the victims are elderly...
I would like to find out which other cities/countries are willing to co-ordinate a joint protest on Sep. 15. The aim is to maximize our joint press coverage and make clear that our fate is a global phenomenon and not just a local/regional aberration. The banks (and Lehman) screwed little people everywhere!!!
Please state which city/country you represent and how many people you could mobilize. Any city/country would do their own planning, we would just co-ordinate stuff like press releases and maybe some big banners.
Please forward this e-mail to anyone you know that represents Lehman victims in other places. As far as I know, we now have the following cities/countries on this distribution list:
- Hong Kong SAR
- Taiwan (?)
- Singapore
- Spain
- Switzerland
- UK
- Germany
I'm looking forward to hearing from you!
LS from Germany
Web: http://www.lehman-zertifikateschaden..biz
Forum: http://forum.lehman-zertifikateschaden.biz
The Standard:61pc of minibond investors undecided on offer
27 July 2009
Investors who bought Lehman Brothers minibonds appear to be softening their stance on the banks' repurchase scheme.
According to the preliminary results of a survey conducted by the Democratic Party at a meeting yesterday, 61 percent of 431 investors are now undecided on whether or not to accept the banks' scheme, while 27 percent plan to reject the offer and just 11 percent will accept it. Previously the investors were overwhelmingly against accepting the plan.
Some 29,000 investors _ more than 90 percent of Hong Kong minibond investors _ will be refunded about 70 percent of their original investments, financial regulators said last week.
``I will not pursue litigation as I don't want to get entangled with the bank,'' an investor surnamed Lee said at yesterday's meeting.
The political party estimated more than 1,200 minibond investors attended the two sessions it held.
Investors also criticized the Hong Kong Monetary Authority and the Securities and Futures Commission for not making clear the requirements for claiming their money back. ``It's confusing as an HKMA staffer told me on phone I am a professional investor if I've invested HK$8 million,'' an investor surnamed Yu said. ``However, another person from the HKMA said the next day that it depends on whether we have signed documents to describe ourselves as professional investors.''
On concern over the definition of ``professional investors,'' HKMA executive director Raymond Li Ling-cheung said on Saturday that investors with more than HK$8 million in investments will not be classified as ``professional'' as long as they have not signed any documents to say they are professional investors.
``I advised investors not to make their final decision in a hurry as they have 60 days to consider the offer after banks inform them in early August,'' said legislator Kam Nai-wai.
Meanwhile, a representative of a group of Lehman underlying equity- linked notes investors said they hope to meet Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung today and they will hold a meeting themselves on August 2, according to Sing Tao Daily, sister publication of The Standard.
A spokesman for the secretary said yesterday: ``Resources from the two regulators could focus on misselling complaints of other non-minibond structured products.''
Investors who bought Lehman Brothers minibonds appear to be softening their stance on the banks' repurchase scheme.
According to the preliminary results of a survey conducted by the Democratic Party at a meeting yesterday, 61 percent of 431 investors are now undecided on whether or not to accept the banks' scheme, while 27 percent plan to reject the offer and just 11 percent will accept it. Previously the investors were overwhelmingly against accepting the plan.
Some 29,000 investors _ more than 90 percent of Hong Kong minibond investors _ will be refunded about 70 percent of their original investments, financial regulators said last week.
``I will not pursue litigation as I don't want to get entangled with the bank,'' an investor surnamed Lee said at yesterday's meeting.
The political party estimated more than 1,200 minibond investors attended the two sessions it held.
Investors also criticized the Hong Kong Monetary Authority and the Securities and Futures Commission for not making clear the requirements for claiming their money back. ``It's confusing as an HKMA staffer told me on phone I am a professional investor if I've invested HK$8 million,'' an investor surnamed Yu said. ``However, another person from the HKMA said the next day that it depends on whether we have signed documents to describe ourselves as professional investors.''
On concern over the definition of ``professional investors,'' HKMA executive director Raymond Li Ling-cheung said on Saturday that investors with more than HK$8 million in investments will not be classified as ``professional'' as long as they have not signed any documents to say they are professional investors.
``I advised investors not to make their final decision in a hurry as they have 60 days to consider the offer after banks inform them in early August,'' said legislator Kam Nai-wai.
Meanwhile, a representative of a group of Lehman underlying equity- linked notes investors said they hope to meet Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung today and they will hold a meeting themselves on August 2, according to Sing Tao Daily, sister publication of The Standard.
A spokesman for the secretary said yesterday: ``Resources from the two regulators could focus on misselling complaints of other non-minibond structured products.''
Sunday, July 26, 2009
TODAY:We should follow HK's example ; Protect individuals, not just the banks
27 July 2009
WHILE the Lehman Minibonds affair is far from over, a final solution to the problem of the ill-fated notes linked to the now-failed American investment bank appears to be nearer in Hong Kong than in Singapore.
Last week, Hong Kong’s Securities and Futures Commission (SFC) announced BOC Hong Kong Holdings and 15 other financial institutions in the Special Administration Region had agreed to pay at least US$0.60 ($0.86) on the dollar to the nearly 30,000 people who invested in the notes.
The total compensation in Hong Kong, where some US$1.8 billion worth of the notes were sold, will amount to about HK$6.3 billion ($1.17 billion). The final compensation will however depend on the amount of collateral the banks can recover from Lehman’s liquidators. And according to Hong Kong’s Financial Secretary John Tsang, investors could get back 70 per cent or more of their original investments.
By comparison, compensation to the nearly 10,000 people here who invested some $520 million in structured notes like the Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes amounted to far less — just over $105 million. In fact, the compensation ranged from a mere 1 per cent of the amount sold as in the case of stockbrokers UOB Kay Hian to the 67 per cent, or some $58 million paid out by Hong Leong Finance to those who complained that they had been misled into buying the notes.
Despite acknowledgment by the Monetary Authority of Singapore (MAS) that there had been at least some mis-selling by the institutions concerned, those investors who have not been offered any compensation have been told to either continue with the three-step dispute resolution process recommended by the MAS, or take legal action on their own, a step a number have since taken. Its findings on the matter were disappointing for many, to say the least.
Worse still, the MAS has also come out to say that the findings of its recent report on the matter, under which some 10 financial institutions were punished, did not automatically mean the institutions are legally liable despite the tacit acknowledgment of mis-selling. The 10 institutions concerned, which included Singapore’s largest bank, DBS Bank, and Hong Leong Finance, have been barred from selling complex financial instruments for periods of up to two years.
It appears the authorities here were more concerned about protecting the system rather than the individual.
The 10 institutions were found guilty of at least one of three failings — misclassifying the rather complex notes they were selling as lower-risk products than they really were; not providing accurate and complete information about the structured notes to sales staff; and not ensuring that the sales teams were adequately trained to sell the notes.
Many felt the punishment meted out was merely a slap on the wrist.
While some investors, especially the elderly and the more ignorant, were able to secure full compensation, the authorities here appear to have relied more on moral suasion rather than have exerted any real pressure on a settlement.
So, why wasn’t the Hong Kong model followed? After all, it isn’t as if the institutions here do not have the capacity to have been more generous with their payouts.
For sure, not all the investors were as ignorant as they made out to be. Many were led by greed to buy the notes by the relatively-high returns they promised. Others did not even bother to assess the risks involved in buying these instruments.
But the authorities must also accept some blame in not adequately monitoring the institutions and the people who sold these highly complex and risky products, which even many bankers did not fully understand.
It is ironic that Hong Kong, one of the greatest bastions of free-wheeling and dealing, was able to wrest a better deal for the victims of the Lehman Minibonds than Singapore, which has a reputation for having a better regulated financial environment.
WHILE the Lehman Minibonds affair is far from over, a final solution to the problem of the ill-fated notes linked to the now-failed American investment bank appears to be nearer in Hong Kong than in Singapore.
Last week, Hong Kong’s Securities and Futures Commission (SFC) announced BOC Hong Kong Holdings and 15 other financial institutions in the Special Administration Region had agreed to pay at least US$0.60 ($0.86) on the dollar to the nearly 30,000 people who invested in the notes.
The total compensation in Hong Kong, where some US$1.8 billion worth of the notes were sold, will amount to about HK$6.3 billion ($1.17 billion). The final compensation will however depend on the amount of collateral the banks can recover from Lehman’s liquidators. And according to Hong Kong’s Financial Secretary John Tsang, investors could get back 70 per cent or more of their original investments.
By comparison, compensation to the nearly 10,000 people here who invested some $520 million in structured notes like the Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes amounted to far less — just over $105 million. In fact, the compensation ranged from a mere 1 per cent of the amount sold as in the case of stockbrokers UOB Kay Hian to the 67 per cent, or some $58 million paid out by Hong Leong Finance to those who complained that they had been misled into buying the notes.
Despite acknowledgment by the Monetary Authority of Singapore (MAS) that there had been at least some mis-selling by the institutions concerned, those investors who have not been offered any compensation have been told to either continue with the three-step dispute resolution process recommended by the MAS, or take legal action on their own, a step a number have since taken. Its findings on the matter were disappointing for many, to say the least.
Worse still, the MAS has also come out to say that the findings of its recent report on the matter, under which some 10 financial institutions were punished, did not automatically mean the institutions are legally liable despite the tacit acknowledgment of mis-selling. The 10 institutions concerned, which included Singapore’s largest bank, DBS Bank, and Hong Leong Finance, have been barred from selling complex financial instruments for periods of up to two years.
It appears the authorities here were more concerned about protecting the system rather than the individual.
The 10 institutions were found guilty of at least one of three failings — misclassifying the rather complex notes they were selling as lower-risk products than they really were; not providing accurate and complete information about the structured notes to sales staff; and not ensuring that the sales teams were adequately trained to sell the notes.
Many felt the punishment meted out was merely a slap on the wrist.
While some investors, especially the elderly and the more ignorant, were able to secure full compensation, the authorities here appear to have relied more on moral suasion rather than have exerted any real pressure on a settlement.
So, why wasn’t the Hong Kong model followed? After all, it isn’t as if the institutions here do not have the capacity to have been more generous with their payouts.
For sure, not all the investors were as ignorant as they made out to be. Many were led by greed to buy the notes by the relatively-high returns they promised. Others did not even bother to assess the risks involved in buying these instruments.
But the authorities must also accept some blame in not adequately monitoring the institutions and the people who sold these highly complex and risky products, which even many bankers did not fully understand.
It is ironic that Hong Kong, one of the greatest bastions of free-wheeling and dealing, was able to wrest a better deal for the victims of the Lehman Minibonds than Singapore, which has a reputation for having a better regulated financial environment.
Honesty and fairness
It is important for our society to be operated on the principles of honesty and fairness. The minibond crisis has raised many issues of deep concerns to me, and many other people in Singapore.
When I organised the Petition last September, it was very clear that the financial institutions had failed in their conduct as required under the Securities and Futures Act and the Financial Advisers Act. The Petition, signed by more than 1,000 people, asked the authority to carry out an investigation and take appropriate actions under these law.
After a protracted period, which left many investors in deep anguish, the investigation report was published. The punishment meted to the financial institutions was light. Many investors, who lost large sums of money, were not compensated. This raised serious doubts on the question of fairness and justice in our society. It seems that the ordinary people are at the mercy of the powerful people and institutions.
Hong Kong took a different approach. The authority exercised its power and influence to get the financial institutions to make compensation of 60% or more, to the investors. The amount that is being compensated is many times of the compensation in Singapore. The situation is similar, in respect of wrong doings by the financial institutions.
The Hong Kong settlement is scantily covered in our local media, although it is a matter of great importance, not only to the investors who are affected and their families, but to the other people who are not affected. It shows two different approaches taken by two states on a similar issue.
This raise another serious issue of honesty and transparency. Why is such an important issue being swept under the carpet and not reported in the mainstream media? People are not blind. They can read the news in the internet and the blog. They have ears and can listen to gossips in the coffee shops and elsewhere.
I hope that the authority will reflect on this matter and re-approach it on the principles of fairness and honesty. It concerns the future of our country, the people and our children.
Tan Kin Lian
When I organised the Petition last September, it was very clear that the financial institutions had failed in their conduct as required under the Securities and Futures Act and the Financial Advisers Act. The Petition, signed by more than 1,000 people, asked the authority to carry out an investigation and take appropriate actions under these law.
After a protracted period, which left many investors in deep anguish, the investigation report was published. The punishment meted to the financial institutions was light. Many investors, who lost large sums of money, were not compensated. This raised serious doubts on the question of fairness and justice in our society. It seems that the ordinary people are at the mercy of the powerful people and institutions.
Hong Kong took a different approach. The authority exercised its power and influence to get the financial institutions to make compensation of 60% or more, to the investors. The amount that is being compensated is many times of the compensation in Singapore. The situation is similar, in respect of wrong doings by the financial institutions.
The Hong Kong settlement is scantily covered in our local media, although it is a matter of great importance, not only to the investors who are affected and their families, but to the other people who are not affected. It shows two different approaches taken by two states on a similar issue.
This raise another serious issue of honesty and transparency. Why is such an important issue being swept under the carpet and not reported in the mainstream media? People are not blind. They can read the news in the internet and the blog. They have ears and can listen to gossips in the coffee shops and elsewhere.
I hope that the authority will reflect on this matter and re-approach it on the principles of fairness and honesty. It concerns the future of our country, the people and our children.
Tan Kin Lian
SCMP:Monetary Authority director clarifies minibond deal rules
6 July 2009
Investors who bought Lehman Brothers minibonds will receive compensation even if they have more than HK$8 million in investments - as long as they have not signed any documents describing themselves as professional investors, the Monetary Authority executive director says.
Raymond Li Ling-cheung's comments yesterday came after a number of minibonds buyers raised questions over whether they would be eligible for a payout under a deal agreed with 16 Hong Kong banks which sold minibonds guaranteed by Lehman Brothers.
In the days since the announcement of the settlement, which applies only to buyers classified as "individual investors", the definition of "professional investor" has been widely debated. Those who had made five or more investments in structured products such as minibonds over the past five years would be considered professionals. Corporate investors would not be covered by the settlement.
Mr Li moved to clear up some of the questions yesterday.
"The definition of professional investors is very clear in the law," he said. "It does not say you must be a professional investor when you have HK$8 million in the bank.
"If the bank classifies you as professional investor, an agreement should follow and the bank must tell you that you are classified as a professional investor and obtain your approval. It is not mandatory to say you are a professional investor when you have HK$8 million.
"If you want to know whether you're classified as a professional investor or not, you had better ask the bank."
The Securities and Futures Commission, the Monetary Authority and 16 distributing banks jointly announced on Wednesday that they had reached an agreement in relation to the compensation payout of Lehman Brothers-linked minibonds from eligible customers.
The agreement means that 90 per cent of investors will get backup to 70 per cent of their money. The banks will repay at least HK$6.3 billion to 29,000 people who bought minibonds in what is likely to be the world's largest compensation package for retail investors.
More than 33,000 Hong Kong investors bought HK$12 billion worth of high-risk minibonds that became virtually worthless when Lehman collapsed last September.
Minibonds are not corporate bonds, but consist of high-risk credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
The banks will send letters to investors next month, the investors will have 60 days to decide if they want to accept the deal. Those aged under 65 will receive 60 per cent of the value of their initial investment. Those over 65 will get 70 per cent back.
The Democratic Party will meet with minibonds investors today to discuss progress on the issue.
Investors who bought Lehman Brothers minibonds will receive compensation even if they have more than HK$8 million in investments - as long as they have not signed any documents describing themselves as professional investors, the Monetary Authority executive director says.
Raymond Li Ling-cheung's comments yesterday came after a number of minibonds buyers raised questions over whether they would be eligible for a payout under a deal agreed with 16 Hong Kong banks which sold minibonds guaranteed by Lehman Brothers.
In the days since the announcement of the settlement, which applies only to buyers classified as "individual investors", the definition of "professional investor" has been widely debated. Those who had made five or more investments in structured products such as minibonds over the past five years would be considered professionals. Corporate investors would not be covered by the settlement.
Mr Li moved to clear up some of the questions yesterday.
"The definition of professional investors is very clear in the law," he said. "It does not say you must be a professional investor when you have HK$8 million in the bank.
"If the bank classifies you as professional investor, an agreement should follow and the bank must tell you that you are classified as a professional investor and obtain your approval. It is not mandatory to say you are a professional investor when you have HK$8 million.
"If you want to know whether you're classified as a professional investor or not, you had better ask the bank."
The Securities and Futures Commission, the Monetary Authority and 16 distributing banks jointly announced on Wednesday that they had reached an agreement in relation to the compensation payout of Lehman Brothers-linked minibonds from eligible customers.
The agreement means that 90 per cent of investors will get backup to 70 per cent of their money. The banks will repay at least HK$6.3 billion to 29,000 people who bought minibonds in what is likely to be the world's largest compensation package for retail investors.
More than 33,000 Hong Kong investors bought HK$12 billion worth of high-risk minibonds that became virtually worthless when Lehman collapsed last September.
Minibonds are not corporate bonds, but consist of high-risk credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
The banks will send letters to investors next month, the investors will have 60 days to decide if they want to accept the deal. Those aged under 65 will receive 60 per cent of the value of their initial investment. Those over 65 will get 70 per cent back.
The Democratic Party will meet with minibonds investors today to discuss progress on the issue.
Advice on individual shares
Dear Tan Kin Lian,
I had bought a China counter Sino Environment Tech shear by using my CPF investment account. But now the shear price drop to 30 % and looks the company is having some internal problem. They did not announce the 1st Qtr result and all investment funds also selling there holding. Could you advice me is it wise decision to sell and investment other counter instead of loosing all?
I had bought a China counter Sino Environment Tech shear by using my CPF investment account. But now the shear price drop to 30 % and looks the company is having some internal problem. They did not announce the 1st Qtr result and all investment funds also selling there holding. Could you advice me is it wise decision to sell and investment other counter instead of loosing all?
REPLY
I do not give advice on individual shares. Sorry.
I do not give advice on individual shares. Sorry.
Pensioner Health Benefits
Hi Sir,
Someone I know is a civil servant who is currently under the Pension Scheme. She is considering purchasing medical insurance. She is 50 years old. She did not opt to switch to the CPF Scheme when the change was offered.
I understand that pensioners are provided good medical coverage. Is my friend adequately covered for her hospitalisation and medical needs? I have tried to find out more details about the health benefits offered under the pension scheme but so far have been unable to find out what I need to know.
REPLY
Your friend, the civil servant, should ask the employer. I do not know the answer because the medical benefit scheme are different for different categories of civil servants and have changed many times in past years.
Always ask the right source, and not someone else.
Someone I know is a civil servant who is currently under the Pension Scheme. She is considering purchasing medical insurance. She is 50 years old. She did not opt to switch to the CPF Scheme when the change was offered.
I understand that pensioners are provided good medical coverage. Is my friend adequately covered for her hospitalisation and medical needs? I have tried to find out more details about the health benefits offered under the pension scheme but so far have been unable to find out what I need to know.
REPLY
Your friend, the civil servant, should ask the employer. I do not know the answer because the medical benefit scheme are different for different categories of civil servants and have changed many times in past years.
Always ask the right source, and not someone else.
Interest rate on 25 July 2009
Here is an update of the interest rate on savings account and fixed deposit as at 25 July 2009. It is for your easy reference. Hope you find it useful. As the interest rate changes, please verify with the financial institution.
Winners of Intelligence Quiz and Name The Shape contests
Congratulations to the following winners:
Intelligence Quiz: Siew Hon Foong SXXXX993E
Name The Shape: Tina Wee SXXXX439B
Books can be ordered here.
Intelligence Quiz: Siew Hon Foong SXXXX993E
Name The Shape: Tina Wee SXXXX439B
Books can be ordered here.
Friday, July 24, 2009
Develop your mind
Develop your mind (and your children's mind) with the following books:
TKL intelligence quiz
TKL shape quiz
TKL sudoku
Available from www.easyapps.sg/iShop or www.easysearch.sg
TKL intelligence quiz
TKL shape quiz
TKL sudoku
Available from www.easyapps.sg/iShop or www.easysearch.sg
SCMP:Lehman inquiry to call SFC chief again
25 July 2009
The Legislative Council subcommittee investigating the Lehman Brothers minibond debacle will again summon the head of the Securities and Futures Commission to explain the HK$6.3 billion deal to repay thousands of investors.
Speaking after a closed-door meeting yesterday, the subcommittee's chairman, Raymond Ho Chung-tai, said it decided to summon the regulator's chief executive, Martin Wheatley, for an open hearing as early as Friday or early next month.
"It's because after announcing the repurchase proposal, we need to understand the deal thoroughly {hellip} and ask about the terms, which are unclear," Mr Ho said.
The 16 banks that sold Lehman Brothers minibonds will send letters to investors early next month, and investors will have 60 days to decide whether to accept the deal.
Mr Ho said the legislators therefore hoped to hold the hearing as soon as possible to obtain more information about the repurchase arrangement. The subcommittee also decided that Financial Secretary John Tsang Chun-wah would be the next to be summoned, Mr Ho said.
The SFC announced on Wednesday the HK$6.3 billion buyout deal, which covers 29,000 investors of Lehman Brothers minibonds.
Under the agreement, those who are over 65 years old will get 70 per cent of the value of their initial investment back, while those below 65 will get 60 per cent back. They will receive at least a further 10 per cent of their initial investment from the residual value of the collateral. Despite their name, minibonds are not corporate bonds but credit-linked derivatives whose worth depends on the health of the underlying assets.
Mr Ho said the subcommittee members had also agreed to extend the area of investigation to include investors' protection, the complaint mechanism and the penalty system for any violation of the law during the selling of financial products.
The subcommittee chairman reiterated that the agreement would not interrupt the subcommittee investigating the matter.
"Unlike previous Legco inquiries, this time the incident is developing and we need to make plans accordingly. But it will not halt our investigation," he said.
Although the subcommittee decided earlier to take a break next month, Mr Ho said that as a result of the latest development, meetings would continue during the summer as long as there were enough lawmakers on hand.
"A lot of members have told me they won't be in Hong Kong in August. But because this is something which has got very wide public attention and interest, we will try our best to find enough members," he said.
The Legislative Council subcommittee investigating the Lehman Brothers minibond debacle will again summon the head of the Securities and Futures Commission to explain the HK$6.3 billion deal to repay thousands of investors.
Speaking after a closed-door meeting yesterday, the subcommittee's chairman, Raymond Ho Chung-tai, said it decided to summon the regulator's chief executive, Martin Wheatley, for an open hearing as early as Friday or early next month.
"It's because after announcing the repurchase proposal, we need to understand the deal thoroughly {hellip} and ask about the terms, which are unclear," Mr Ho said.
The 16 banks that sold Lehman Brothers minibonds will send letters to investors early next month, and investors will have 60 days to decide whether to accept the deal.
Mr Ho said the legislators therefore hoped to hold the hearing as soon as possible to obtain more information about the repurchase arrangement. The subcommittee also decided that Financial Secretary John Tsang Chun-wah would be the next to be summoned, Mr Ho said.
The SFC announced on Wednesday the HK$6.3 billion buyout deal, which covers 29,000 investors of Lehman Brothers minibonds.
Under the agreement, those who are over 65 years old will get 70 per cent of the value of their initial investment back, while those below 65 will get 60 per cent back. They will receive at least a further 10 per cent of their initial investment from the residual value of the collateral. Despite their name, minibonds are not corporate bonds but credit-linked derivatives whose worth depends on the health of the underlying assets.
Mr Ho said the subcommittee members had also agreed to extend the area of investigation to include investors' protection, the complaint mechanism and the penalty system for any violation of the law during the selling of financial products.
The subcommittee chairman reiterated that the agreement would not interrupt the subcommittee investigating the matter.
"Unlike previous Legco inquiries, this time the incident is developing and we need to make plans accordingly. But it will not halt our investigation," he said.
Although the subcommittee decided earlier to take a break next month, Mr Ho said that as a result of the latest development, meetings would continue during the summer as long as there were enough lawmakers on hand.
"A lot of members have told me they won't be in Hong Kong in August. But because this is something which has got very wide public attention and interest, we will try our best to find enough members," he said.
Broadcast this message: Petition
Please broadcast this message to your contacts by email, Facebook and other social networks:
"Mr. Tan Kin Lian is organising a Petition to the Prime Minister to ask him to assist the investors to get similar compensation given to investors in Hong Kong. Please inform the people who are affected by the credit-linked notes to sign the Petition. The blog is www.tankinlian.blogspot.com".
"Mr. Tan Kin Lian is organising a Petition to the Prime Minister to ask him to assist the investors to get similar compensation given to investors in Hong Kong. Please inform the people who are affected by the credit-linked notes to sign the Petition. The blog is www.tankinlian.blogspot.com".
Cheated in a good reputation country
Dear (MAS officer)
I would like to share a story with your MAS people.
20 years ago, my father finished his army service and got a big sum money for his army service in China. The amount is equal to 5 years salary. He bought 10 years China government bond (国库券）with that money from a national bank. He thought China government bond was very safe and he only want to use it for his children's education need in the future. He locked those coupon with much care.
10 years later, when the bond matured, he brought the coupon to bank to cash out, the teller told him the coupon were faked. He can not get anything. What a big shock for him and his family. The teller from national bank sold him the faked coupon. The bank told him they could not find the teller any more. He was not the only unlucky person. Actually there are quite a lot of people faced the same. They together tried to ask help from bank, government, press, and law firm. Finally, a lawyer want to take their case. However, somebody threaten the lawyer and the press. The press stopped reporting their story and lawyer didn't dare to take their case.
His daughter thought this was a place without justice. She studied very hard to got in a good university and later left the place for what she thought was a better country.
However, what happened to her? She fell into the same trap. She didn't suspect that the famous Singapore financial institution would cheat people's money also. She clearly told the FI officer she needed government bond only as she was very conservative and she needed the money for her father's medical need. Her father is paralyzed now. However, The RM sold her toxic complicated product with a faked name "Bond".
She was worse hurt. Her father had to accept the unfair things that happened in a developing country. For her, she didn't prepared for such unfair things in this good reputation country.
If you, MAS people, the best educated and smartest people in Singapore, allowed such unfair things to continue, I won't cry for my money, but cry for your future. If the best educated, smartest people are not looking for justice, what is the future for this country?
Best Regard!
GD
I would like to share a story with your MAS people.
20 years ago, my father finished his army service and got a big sum money for his army service in China. The amount is equal to 5 years salary. He bought 10 years China government bond (国库券）with that money from a national bank. He thought China government bond was very safe and he only want to use it for his children's education need in the future. He locked those coupon with much care.
10 years later, when the bond matured, he brought the coupon to bank to cash out, the teller told him the coupon were faked. He can not get anything. What a big shock for him and his family. The teller from national bank sold him the faked coupon. The bank told him they could not find the teller any more. He was not the only unlucky person. Actually there are quite a lot of people faced the same. They together tried to ask help from bank, government, press, and law firm. Finally, a lawyer want to take their case. However, somebody threaten the lawyer and the press. The press stopped reporting their story and lawyer didn't dare to take their case.
His daughter thought this was a place without justice. She studied very hard to got in a good university and later left the place for what she thought was a better country.
However, what happened to her? She fell into the same trap. She didn't suspect that the famous Singapore financial institution would cheat people's money also. She clearly told the FI officer she needed government bond only as she was very conservative and she needed the money for her father's medical need. Her father is paralyzed now. However, The RM sold her toxic complicated product with a faked name "Bond".
She was worse hurt. Her father had to accept the unfair things that happened in a developing country. For her, she didn't prepared for such unfair things in this good reputation country.
If you, MAS people, the best educated and smartest people in Singapore, allowed such unfair things to continue, I won't cry for my money, but cry for your future. If the best educated, smartest people are not looking for justice, what is the future for this country?
Best Regard!
GD
Journalists refused to cover the Petition
I sent an email to notify the journalists on two occasions about the Petition concerning the credit linked notes. There were about 10 journalists in my mailing list. They have covered the credit linked notes previously.
None of the journalists replied to me. They also did not cover this effort. There was total silence on their part. This is a sad state of affairs.
None of the journalists replied to me. They also did not cover this effort. There was total silence on their part. This is a sad state of affairs.
Thursday, July 23, 2009
Pinnacle Notes - many series in trouble
Hi Kin Lian,
Please post the latest valuation (July24)of the following series of Pinnacles Notes. The situation is now very critical for holders of these notes.
Series 9 & 10 are already kaput, 1 & 3 may be gone too, and 2,6 & 7 are almost worthless at 0.3% or less(they were at 2% a fortnight ago!) and Series 5 at 1.8%, barely alive and hanging by their skin.
Only remaining 4 Series are fairly safe at this time.
Yet MAS unlike its HK counterpart is expecting each and every investor to fight it out on a case-by-case basis with his FI distributor when it has already found the FIs guilty of near-systemic or firm-wide errors and faults. MAS is indeed prescribing a slow and painful death for the investors who are the victims in toiling through processes of complaints, FIDREC and/or legal actions, while the guilty are merely given what is effectively an enforced but cost-free and painless holiday.
In the light of the latest empathetic resolution led by HK's authority, I think the Petition ought to updated appropriately to add more punch.
SB
Please post the latest valuation (July24)of the following series of Pinnacles Notes. The situation is now very critical for holders of these notes.
Series 9 & 10 are already kaput, 1 & 3 may be gone too, and 2,6 & 7 are almost worthless at 0.3% or less(they were at 2% a fortnight ago!) and Series 5 at 1.8%, barely alive and hanging by their skin.
Only remaining 4 Series are fairly safe at this time.
Yet MAS unlike its HK counterpart is expecting each and every investor to fight it out on a case-by-case basis with his FI distributor when it has already found the FIs guilty of near-systemic or firm-wide errors and faults. MAS is indeed prescribing a slow and painful death for the investors who are the victims in toiling through processes of complaints, FIDREC and/or legal actions, while the guilty are merely given what is effectively an enforced but cost-free and painless holiday.
In the light of the latest empathetic resolution led by HK's authority, I think the Petition ought to updated appropriately to add more punch.
SB
CPF Life - does it need to be compulsory?
Hi Mr Tan,
Thanks for willing to spend time to write on CPF Life. We all understand the NEED to have CPF Life. But I would like to have an unbiased view on this plan which is made compulsory for everybody.
Our government is taking a significant portion of our hard-earned CPF money and place us on this plan. Is this a reasonable deal for us or simply we have no choice but to swallow this bitter pill?
Among the options available in this CPF Life, is it just choose based on "whether I want to leave some money for our younger generation" and thus opt for "receive minimum payout when I am alive"?
Is it really true that since CPF Board will be administering this annuity plan, it is better and reliable than those offered by insurers which definitely have more experience in this area?
JL
Thanks for willing to spend time to write on CPF Life. We all understand the NEED to have CPF Life. But I would like to have an unbiased view on this plan which is made compulsory for everybody.
Our government is taking a significant portion of our hard-earned CPF money and place us on this plan. Is this a reasonable deal for us or simply we have no choice but to swallow this bitter pill?
Among the options available in this CPF Life, is it just choose based on "whether I want to leave some money for our younger generation" and thus opt for "receive minimum payout when I am alive"?
Is it really true that since CPF Board will be administering this annuity plan, it is better and reliable than those offered by insurers which definitely have more experience in this area?
JL
SCMP:Minibond decision heartens investors similarly burned
24 July 2009
The watershed decision forcing banks to pay more than HK$6 billion compensation to Lehman minibond victims has given hope to thousands of investors burned in meltdowns of similar structured products.
The Securities and Futures Commission (SFC) ordered 16 banks, including Bank of China (Hong Kong) and Bank of East Asia, to return up to 70 per cent of money invested in minibonds to investors because bank staff sold the complex derivatives as low-risk.
The banking regulator, the Hong Kong Monetary Authority, will now deal with 9,000 other complaints of mis-selling of structured products. These are likely to include gripes about worthless Constellation Notes, sold by DBS Bank, and Octave Notes, sold by 17 banks and designed by Morgan Stanley.
"We will investigate if there is any mis-selling in these complaints. Our target is to complete all the cases by March," HKMA executive director Raymond Li Ling-cheung said.
Democratic Party chairman Albert Ho Chun-yan said: "Octave Notes and Constellation investors now have a stronger case for compensation."
Like minibonds, Constellation Notes were derivative products - financial bets - linked to the financial health of Lehman Brothers. Their buyers wagered that no companies in a group that included Lehman would go bust.
Investors were wiped out when the US bank failed last September.
Out of a series of 18 derivative-based Octave Notes, three required buyers to strike similar bets that Lehman would not fail. Buyers lost everything after the bank's demise.
Many investors who attended meetings organised by the Democratic Party claimed they had no idea they were buying derivatives. Instead, they claimed they were told the notes were comparable to time deposits or simple corporate bonds.
Shelley So, a Constellation investor, said DBS staff told her the notes were "for extra income, because we do not earn very much". In 2006, she and her husband poured US$130,000 into the product. The couple had instructed lawyers to try to get their money back.
DBS declined to comment.
About 4,000 Hong Kong people bought HK$2.4 billion worth of Constellation Notes. Octave Notes were sold to more than 8,000 people, who invested HK$1.8 billion.
Meanwhile, dozens of Lehman minibond investors protested outside the SFC yesterday, saying the new payout proposal was not acceptable and they wanted all of their investment principal back.
The watershed decision forcing banks to pay more than HK$6 billion compensation to Lehman minibond victims has given hope to thousands of investors burned in meltdowns of similar structured products.
The Securities and Futures Commission (SFC) ordered 16 banks, including Bank of China (Hong Kong) and Bank of East Asia, to return up to 70 per cent of money invested in minibonds to investors because bank staff sold the complex derivatives as low-risk.
The banking regulator, the Hong Kong Monetary Authority, will now deal with 9,000 other complaints of mis-selling of structured products. These are likely to include gripes about worthless Constellation Notes, sold by DBS Bank, and Octave Notes, sold by 17 banks and designed by Morgan Stanley.
"We will investigate if there is any mis-selling in these complaints. Our target is to complete all the cases by March," HKMA executive director Raymond Li Ling-cheung said.
Democratic Party chairman Albert Ho Chun-yan said: "Octave Notes and Constellation investors now have a stronger case for compensation."
Like minibonds, Constellation Notes were derivative products - financial bets - linked to the financial health of Lehman Brothers. Their buyers wagered that no companies in a group that included Lehman would go bust.
Investors were wiped out when the US bank failed last September.
Out of a series of 18 derivative-based Octave Notes, three required buyers to strike similar bets that Lehman would not fail. Buyers lost everything after the bank's demise.
Many investors who attended meetings organised by the Democratic Party claimed they had no idea they were buying derivatives. Instead, they claimed they were told the notes were comparable to time deposits or simple corporate bonds.
Shelley So, a Constellation investor, said DBS staff told her the notes were "for extra income, because we do not earn very much". In 2006, she and her husband poured US$130,000 into the product. The couple had instructed lawyers to try to get their money back.
DBS declined to comment.
About 4,000 Hong Kong people bought HK$2.4 billion worth of Constellation Notes. Octave Notes were sold to more than 8,000 people, who invested HK$1.8 billion.
Meanwhile, dozens of Lehman minibond investors protested outside the SFC yesterday, saying the new payout proposal was not acceptable and they wanted all of their investment principal back.
The Standard:Protests ease, investors come to terms with offer
24 July 2009
Regular investors started coming to terms with the Lehman minibond compensation offer yesterday, with only a handful of elderly investors protesting outside the Securities and Futures Commission offices.
Some of those protesting said they were inclined to accept the offer, although they held out a sliver of hope that they would get more.
``I have no money to use. My wife and I only have this pension, I can only accept the 60 percent compensation and use it,'' said an investor surnamed Chan.
Another investor said he prefers to reinvest the settlement amount to make more money. ``It's better to get back some money to invest in stocks. As the entanglement goes, chances are you won't be able to get it back some five years later,'' he said. ``Making up for the loss from stocks now is just the same.''
Consumer Council chairman Anthony Cheung Bing-leung advised investors to evaluate their individual situations before deciding whether or not to accept the buyback proposals by the regulators and banks. ``If the investors are willing to accept it, we will be pleased. But we also respect whatever decisions the investors make in the end,'' Cheung said. The council has received about 12,000 complaints from investors so far, including about 50 cases applying to the legal fund.
Customers of DBS Bank (Hong Kong), who bought Constellation credit-linked notes linked to Lehman, are still fighting for more compensation from the bank. They are not covered under the repurchase scheme as what they bought was not minibonds.
Bank shares surged yesterday as investors were relieved that the uncertainty on the minibond compensation plan was removed. Bank of East Asia (0023) jumped 3.3 percent to HK$25.10, while Bank of China (Hong Kong) (2388) rose 2.5 percent to HK$15.54.
Bank of Communications (3328) said yesterday it would have to pay a total of HK$204.54 million in investor compensation. It said the minibond repurchases will have ``minimal impact'' on financial results.
Dah Sing Banking Group (2356) said it would need to pay up to HK$444 million in compensation, plus HK$20 million in ``top-up payments'' and HK$22 million in legal-fund contributions.
Regular investors started coming to terms with the Lehman minibond compensation offer yesterday, with only a handful of elderly investors protesting outside the Securities and Futures Commission offices.
Some of those protesting said they were inclined to accept the offer, although they held out a sliver of hope that they would get more.
``I have no money to use. My wife and I only have this pension, I can only accept the 60 percent compensation and use it,'' said an investor surnamed Chan.
Another investor said he prefers to reinvest the settlement amount to make more money. ``It's better to get back some money to invest in stocks. As the entanglement goes, chances are you won't be able to get it back some five years later,'' he said. ``Making up for the loss from stocks now is just the same.''
Consumer Council chairman Anthony Cheung Bing-leung advised investors to evaluate their individual situations before deciding whether or not to accept the buyback proposals by the regulators and banks. ``If the investors are willing to accept it, we will be pleased. But we also respect whatever decisions the investors make in the end,'' Cheung said. The council has received about 12,000 complaints from investors so far, including about 50 cases applying to the legal fund.
Customers of DBS Bank (Hong Kong), who bought Constellation credit-linked notes linked to Lehman, are still fighting for more compensation from the bank. They are not covered under the repurchase scheme as what they bought was not minibonds.
Bank shares surged yesterday as investors were relieved that the uncertainty on the minibond compensation plan was removed. Bank of East Asia (0023) jumped 3.3 percent to HK$25.10, while Bank of China (Hong Kong) (2388) rose 2.5 percent to HK$15.54.
Bank of Communications (3328) said yesterday it would have to pay a total of HK$204.54 million in investor compensation. It said the minibond repurchases will have ``minimal impact'' on financial results.
Dah Sing Banking Group (2356) said it would need to pay up to HK$444 million in compensation, plus HK$20 million in ``top-up payments'' and HK$22 million in legal-fund contributions.
China Daily:Investors continue minibond fight
24 July 2009
HONG KONG: A complaint arising from the sale of Lehman Brothers minibonds is headed for the courts. At the same time the Consumer Council will continue assisting those hit hard when the minibonds and other dicey financial instruments became worthless.
The watchdog has received about 12,000 related complaints since the US investment bank collapsed last September causing astronomical losses to investors.
Apart from the one case that has been set for litigation, about 50 other cases are under review for possible legal action.
Investors burnt in the minibonds collapse have accused local banks of malpractice and deception in their efforts to sell the complex investment tools. Many of those who were hurt are elderly. Many don't have education sufficient to provide them a clear grasp on what happened to their money.
Speaking at a Consumer Council seminar yesterday, Secretary for Financial Services and the Treasury Chan Ka-keung urged sellers and financial consultants to expound fully the risk of investment products to investors and to assess actual needs in order to protect the consumers' rights.
They should not "hard sell" products, Chan said.
Meanwhile, Consumer Council chairman Anthony Cheung reminded consumers that it is they who must decide whether to accept the buy-back scheme.
Regulators and 16 banks set up the compensation package which was announced on Wednesday. Investors could receive between 60 and 70 percent of the principal they invested. But "experienced" and "professional" investors will not be eligible.
"The package is proposed by the Securities and Futures Commission (SFC), the Hong Kong Monetary Authority and banks. It is up to consumers to make final judgment. Everyone is under different circumstances," he said at a seminar yesterday.
Lawmaker Kam Nai-wai who has helped to champion the cause of investors pressed for the 16 banks to disclose the valuation of minibond collateral for investors in order to help the investors to consider whether they should accept the buy-back package.
Some minibond holders staged a sit-in at the headquarters of the SFC yesterday expressing their dissatisfaction with the compensation package. The protestors demanded full restitution, not partial.
Some said they had no alternative but to accept the offer. They need money to live. Some were confused, saying they had no idea whether they are entitled to compensation.
Local actress Meg Lam Kin-ming invested about HK$10 million in the minibonds and other investment tools. She may not be able to get back the principal, as a "professional investor" is one with over HK$8 million investment portfolio.
"What is the judgment of an investor as 'professional'? Does it mean buying lots of investment products before? I have no idea at all," said Lam.
HONG KONG: A complaint arising from the sale of Lehman Brothers minibonds is headed for the courts. At the same time the Consumer Council will continue assisting those hit hard when the minibonds and other dicey financial instruments became worthless.
The watchdog has received about 12,000 related complaints since the US investment bank collapsed last September causing astronomical losses to investors.
Apart from the one case that has been set for litigation, about 50 other cases are under review for possible legal action.
Investors burnt in the minibonds collapse have accused local banks of malpractice and deception in their efforts to sell the complex investment tools. Many of those who were hurt are elderly. Many don't have education sufficient to provide them a clear grasp on what happened to their money.
Speaking at a Consumer Council seminar yesterday, Secretary for Financial Services and the Treasury Chan Ka-keung urged sellers and financial consultants to expound fully the risk of investment products to investors and to assess actual needs in order to protect the consumers' rights.
They should not "hard sell" products, Chan said.
Meanwhile, Consumer Council chairman Anthony Cheung reminded consumers that it is they who must decide whether to accept the buy-back scheme.
Regulators and 16 banks set up the compensation package which was announced on Wednesday. Investors could receive between 60 and 70 percent of the principal they invested. But "experienced" and "professional" investors will not be eligible.
"The package is proposed by the Securities and Futures Commission (SFC), the Hong Kong Monetary Authority and banks. It is up to consumers to make final judgment. Everyone is under different circumstances," he said at a seminar yesterday.
Lawmaker Kam Nai-wai who has helped to champion the cause of investors pressed for the 16 banks to disclose the valuation of minibond collateral for investors in order to help the investors to consider whether they should accept the buy-back package.
Some minibond holders staged a sit-in at the headquarters of the SFC yesterday expressing their dissatisfaction with the compensation package. The protestors demanded full restitution, not partial.
Some said they had no alternative but to accept the offer. They need money to live. Some were confused, saying they had no idea whether they are entitled to compensation.
Local actress Meg Lam Kin-ming invested about HK$10 million in the minibonds and other investment tools. She may not be able to get back the principal, as a "professional investor" is one with over HK$8 million investment portfolio.
"What is the judgment of an investor as 'professional'? Does it mean buying lots of investment products before? I have no idea at all," said Lam.
Parliament Answers to Lehman Structure Products - 20 July 2009
Dear Mr. Tan,
QUOTE: MAS’ role is not to judge the merits of the product being offered. Rather, MAS checks that the issuer discloses the features and risks of the product, and that there are no false or misleading statements. MAS does so based on the information provided by the issuer and its advisers.
The most significant point from the above statement of the Deputy Chairman is "MAS does so based on information provided by the issuer and its advisers".
If subsequently the court find that the prospectus and pricing statements:
* fail to disclose the features and risks of the product and
* there are false and misleading statements
the investor is able to claim for full recovery of the investment.
QUOTE: MAS’ role is not to judge the merits of the product being offered. Rather, MAS checks that the issuer discloses the features and risks of the product, and that there are no false or misleading statements. MAS does so based on the information provided by the issuer and its advisers.
The most significant point from the above statement of the Deputy Chairman is "MAS does so based on information provided by the issuer and its advisers".
If subsequently the court find that the prospectus and pricing statements:
* fail to disclose the features and risks of the product and
* there are false and misleading statements
the investor is able to claim for full recovery of the investment.
SCMP:Some sympathy for the devils
24 July 2009
It's deeply unfashionable to feel any sympathy for bankers these days.
In Hong Kong, they have been exposed as no better than back-alley thieves, cruelly mugging harmless old grannies, stealing their savings and leaving them with purses stuffed with nothing but worthless Lehman Brothers minibonds.
That's pretty much the narrative as it's been told to us. But you have to wonder how accurate that interpretation of the minibond story is. And you have to doubt whether Wednesday's settlement, in which 16 banks agreed to pay minibond investors back at least 60 cents in the dollar, is really as great a deal as it's been made out.
With minibonds sold to senile, illiterate and mentally handicapped savers, there were clear breaches of the regulations in some cases. Those investors should be paid back at 100 cents in the dollar, not 60, and the offending banks should be hammered with stiff penalties to boot, not allowed to escape additional punishment.
But those cases are in the minority. For the most part, minibonds were bought by people who went into their banks with eyes open and who knew exactly what they were after: higher returns.
As the first chart below shows, interest rates on bank time deposits have collapsed in recent years, falling from double-digit levels in the early 1980s to rates as low as zero in the early years of this decade.
As a result, depositors turned into eager buyers of complex structured instruments that promised a higher rate of return than plain vanilla time deposits.
Yet as anyone who isn't senile, illiterate or mentally handicapped can work out for themselves, a product that offers a yield of 5 per cent or more when interest rates are at zero must come with considerably more risk of loss than a simple time deposit. You don't need to understand one-touch options or credit default swaps to work that one out. It's a clear case of caveat emptor: buyer beware.
There is a strong argument to be made that savers who bought minibonds because they demanded higher returns should have to bear their losses. They invested in risky securities and were unlucky enough to have them blow up in their faces. That's tough. But it is hard to see why one group of investors - the banks' shareholders - should be forced to bail out another - the minibond buyers - simply because the second group made a bad decision.
On the other hand, the banks were hardly blameless. Until the mid-1990s, profits were relatively easy to come by. Demand for loans was brisk, and Hong Kong's loan to deposit ratio rose as high as 180 per cent.
The 1997 Asian crisis changed all that. As the second chart below shows, loan demand dried up even as deposits kept mounting. The loan to deposit ratio tumbled, falling to within a whisker of 50 per cent in recent years, brutally squeezing bank's interest income.
In response, Hong Kong banks ramped up their sales of securities, pushing structured products like minibonds to their depositors in order to capture lucrative commission income. Many went for the hard sell, sacrificing long-term customer relationships to boost short-term profits.
Yet although that's dumb and although many of the instruments sold were wildly unsuitable for ordinary retail investors, what the banks did - for the most part - was perfectly legal. It is unclear why they should be punished for it.
But the real problem with the minibond settlement is not so much its injustice, but the precedent it sets.
Securities and Futures Commission chief Martin Wheatley called Wednesday's deal "a watershed in the regulation of financial services in Hong Kong". He's not kidding. In pushing for a blanket bail-out of minibond investors, the regulators have served notice that from now on investors who lose money will be bailed out if only they make a loud enough noise about it.
So, expect a flood of compensation demands from investors who have taken losses on other structured products, on warrants or hedge funds. The list is endless.
Worse, Wednesday's agreement will only encourage investors to take excessive risks in the future, safe in the knowledge that if they end up out of pocket, they will be able to cry "mis-selling" and force the banks to refund their money. The minibond deal badly skews the balance of risk and reward for investors, introducing a hefty dose of moral hazard that stands to inflict severe damage on Hong Kong's financial services industry.
So although it's not fashionable to feel sorry for bankers, perhaps they do deserve some small sympathy in this case.
It's deeply unfashionable to feel any sympathy for bankers these days.
In Hong Kong, they have been exposed as no better than back-alley thieves, cruelly mugging harmless old grannies, stealing their savings and leaving them with purses stuffed with nothing but worthless Lehman Brothers minibonds.
That's pretty much the narrative as it's been told to us. But you have to wonder how accurate that interpretation of the minibond story is. And you have to doubt whether Wednesday's settlement, in which 16 banks agreed to pay minibond investors back at least 60 cents in the dollar, is really as great a deal as it's been made out.
With minibonds sold to senile, illiterate and mentally handicapped savers, there were clear breaches of the regulations in some cases. Those investors should be paid back at 100 cents in the dollar, not 60, and the offending banks should be hammered with stiff penalties to boot, not allowed to escape additional punishment.
But those cases are in the minority. For the most part, minibonds were bought by people who went into their banks with eyes open and who knew exactly what they were after: higher returns.
As the first chart below shows, interest rates on bank time deposits have collapsed in recent years, falling from double-digit levels in the early 1980s to rates as low as zero in the early years of this decade.
As a result, depositors turned into eager buyers of complex structured instruments that promised a higher rate of return than plain vanilla time deposits.
Yet as anyone who isn't senile, illiterate or mentally handicapped can work out for themselves, a product that offers a yield of 5 per cent or more when interest rates are at zero must come with considerably more risk of loss than a simple time deposit. You don't need to understand one-touch options or credit default swaps to work that one out. It's a clear case of caveat emptor: buyer beware.
There is a strong argument to be made that savers who bought minibonds because they demanded higher returns should have to bear their losses. They invested in risky securities and were unlucky enough to have them blow up in their faces. That's tough. But it is hard to see why one group of investors - the banks' shareholders - should be forced to bail out another - the minibond buyers - simply because the second group made a bad decision.
On the other hand, the banks were hardly blameless. Until the mid-1990s, profits were relatively easy to come by. Demand for loans was brisk, and Hong Kong's loan to deposit ratio rose as high as 180 per cent.
The 1997 Asian crisis changed all that. As the second chart below shows, loan demand dried up even as deposits kept mounting. The loan to deposit ratio tumbled, falling to within a whisker of 50 per cent in recent years, brutally squeezing bank's interest income.
In response, Hong Kong banks ramped up their sales of securities, pushing structured products like minibonds to their depositors in order to capture lucrative commission income. Many went for the hard sell, sacrificing long-term customer relationships to boost short-term profits.
Yet although that's dumb and although many of the instruments sold were wildly unsuitable for ordinary retail investors, what the banks did - for the most part - was perfectly legal. It is unclear why they should be punished for it.
But the real problem with the minibond settlement is not so much its injustice, but the precedent it sets.
Securities and Futures Commission chief Martin Wheatley called Wednesday's deal "a watershed in the regulation of financial services in Hong Kong". He's not kidding. In pushing for a blanket bail-out of minibond investors, the regulators have served notice that from now on investors who lose money will be bailed out if only they make a loud enough noise about it.
So, expect a flood of compensation demands from investors who have taken losses on other structured products, on warrants or hedge funds. The list is endless.
Worse, Wednesday's agreement will only encourage investors to take excessive risks in the future, safe in the knowledge that if they end up out of pocket, they will be able to cry "mis-selling" and force the banks to refund their money. The minibond deal badly skews the balance of risk and reward for investors, introducing a hefty dose of moral hazard that stands to inflict severe damage on Hong Kong's financial services industry.
So although it's not fashionable to feel sorry for bankers, perhaps they do deserve some small sympathy in this case.
CPF Life
There are some comments about CPF Life. I will be doing some research about it and will write my views later. If you have specific offers for CPF Life, please send them to me for analysis.
Coverage of HK settlement
I was surprised that ther was no coverage of the HK settlement of the minibonds in the Straits Times today (Friday). I do not know if there were any coverage during the past two days. What about the other newspapers? Did they cover the HK settlement agreed between the regulators and the 16 banks?
Please help me to check your newspapers (Strait Times, Today, MyPaper, Zaobao, Wanbao) for the past few days and report your findings here.
Please help me to check your newspapers (Strait Times, Today, MyPaper, Zaobao, Wanbao) for the past few days and report your findings here.
The Emperor's Clothes and Singapore
Read this article.
Share your views about this article and the findings of the survey. Does the survey reflect a small proportion of unhappy Singaporeans, or is a wider reflection of the views of many people?
Share your views about this article and the findings of the survey. Does the survey reflect a small proportion of unhappy Singaporeans, or is a wider reflection of the views of many people?
SCMP:How swift lobbying ended a dispute that had dragged on for 10 months
23 July 2009
A 20-day lobbying effort by government officials and bankers has ended a 10-month dispute between banks and investors over settling the Lehman Brothers minibonds issue.
"The past 10 months have been very tough - especially the last 20 days," a banking source said.
The 16 lenders yesterday sealed the HK$6.3 billion agreement with the Securities and Futures Commission and the Monetary Authority to pay back 29,000 investors.
The SFC, the HKMA and banking sources all denied that political pressure forced the agreement, although the Legislative Council is questioning the heads of both regulatory bodies and bankers over more than 20,000 complaints from investors about the conduct of banks in selling the minibonds.
Shortly after Lehman Brothers collapsed last September, the government proposed that banks buy back minibonds from investors - similar to the current agreement. But it took 10 months for the deal to unfold, as banks were initially concerned that it might attract legal challenges from the liquidators of Lehman Brothers.
Since then, the SFC persuaded two brokers - Sun Hung Kai Financial and KGI Asia - to repay investors fully. But until yesterday, it had yet to clinch a deal with the 16 banks that sold the minibonds.
The turning point came only 20 days ago, after Bank of China (Hong Kong) came up with an agreement similar to the deal agreed yesterday. Then the other 15 banks joined forces to negotiate with the SFC as a group.
Bankers said the sector's legislator, David Li Kwok-po, chairman and chief executive of the Bank of East Asia, was one of the most active in lobbying the SFC and the HKMA to accept the deal.
"This is the best deal possible, with the greatest sincerity from the banks. There is upside and no downside in this deal," one banker said. "We want to leave this all behind us, to move on and look forward."
Secretary for Financial Services and the Treasury Chan Ka-keung said: "I hope the settlement scheme {hellip} will help investors return to their normal lives."
A 20-day lobbying effort by government officials and bankers has ended a 10-month dispute between banks and investors over settling the Lehman Brothers minibonds issue.
"The past 10 months have been very tough - especially the last 20 days," a banking source said.
The 16 lenders yesterday sealed the HK$6.3 billion agreement with the Securities and Futures Commission and the Monetary Authority to pay back 29,000 investors.
The SFC, the HKMA and banking sources all denied that political pressure forced the agreement, although the Legislative Council is questioning the heads of both regulatory bodies and bankers over more than 20,000 complaints from investors about the conduct of banks in selling the minibonds.
Shortly after Lehman Brothers collapsed last September, the government proposed that banks buy back minibonds from investors - similar to the current agreement. But it took 10 months for the deal to unfold, as banks were initially concerned that it might attract legal challenges from the liquidators of Lehman Brothers.
Since then, the SFC persuaded two brokers - Sun Hung Kai Financial and KGI Asia - to repay investors fully. But until yesterday, it had yet to clinch a deal with the 16 banks that sold the minibonds.
The turning point came only 20 days ago, after Bank of China (Hong Kong) came up with an agreement similar to the deal agreed yesterday. Then the other 15 banks joined forces to negotiate with the SFC as a group.
Bankers said the sector's legislator, David Li Kwok-po, chairman and chief executive of the Bank of East Asia, was one of the most active in lobbying the SFC and the HKMA to accept the deal.
"This is the best deal possible, with the greatest sincerity from the banks. There is upside and no downside in this deal," one banker said. "We want to leave this all behind us, to move on and look forward."
Secretary for Financial Services and the Treasury Chan Ka-keung said: "I hope the settlement scheme {hellip} will help investors return to their normal lives."
SCMP:Legco inquiry to proceed despite agreement on compensation
23 July 2009
A proposed deal to settle all investor claims against banks involved in the Lehman Brothers minibond debacle will not derail attempts by the Legislative Council to get to the bottom of the unprecedented case.
Raymond Ho Chung-tai, chairman of the Legco subcommittee investigating the minibond saga, declined to comment on the settlement deal but said the investigation would continue.
The subcommittee was set up to examine issues relating to the way banks sold the structured investments to clients and not to help investors seek compensation, Mr Ho said. He said it would publish its findings in a report by next year at the earliest.
Similarly, the Consumer Council will proceed with its application to the consumer legal action fund to bring a case to court against a financial institution that sold a Lehman-related product to an investor. But a spokesman for the council said investors should seriously consider the settlement deal.
Some lawmakers, including Regina Ip Lau Suk-yee and Jeffery Lam Kin-fung, said the deal was acceptable. "The deal is quite good and covers a lot of the investors," Mrs Ip said. "Banks here are more generous than those in Singapore." On average, investors in Singapore got back only 32.2 per cent of their investment, she said.
But Democrat legislator Kam Nai-wai called on the government to get the banks to first reveal the remaining value of the Lehman products' underlying assets. Mr Kam insisted it was unfair to investors if they had to decide whether or not to accept the deal before knowing what the collateral of their investment was worth.
Minibonds are not corporate bonds, but consist of high-risk credit-linked derivatives. They are marketed as a proxy investment in well-known firms.
A Ms Lau, who sunk US$100,000 of her grandfather's savings into Lehman minibonds, said the settlement offer did not adequately reflect the banks' responsibility to investors. She said she felt the banks were trying to absolve themselves without shouldering responsibility by paying off investors through the settlement deal. "I still haven't told my grandfather that the money is in Lehman minibonds," Ms Lau said. "I'm afraid he wouldn't be able to take the news if I told him."
Kitty Lai, who poured HK$6 million into minibonds, flatly rejected the deal and accused the government and regulators of siding with the banks.
"You cannot trust the government or the Hong Kong Monetary Authority. Sometimes, when I think about this, I just want to kill myself," Ms Lai said.
To Kam-leung, whose 66-year-old father purchased Lehman minibonds from the Bank of Communications, said his family would accept the deal even though they felt it was unreasonable.
"It's because we don't want it to drag on. And we only invested HK$120,000, which is a comparatively small amount," he said. "My father suffers from diabetes and the minibond issue has troubled us for months. We also bear part of the responsibility because my father trusted the bank staff and didn't consult us before signing the documents."
A proposed deal to settle all investor claims against banks involved in the Lehman Brothers minibond debacle will not derail attempts by the Legislative Council to get to the bottom of the unprecedented case.
Raymond Ho Chung-tai, chairman of the Legco subcommittee investigating the minibond saga, declined to comment on the settlement deal but said the investigation would continue.
The subcommittee was set up to examine issues relating to the way banks sold the structured investments to clients and not to help investors seek compensation, Mr Ho said. He said it would publish its findings in a report by next year at the earliest.
Similarly, the Consumer Council will proceed with its application to the consumer legal action fund to bring a case to court against a financial institution that sold a Lehman-related product to an investor. But a spokesman for the council said investors should seriously consider the settlement deal.
Some lawmakers, including Regina Ip Lau Suk-yee and Jeffery Lam Kin-fung, said the deal was acceptable. "The deal is quite good and covers a lot of the investors," Mrs Ip said. "Banks here are more generous than those in Singapore." On average, investors in Singapore got back only 32.2 per cent of their investment, she said.
But Democrat legislator Kam Nai-wai called on the government to get the banks to first reveal the remaining value of the Lehman products' underlying assets. Mr Kam insisted it was unfair to investors if they had to decide whether or not to accept the deal before knowing what the collateral of their investment was worth.
Minibonds are not corporate bonds, but consist of high-risk credit-linked derivatives. They are marketed as a proxy investment in well-known firms.
A Ms Lau, who sunk US$100,000 of her grandfather's savings into Lehman minibonds, said the settlement offer did not adequately reflect the banks' responsibility to investors. She said she felt the banks were trying to absolve themselves without shouldering responsibility by paying off investors through the settlement deal. "I still haven't told my grandfather that the money is in Lehman minibonds," Ms Lau said. "I'm afraid he wouldn't be able to take the news if I told him."
Kitty Lai, who poured HK$6 million into minibonds, flatly rejected the deal and accused the government and regulators of siding with the banks.
"You cannot trust the government or the Hong Kong Monetary Authority. Sometimes, when I think about this, I just want to kill myself," Ms Lai said.
To Kam-leung, whose 66-year-old father purchased Lehman minibonds from the Bank of Communications, said his family would accept the deal even though they felt it was unreasonable.
"It's because we don't want it to drag on. And we only invested HK$120,000, which is a comparatively small amount," he said. "My father suffers from diabetes and the minibond issue has troubled us for months. We also bear part of the responsibility because my father trusted the bank staff and didn't consult us before signing the documents."
SCMP:The right rules, and the facts to invest prudently
23 July 2009
The proposed settlement brokered by the Securities and Futures Commission offers a swift and practical way to resolve the long-running minibond controversy. It will not settle all outstanding claims, but it is a realistic solution that should help most retail investors recover up to 70 per cent of their investments, and possibly more, depending on market conditions. No doubt some will still reject it, having clamoured for a 100 per cent refund. But those who want to put the stressful matter behind them can now do so on generally fair terms.
Banks responsible for selling the complex products stand to lose most. But in return for their agreement to settle, regulators will drop all investigations against them. The banks are more willing to settle now because recent market rallies have pushed up the value of the collateral tied to the products. That should help lessen their losses and recover more money for investors.
The deal, therefore, is a compromise that will hopefully bring this sorry saga to an end. But lessons need to be learned if we are to avoid a repeat. The episode has exposed cracks in the regulatory system and lax monitoring. It turns out that many complex financial products proffered by banks are not regulated by the commission or the Monetary Authority. Financial institutions need to be reined in by closing such loopholes. A strong argument can be made that complicated derivative instruments such as minibonds should not be sold to ordinary investors.
On the other hand, investors cannot be absolved of all responsibility. They cannot plead ignorance and demand a refund every time they lose their shirts. Without doubt, some elderly clients and victims of blatant mis-selling deserve to have all their money back. But the majority of minibond investors simply made a bad investment and should accept some losses. There needs to be more of a culture of risk awareness. If something looks too good to be true, it probably is. The latest offer is, nonetheless, an improvement on banks' original proposal to buy back the minibonds at their market value, which is a fraction of what investors paid for them.
The minibonds are just one of many types of derivative instruments being sold to ordinary investors that have caused catastrophic losses during the market downturn. The notorious "accumulators" have caused much grief, but because most who bought them were high-net-worth individuals, regulators have been unwilling to get involved. Already, buyers of so-called Octave Notes - complex derivatives that have gone bust like the minibonds - are demanding compensation. The minibond settlement may offer a template to resolve their dispute as well, and perhaps others. But the line has to be drawn somewhere. Only where there is evidence of abuses should compensation be paid.
Generally, there should be broader markets and greater choices for investors. However, financial institutions should not use this as a pretext to sell fiendishly complex derivative products to gullible investors. Forcing banks to establish better complaint channels for clients and disclose investment information in simple language are moves in the right direction. A strong regulatory regime must not allow problems to fall through the cracks - and ensure people have the information they need to make appropriate investment choices. Greater transparency needs to be enforced in banks' dealings with clients. The financial crisis has forced many jurisdictions around the world to reform their regulatory systems. Hong Kong too needs to follow suit - and make sure it gets it right this time.
The proposed settlement brokered by the Securities and Futures Commission offers a swift and practical way to resolve the long-running minibond controversy. It will not settle all outstanding claims, but it is a realistic solution that should help most retail investors recover up to 70 per cent of their investments, and possibly more, depending on market conditions. No doubt some will still reject it, having clamoured for a 100 per cent refund. But those who want to put the stressful matter behind them can now do so on generally fair terms.
Banks responsible for selling the complex products stand to lose most. But in return for their agreement to settle, regulators will drop all investigations against them. The banks are more willing to settle now because recent market rallies have pushed up the value of the collateral tied to the products. That should help lessen their losses and recover more money for investors.
The deal, therefore, is a compromise that will hopefully bring this sorry saga to an end. But lessons need to be learned if we are to avoid a repeat. The episode has exposed cracks in the regulatory system and lax monitoring. It turns out that many complex financial products proffered by banks are not regulated by the commission or the Monetary Authority. Financial institutions need to be reined in by closing such loopholes. A strong argument can be made that complicated derivative instruments such as minibonds should not be sold to ordinary investors.
On the other hand, investors cannot be absolved of all responsibility. They cannot plead ignorance and demand a refund every time they lose their shirts. Without doubt, some elderly clients and victims of blatant mis-selling deserve to have all their money back. But the majority of minibond investors simply made a bad investment and should accept some losses. There needs to be more of a culture of risk awareness. If something looks too good to be true, it probably is. The latest offer is, nonetheless, an improvement on banks' original proposal to buy back the minibonds at their market value, which is a fraction of what investors paid for them.
The minibonds are just one of many types of derivative instruments being sold to ordinary investors that have caused catastrophic losses during the market downturn. The notorious "accumulators" have caused much grief, but because most who bought them were high-net-worth individuals, regulators have been unwilling to get involved. Already, buyers of so-called Octave Notes - complex derivatives that have gone bust like the minibonds - are demanding compensation. The minibond settlement may offer a template to resolve their dispute as well, and perhaps others. But the line has to be drawn somewhere. Only where there is evidence of abuses should compensation be paid.
Generally, there should be broader markets and greater choices for investors. However, financial institutions should not use this as a pretext to sell fiendishly complex derivative products to gullible investors. Forcing banks to establish better complaint channels for clients and disclose investment information in simple language are moves in the right direction. A strong regulatory regime must not allow problems to fall through the cracks - and ensure people have the information they need to make appropriate investment choices. Greater transparency needs to be enforced in banks' dealings with clients. The financial crisis has forced many jurisdictions around the world to reform their regulatory systems. Hong Kong too needs to follow suit - and make sure it gets it right this time.
Wednesday, July 22, 2009
The Standard:Deal tones down minibond anger
23 July 2009
The tone of the beleaguered holders of Lehman minibonds has now softened, but many said yesterday they still find the compensation deal unacceptable.
A 74-year-old minibond investor surnamed Yiu said he wants the government to make the banks repay him 100 percent.
``I was about to renew my time deposit on November 2, 2007, when CITIC Ka Wah Bank cheated me to switch to equity-linked products,'' Yiu said.
Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the compensation agreement was ``not acceptable at all.''
``This is not making sense,'' Chan said. ``The guy who drafted up this agreement _ either he is doing some very tricky thing, or he does not understand Hong Kong people at all.''
One hundred members of the Alliance protested all day yesterday outside the office of the Securities and Futures Commission.
Alliance member Ng Shing-fung said he thinks the banks will still be able to make a profit after compensating minibond investors, so he will refuse to accept the proposal. ``They are simply cheating us once more,'' said Ng, 63.
Raymond So Wai-man, an associate professor of finance at Chinese University of Hong Kong, urged individual investors to take the compensation, as the value of minibond collateral could fall further. ``The monetary value of your minibond has effectively been locked up,'' So said. ``Not getting back the money, you cannot invest even when there is a better investment opportunity.''
Independent lawmaker Priscilla Leung Mei-fun said minibond holders should seriously consider the proposal because they will have to resort to lawsuits to get full compensation. Sixty percent compensation is a fair baseline, Leung said.
Chan said the problem is the settlement agreement does not apply to so- called ``experienced investors,'' defined as people who had invested in leveraged or structured products five times in the three years before buying minibonds.
Even conservative investors in Hong Kong may have been convinced by banks to put their money into a foreign exchange-linked deposit, he said.
``I tell you, Martin Wheatley has no sense about the Hong Kong people,'' Chan said. ``First he says `minibonds' does not mean `bonds,' then he comes up with this agreement.''
However, Chan admitted the basic framework of the agreement seems ``reasonable at first glance. But when you think more about it, it gives you the sense investors are being trapped.''
Chan estimated about half the members of his group may qualify as ``experienced investors'' and would not be eligible for compensation. He said the Alliance will meet Sunday to decide whether to pursue further action.
Minibond investor Wong Kin-ming, 54, said he thinks the government is treating the public unfairly. ``Government policies are two-sided,'' Wong added. ``Sun Hung Kai just paid us all back.''
The tone of the beleaguered holders of Lehman minibonds has now softened, but many said yesterday they still find the compensation deal unacceptable.
A 74-year-old minibond investor surnamed Yiu said he wants the government to make the banks repay him 100 percent.
``I was about to renew my time deposit on November 2, 2007, when CITIC Ka Wah Bank cheated me to switch to equity-linked products,'' Yiu said.
Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the compensation agreement was ``not acceptable at all.''
``This is not making sense,'' Chan said. ``The guy who drafted up this agreement _ either he is doing some very tricky thing, or he does not understand Hong Kong people at all.''
One hundred members of the Alliance protested all day yesterday outside the office of the Securities and Futures Commission.
Alliance member Ng Shing-fung said he thinks the banks will still be able to make a profit after compensating minibond investors, so he will refuse to accept the proposal. ``They are simply cheating us once more,'' said Ng, 63.
Raymond So Wai-man, an associate professor of finance at Chinese University of Hong Kong, urged individual investors to take the compensation, as the value of minibond collateral could fall further. ``The monetary value of your minibond has effectively been locked up,'' So said. ``Not getting back the money, you cannot invest even when there is a better investment opportunity.''
Independent lawmaker Priscilla Leung Mei-fun said minibond holders should seriously consider the proposal because they will have to resort to lawsuits to get full compensation. Sixty percent compensation is a fair baseline, Leung said.
Chan said the problem is the settlement agreement does not apply to so- called ``experienced investors,'' defined as people who had invested in leveraged or structured products five times in the three years before buying minibonds.
Even conservative investors in Hong Kong may have been convinced by banks to put their money into a foreign exchange-linked deposit, he said.
``I tell you, Martin Wheatley has no sense about the Hong Kong people,'' Chan said. ``First he says `minibonds' does not mean `bonds,' then he comes up with this agreement.''
However, Chan admitted the basic framework of the agreement seems ``reasonable at first glance. But when you think more about it, it gives you the sense investors are being trapped.''
Chan estimated about half the members of his group may qualify as ``experienced investors'' and would not be eligible for compensation. He said the Alliance will meet Sunday to decide whether to pursue further action.
Minibond investor Wong Kin-ming, 54, said he thinks the government is treating the public unfairly. ``Government policies are two-sided,'' Wong added. ``Sun Hung Kai just paid us all back.''
The Standard:Nightmare nears end
23 July 2009
Banks have agreed to splash out more than HK$6 billion to buy back all outstanding Lehman Brothers minibonds.
By doing so, they seek an end to a saga that has run for more than 10 months, sparking deep anger and distress among investors.
The 16 banks that sold the complex products will offer about 29,000 Hong Kong investors - more than 90 percent of those in the SAR who bought the high- risk derivatives linked to the collapsed US bank - an average 70 percent of their investments.
That means banks need to pay out around HK$6.3 billion to repurchase the minibonds.
The scandal, which began last September, has fueled street protests and had senior financial officials testifying before the Legislative Council.
The deal announced yesterday was thrashed out with the banks by the Securities and Futures Commission and the Hong Kong Monetary Authority. It will "provide substantial benefits for the vast majority of customers holding minibonds that would not otherwise be received by them,'' said Martin Wheatley, chief executive of the Securities and Futures Commission, who described the deal as a "good compromise.'' Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung agreed. "Those accepting the offers will be relieved of the delay and uncertainty in going through the liquidation process,'' Chan said.
A bank must pay a price equal to 60 percent of the principal of the original investment for investors below the age of 65, and 70 percent for those aged 65 or more as at July 1. They can retain any coupon payments already received.
Once the underlying collateral is recovered by the banks, each of them will make a further payment of initially up to 10 percent of the principal of the minibonds to customers below the age of 65.
And if recoveries exceed 70 percent, the banks will pay the entire excess amount to those who have accepted the offer, which could take some investors' settlements to 100 percent.
For example, assuming an investment of HK$100 and the product's collateral is worth HK$40, an investor will first receive HK$60 and then another HK$10 for the collateral recovered, taking the total settlement to HK$70.
If the collateral is worth HK$80, the investor will get HK$80. If the collateral is worth HK$100, the investor will be refunded in full.
Banks will make available a total of HK$200 million to the trustee of the minibonds to assist in the recovery of the underlying collateral for each outstanding series of the product. Those who have already reached a settlement with the banks will not qualify for the buyback. However, the banks will make ex-gratia payments to those whose settlements were less than they would receive under the deal announced yesterday. Banks need to inform customers about the offer ``in an expeditious manner'' and put money in their accounts within 30 days of the offer being accepted, according to the HKMA.
Professional investors, including non-individual and experienced investors, are not qualified under the repurchase offer, Wheatley said.
The regulators will call off investigations into the sale and distribution of minibonds by the banks in respect of investors accepting the offer. But authorities will continue investigations if there are claims of deception or other crimes. ``We intend to allocate resources to handle non-Lehman complaints,'' said Choi Yiu-kwan, HKMA deputy chief executive.
Each of the banks will also engage an independent reviewer to examine systems and processes relating to the sale of structured products and then report to authorities. The banks must also commit to the implementation of all recommendations by the reviewer.
A qualified third party also has to be engaged to review and enhance complaint-handling procedures.
``The distributing banks should draw lessons from this incident and properly implement the agreement reached with the regulatory authorities'' on selling structured investment products, Ceajer Chan said.
Speaking on behalf of the banks, David Li Kwok-po, chairman of the Bank of East Asia (0023), said the agreement demonstrates their ``unwavering commitment'' to Hong Kong and the welfare of customers.
Ahead of the repurchase agreement by banks, only brokerages Sun Hung Kai Investment Services and KGI Asia had fully refunded their clients. That occurred earlier this year. As of July 16, the HKMA had received 21,490 complaints concerning Lehman-related products, including minibonds.
Banks have agreed to splash out more than HK$6 billion to buy back all outstanding Lehman Brothers minibonds.
By doing so, they seek an end to a saga that has run for more than 10 months, sparking deep anger and distress among investors.
The 16 banks that sold the complex products will offer about 29,000 Hong Kong investors - more than 90 percent of those in the SAR who bought the high- risk derivatives linked to the collapsed US bank - an average 70 percent of their investments.
That means banks need to pay out around HK$6.3 billion to repurchase the minibonds.
The scandal, which began last September, has fueled street protests and had senior financial officials testifying before the Legislative Council.
The deal announced yesterday was thrashed out with the banks by the Securities and Futures Commission and the Hong Kong Monetary Authority. It will "provide substantial benefits for the vast majority of customers holding minibonds that would not otherwise be received by them,'' said Martin Wheatley, chief executive of the Securities and Futures Commission, who described the deal as a "good compromise.'' Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung agreed. "Those accepting the offers will be relieved of the delay and uncertainty in going through the liquidation process,'' Chan said.
A bank must pay a price equal to 60 percent of the principal of the original investment for investors below the age of 65, and 70 percent for those aged 65 or more as at July 1. They can retain any coupon payments already received.
Once the underlying collateral is recovered by the banks, each of them will make a further payment of initially up to 10 percent of the principal of the minibonds to customers below the age of 65.
And if recoveries exceed 70 percent, the banks will pay the entire excess amount to those who have accepted the offer, which could take some investors' settlements to 100 percent.
For example, assuming an investment of HK$100 and the product's collateral is worth HK$40, an investor will first receive HK$60 and then another HK$10 for the collateral recovered, taking the total settlement to HK$70.
If the collateral is worth HK$80, the investor will get HK$80. If the collateral is worth HK$100, the investor will be refunded in full.
Banks will make available a total of HK$200 million to the trustee of the minibonds to assist in the recovery of the underlying collateral for each outstanding series of the product. Those who have already reached a settlement with the banks will not qualify for the buyback. However, the banks will make ex-gratia payments to those whose settlements were less than they would receive under the deal announced yesterday. Banks need to inform customers about the offer ``in an expeditious manner'' and put money in their accounts within 30 days of the offer being accepted, according to the HKMA.
Professional investors, including non-individual and experienced investors, are not qualified under the repurchase offer, Wheatley said.
The regulators will call off investigations into the sale and distribution of minibonds by the banks in respect of investors accepting the offer. But authorities will continue investigations if there are claims of deception or other crimes. ``We intend to allocate resources to handle non-Lehman complaints,'' said Choi Yiu-kwan, HKMA deputy chief executive.
Each of the banks will also engage an independent reviewer to examine systems and processes relating to the sale of structured products and then report to authorities. The banks must also commit to the implementation of all recommendations by the reviewer.
A qualified third party also has to be engaged to review and enhance complaint-handling procedures.
``The distributing banks should draw lessons from this incident and properly implement the agreement reached with the regulatory authorities'' on selling structured investment products, Ceajer Chan said.
Speaking on behalf of the banks, David Li Kwok-po, chairman of the Bank of East Asia (0023), said the agreement demonstrates their ``unwavering commitment'' to Hong Kong and the welfare of customers.
Ahead of the repurchase agreement by banks, only brokerages Sun Hung Kai Investment Services and KGI Asia had fully refunded their clients. That occurred earlier this year. As of July 16, the HKMA had received 21,490 complaints concerning Lehman-related products, including minibonds.
Help Minibond investors to secure the collateral
Mr. Tan
If govt is reluctant to force FI to compensate like what happen in Hk, perhaps you can suggest that it takes the leader role to help Minibond investors to secure the Collateral [GE capital bonds etc] which has up to 70% value for the benefits of the investors.
This is a concrete action that would help all to investors - whether they are compensated or not. Don't forget, many investors are compensated just 10%.
If you read bullet point 3, "banks will make available an amount equivalent to the amount of commission income received by it as a distributor of the outstanding Minibonds to the trustee of the Minibonds to assist in the recovery of the underlying collateral for each outstanding series of Minibonds"
Regards
Steve
If govt is reluctant to force FI to compensate like what happen in Hk, perhaps you can suggest that it takes the leader role to help Minibond investors to secure the Collateral [GE capital bonds etc] which has up to 70% value for the benefits of the investors.
This is a concrete action that would help all to investors - whether they are compensated or not. Don't forget, many investors are compensated just 10%.
If you read bullet point 3, "banks will make available an amount equivalent to the amount of commission income received by it as a distributor of the outstanding Minibonds to the trustee of the Minibonds to assist in the recovery of the underlying collateral for each outstanding series of Minibonds"
Regards
Steve
Petition to Prime Minister (5)
389 people have signed the Petition and provided their full particulars. This is much better than the optimists (including me) had earlier hoped. Our initial target was only 300 signatures. Some pessimists poured cold water on this effort.
Please help to get more people to sign the Petition and achieve the new target of 1,000 signatures.
Q&A US Health Reform
The BBC news website explains the Obama administration's attempts to reform the American healthcare system
http://news.bbc.co.uk/2/hi/americas/8160058.stm
http://news.bbc.co.uk/2/hi/americas/8160058.stm
The Petition is NOT a futile effort
Another blog described my effort to help the investors get a fair settlement as "futile". It is a sad state of affairs that we have a government that ignores the plight and appeal of the people. It is equally sad that we have many cynics who stand by and pass discouraging remarks.
Many signatories know that the petition may be ignored, as it has happened in the past. But, they are willing to come forward to have their voices heard. It is important that their signatures be placed on the record.
The situation has now changed, and it may warrant a re-consideration by our government. All investors in Hong Kong are being compensated at a minimum of 60% to 70% of the invested sum. I believe that the investors in Singpore should be treated on a similar basis, as the systemic mis-selling is similar in both territories.
I hope that everyone will take a positive approach and help to pass the message to all investors to sign the petition.
The petition is intended to include all investors, including those who have bought from the security firms. They have also been advised, either directly or indirectly, by the sales representatives who acted for the security firms. I hope that these investors will read the Petition more widely and come forwqrd to sign it.
Tan Kin Lian
Many signatories know that the petition may be ignored, as it has happened in the past. But, they are willing to come forward to have their voices heard. It is important that their signatures be placed on the record.
The situation has now changed, and it may warrant a re-consideration by our government. All investors in Hong Kong are being compensated at a minimum of 60% to 70% of the invested sum. I believe that the investors in Singpore should be treated on a similar basis, as the systemic mis-selling is similar in both territories.
I hope that everyone will take a positive approach and help to pass the message to all investors to sign the petition.
The petition is intended to include all investors, including those who have bought from the security firms. They have also been advised, either directly or indirectly, by the sales representatives who acted for the security firms. I hope that these investors will read the Petition more widely and come forwqrd to sign it.
Tan Kin Lian
Gathering in Hong Lim Park on 22 Aug 09
I confirm that there will be a gathering in Hong Lim Park on 22 Aug 09 from 5 pm to 6.30 pm. We will arrange for the Petition to be signed, for those who have not signed the online Petition. This Petition is addressed to the Prime Minister. We will arrange for a few people to speak on this issue. Please encourage more people to show up for bigger impact.
So far, I am the only speaker. If you are able to speak, please send an email to me at kinlian@gmail.com. I like to ask the coordinators of the class actions to speak and give an update. You may be able to attract more investors to join the class action.
So far, I am the only speaker. If you are able to speak, please send an email to me at kinlian@gmail.com. I like to ask the coordinators of the class actions to speak and give an update. You may be able to attract more investors to join the class action.
355 people have signed the online Petition to the Prime Minister on the credit-linked notes. We are now aiming for 1,000 signatures. Please pass the word around.
Minibond - misconceptions and unfair criticisms
Dear Mr. Tan,
I would like to respond to the following misconceptions and unfair criticisms:
1) The fixed deposit is about 1.5% in 2007 and you get 5% from minibond. You should have known better. So high differential. Still claims risk?
It is not fair to use 12 months fixed deposit rate because minibond is for 5 years. There are many low risk products offer 4% to 6% returns from the market. E.g. DBS6%NCPS, UOB5.05%NCPS, OCBC5.1%NCPS, OCBC4.2%NCPS…. If we compare the minibond with the OCBC 4.2% and 4.5% preference shares available from the stock market, which we can sell the shares anytime if we need cash, the 5% offered by minibond is not attractive because we can’t touch the money for 5 years.
2) High return high risk, since you get 5%, the risk should be high.
Many financial experts agreed that the reasonable return from long term investments (5 to 10 years) should be around 4% to 6%. A 5% return from minibond should not be considered as high as it is a long term (5 years) investment. All high risk investments are on short term basis, who would want to invest into a long term high risk product?
3) Who ask them to invest blindly on a product which they don’t understand?
Misled by the newspaper advertisements and sales brochures, many investors thought they were buying a five-year bond issued by the six leading banks. It turned out that it is a very complex product which even the sales people from the financial institutions are unable to explain clearly.
4) As a responsible investor, you should have read the prospectus before making the investment.
The minibond prospectus summary is as misleading as the sales brochures. The other parts of the prospectus give plenty of information on the credit ratings of the six leading banks which reinforce the believing that it is a bond issued by the banks.
It is also not realistic to expect an ordinary investor to understand fully the entire prospectus before making an investment. For example, of the tens of thousands of OCBC preferences shares investors, how many of them really read and understand fully the entire prospectus of the preference shares before making the investment?
5) Who would expect Lehman brothers to go bankrupt? (i.e. the risk is low at the time of selling) It is unfortunate that Lehman did fail. You have to accept it and move on.
Minibond is not a bond issued by Lehman or by the six banks. It is a high risk long term complex structure product. Who would dare to invest in a high risk product for 5 years?
Pang
I would like to respond to the following misconceptions and unfair criticisms:
1) The fixed deposit is about 1.5% in 2007 and you get 5% from minibond. You should have known better. So high differential. Still claims risk?
It is not fair to use 12 months fixed deposit rate because minibond is for 5 years. There are many low risk products offer 4% to 6% returns from the market. E.g. DBS6%NCPS, UOB5.05%NCPS, OCBC5.1%NCPS, OCBC4.2%NCPS…. If we compare the minibond with the OCBC 4.2% and 4.5% preference shares available from the stock market, which we can sell the shares anytime if we need cash, the 5% offered by minibond is not attractive because we can’t touch the money for 5 years.
2) High return high risk, since you get 5%, the risk should be high.
Many financial experts agreed that the reasonable return from long term investments (5 to 10 years) should be around 4% to 6%. A 5% return from minibond should not be considered as high as it is a long term (5 years) investment. All high risk investments are on short term basis, who would want to invest into a long term high risk product?
3) Who ask them to invest blindly on a product which they don’t understand?
Misled by the newspaper advertisements and sales brochures, many investors thought they were buying a five-year bond issued by the six leading banks. It turned out that it is a very complex product which even the sales people from the financial institutions are unable to explain clearly.
4) As a responsible investor, you should have read the prospectus before making the investment.
The minibond prospectus summary is as misleading as the sales brochures. The other parts of the prospectus give plenty of information on the credit ratings of the six leading banks which reinforce the believing that it is a bond issued by the banks.
It is also not realistic to expect an ordinary investor to understand fully the entire prospectus before making an investment. For example, of the tens of thousands of OCBC preferences shares investors, how many of them really read and understand fully the entire prospectus of the preference shares before making the investment?
5) Who would expect Lehman brothers to go bankrupt? (i.e. the risk is low at the time of selling) It is unfortunate that Lehman did fail. You have to accept it and move on.
Minibond is not a bond issued by Lehman or by the six banks. It is a high risk long term complex structure product. Who would dare to invest in a high risk product for 5 years?
Pang
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