Someone criticized me for not providing an alternative solution to the current practice of relying on scholars to run our nation.
I like the system adopted in America. The citizens elect the President based on the platform of policies presented by the candidate to the people. After taking office, the President appoints suitable people to manage the various departments and agencies of the government. These appointees have to be approved by the Congress – whose members were also elected by the people.
This system allows the Present to choose the most suitable candidates from the political, business, community and academic establishments. There is no shortage of talents. The appointees are people who share the President’s visions and strategies, which were also chosen by the people. Most of them are leaders in their own right and are likely to have wide knowledge and experience of their fields.
Critics may argue that the American system does not produce the economic success that is achieved by other models, such as Singapore or China. These critics overlook the fact that economic performance is not the only factor, although it is an important factor, that determines the election of the leaders. This factor has to be balanced against other factors, such as the social policies, quality of life and America’s role in providing security and leadership to the world.
The democratic nature of the American system gets the right balance of policies, that are suitable for the challenges of the time. They are even able to elect an African American to be the President!
A negative factor for the American system is the power of the business lobby. It has led to the wide gap in income and wealth – a factor shared by the Singapore system. I hope that under President Obama and the Democratic control of both houses of Congress, the situation will be changed over the next few years – for the better of America and the world.
The lament of the shortage of talents in Singapore is a product of our Singapore model. We reap what we sow.
There is a workable alternative to the Singapore model of using scholars to run the nation. We should examine if the American system can be adopted here. The small size of Singapore actually makes it easier for the country to be managed. We only need to have an open mind and explore other models.
Tan Kin Lian
Monday, August 31, 2009
Incidents at Changi Airport
I shared two stories about the security clearance at Changi Airport. The multi-million dollar automated system failed this morning. Read here.
Survey results - blogs of political parties
Here are the survey results, based on 33 replies. This is too small, and tends to be biased towards the opposition parties.
Survey: SMU Risk Management & Insurance
I have taught three terms of Risk Management & Insurance (about 100 students). Many of them have graduated and do not use their SMU email address. I like to get in touch with these students. If you were my student, please update your particulars here.
If you are in touch with other students in my past years' classes, please ask them to update their particulars also. Pass the word around.
Negative return from endowment policies
Dear Mr Tan,
Thank you for all your effort at this site and FiSCA (I just became a member). I really appreciate all that you are doing for us consumers.
Recently I have decided to give up 4 endowment policies. I have not actually terminate them but I have informed my agent of my desire. I have held them for 10 years and have another 10-15 years more to go. The current cash value is very low. I would only get back half of what I put in if I were to give them up now. Two policies were meant for my son's education and the other two are for my own savings.
I am thinking of cashing them out now and putting them in other forms of investment that would hopefully give me a better return by the time my son enters college. He is 14 now. I do not have a lot of time left as you can see. What is the best way to grow the money to meet that goal? The policies will only mature when he is 24 and 25. Are the policies worth keeping or are there better options?
I really hope to hear your advise on this.
REPLY
Please read this FAQ. I hope that it will help you to make a better decision.
Thank you for all your effort at this site and FiSCA (I just became a member). I really appreciate all that you are doing for us consumers.
Recently I have decided to give up 4 endowment policies. I have not actually terminate them but I have informed my agent of my desire. I have held them for 10 years and have another 10-15 years more to go. The current cash value is very low. I would only get back half of what I put in if I were to give them up now. Two policies were meant for my son's education and the other two are for my own savings.
I am thinking of cashing them out now and putting them in other forms of investment that would hopefully give me a better return by the time my son enters college. He is 14 now. I do not have a lot of time left as you can see. What is the best way to grow the money to meet that goal? The policies will only mature when he is 24 and 25. Are the policies worth keeping or are there better options?
I really hope to hear your advise on this.
REPLY
Please read this FAQ. I hope that it will help you to make a better decision.
You can also read other FAQs here.
High prices in Singapore
Dear Mr TAN
The prices of electrical and electronic engineering products and falling by the day reflecting the advent of sciences and technology, increasing scale of economy, reducing labour cost from cheap foreign labour, falling cost of capital, intensive competition and the substitution of labour with automation.
But the prices of financial services are rising significantly by the day, despite the advent of information technology, ATM humanless banking, increasing scale of economy, reducing labour cost from cheap foreign labour, falling cost of capital, intensive competition and e-documentation.
Is it NOT cheaper NOW to issue and process a bank draft or money order?
Is it NOT cheaper NOW to issue and maintain an insurance policy?
Also, there is a significant management failure in the efficacy, efficiency, economy of distribution cost in Singapore.
Examples: The exact same box of Nestle ice cream is sold in JB supermart at RM5.05 but it is sold in Singapore supermart at S$5.05. The exact same bottle of Narcissus rice wine is sold in Shenzhen China at RMB5.00 but it is sold in Singapore supermart at S$5.00.
Same Air, Train and Bus return trip tickets are sold in Malaysia at RM but in Singapore at S$.
Why are hawker stores NOT restricted to owner operators and instead, there is an intermediary sub-store landlord to increase the cost of operations. Please advise WHAT and WHERE distribution management had gone WRONG.
Thanks & regards
T E O
The prices of electrical and electronic engineering products and falling by the day reflecting the advent of sciences and technology, increasing scale of economy, reducing labour cost from cheap foreign labour, falling cost of capital, intensive competition and the substitution of labour with automation.
But the prices of financial services are rising significantly by the day, despite the advent of information technology, ATM humanless banking, increasing scale of economy, reducing labour cost from cheap foreign labour, falling cost of capital, intensive competition and e-documentation.
Is it NOT cheaper NOW to issue and process a bank draft or money order?
Is it NOT cheaper NOW to issue and maintain an insurance policy?
Also, there is a significant management failure in the efficacy, efficiency, economy of distribution cost in Singapore.
Examples: The exact same box of Nestle ice cream is sold in JB supermart at RM5.05 but it is sold in Singapore supermart at S$5.05. The exact same bottle of Narcissus rice wine is sold in Shenzhen China at RMB5.00 but it is sold in Singapore supermart at S$5.00.
Same Air, Train and Bus return trip tickets are sold in Malaysia at RM but in Singapore at S$.
Why are hawker stores NOT restricted to owner operators and instead, there is an intermediary sub-store landlord to increase the cost of operations. Please advise WHAT and WHERE distribution management had gone WRONG.
Thanks & regards
T E O
Sunday, August 30, 2009
FISCA - Choosing the people
I do not choose the people to join the FISCA committee. They will be elected by the members.
For the protem committee, I only managed to get sufficient people to sign to get FISCA started. Some of them may not wish to be in the limelight.
The FISCA committee will be elected by the members. They will not be chosen by Tan Kin Lian. But I will do my best to encourage people of integrity to step forward. It is difficult to know if someone has integrity, unless one works with that person. More importantly, we should set certain principles for people to abide by.
I hope that members of FISCA knows that they can play a part in building an organisation that is strong, and run by people of integrity. Do not expert other people to carry this burden for you. This burden has to be shared.
For the protem committee, I only managed to get sufficient people to sign to get FISCA started. Some of them may not wish to be in the limelight.
The FISCA committee will be elected by the members. They will not be chosen by Tan Kin Lian. But I will do my best to encourage people of integrity to step forward. It is difficult to know if someone has integrity, unless one works with that person. More importantly, we should set certain principles for people to abide by.
I hope that members of FISCA knows that they can play a part in building an organisation that is strong, and run by people of integrity. Do not expert other people to carry this burden for you. This burden has to be shared.
Saturday, August 29, 2009
Future for cloud companies
Read this report about how work will be done in the future, made possible by the impact of technology.
Telecommuting is a trend for the future
More people are working from home, i.e. telecommuting. It has positive and negative aspects. Find out more here.
Mecca - for Muslims only
I wanted to visit Mecca. My friend said that this not possible. Mecca can only be visited by Muslims. This is posted in large signs along the road to Mecca.
I have a guide book that explains the rites of Hajj, Umrah, Ihram, Tawaf, Sai, etc. It was quite educational.
I have a guide book that explains the rites of Hajj, Umrah, Ihram, Tawaf, Sai, etc. It was quite educational.
Shopping in Jeddah at midnight
I went to the Balad (old town) at midnight. The roads are congested. Many people travelled at night in Jeddah. Night becomes like day in the hot summer.
The streets at Balad is busy and crowded. I enjoyed the architecture of the old buildings. The windows are constructed with thin strips of wood allowing the women to look out into the streets, without being seen. My friend said that the roads in Cairo Egypt also have similar structures.
I left the souk (market) close to 2 AM. That is the time that most shops close in Jeddah during Ramadan.
The streets at Balad is busy and crowded. I enjoyed the architecture of the old buildings. The windows are constructed with thin strips of wood allowing the women to look out into the streets, without being seen. My friend said that the roads in Cairo Egypt also have similar structures.
I left the souk (market) close to 2 AM. That is the time that most shops close in Jeddah during Ramadan.
FISCA Committee
Someone expressed the concern that the FISCA committee may include people working for the banks. He had his money burnt through the Mini-bond and does not trust people anymore (including FISCA).
There is no need for this worry. The people from the banks will not be interested to sit in the FISCA committee. Even if they personally support the aims of FISCA, they will not dare to be involved (for the sake of their jobs). Similarly, most financial advisers are not likely to support or be involved with FISCA.
At present, we only have a protem committee in FISCA, and some of these members do not wish to be in the limelight. This is a temporary situation. FISCA will have to call an election. The profile of the elected Committee members will be put up in the website after the election.
FISCA will have the other challenge. How to get the financial experts to be involved in the work. Do not think that all this information can drop easily from the sky. Consumers should support FISCA now, if they do not wish to see their money burnt again in the future.
Tan Kin Lian
There is no need for this worry. The people from the banks will not be interested to sit in the FISCA committee. Even if they personally support the aims of FISCA, they will not dare to be involved (for the sake of their jobs). Similarly, most financial advisers are not likely to support or be involved with FISCA.
At present, we only have a protem committee in FISCA, and some of these members do not wish to be in the limelight. This is a temporary situation. FISCA will have to call an election. The profile of the elected Committee members will be put up in the website after the election.
FISCA will have the other challenge. How to get the financial experts to be involved in the work. Do not think that all this information can drop easily from the sky. Consumers should support FISCA now, if they do not wish to see their money burnt again in the future.
Tan Kin Lian
Friday, August 28, 2009
A nation run by scholars
Two senior persons, a company director and a businessman, expressed a similar view. They are concerned that Singapore is now run by scholars who do not have experience about the business environment and try to solve the problems by writing papers.
The handling of the mini-bond crisis is an example. Although the initial response of the authority was appropriate, the subsequent events (especially after the Hong Kong settlement) needed a new response. But, the scholars were not able to handle this type of situation.
There were incidences of cheating in motor insurance claims. The situation is getting worse over the years. Reports made to the authority were not followed up or investigated, but were pushed aside. The insurance companies were asked to solve this problem, but they do not have the regulatory power.
Many foreign workers reported that they had to pay a large sum of money (USD 9,000) to get a permit to work in Singapore. There were a suspicion that a large part of this money goes to the pocket of the employer who held the work permits.
A minister was reported to have said that as the payment was made in a foreign country, it falls outside the jurisdiction of Singapore. Surely, an investigation can be done in Singapore to see if the employer had received some payments?
This lack of practical experience applies not only to the senior levels of the civil service, but higher up in the chain of command. We have to move away from writing papers to the real issues faced by the people in Singapore.
Tan Kin Lian
The handling of the mini-bond crisis is an example. Although the initial response of the authority was appropriate, the subsequent events (especially after the Hong Kong settlement) needed a new response. But, the scholars were not able to handle this type of situation.
There were incidences of cheating in motor insurance claims. The situation is getting worse over the years. Reports made to the authority were not followed up or investigated, but were pushed aside. The insurance companies were asked to solve this problem, but they do not have the regulatory power.
Many foreign workers reported that they had to pay a large sum of money (USD 9,000) to get a permit to work in Singapore. There were a suspicion that a large part of this money goes to the pocket of the employer who held the work permits.
A minister was reported to have said that as the payment was made in a foreign country, it falls outside the jurisdiction of Singapore. Surely, an investigation can be done in Singapore to see if the employer had received some payments?
This lack of practical experience applies not only to the senior levels of the civil service, but higher up in the chain of command. We have to move away from writing papers to the real issues faced by the people in Singapore.
Tan Kin Lian
Jeddah - shopping during Ramadan
The shopping mall next to the hotel opened in the afternoon. I went into the supermarket to buy a few drinks and snacks. There was no staff at the checkout counters. Some customers, who had done their shopping, were waiting at the counter.
I learned that the counters were closed for 15 minutes, while the staff went for their prayers. They returned back later, and it became busy again. The customer told me that this would happen three times each day (even outside of Ramadan).
I learned that the counters were closed for 15 minutes, while the staff went for their prayers. They returned back later, and it became busy again. The customer told me that this would happen three times each day (even outside of Ramadan).
Opponent of US health reform yield fear weapon
Read this report.
* Fear motivates people more than facts
* Study shows people will seek facts to support beliefs
* Positive emotional appeals can counter the effect
* Fear motivates people more than facts
* Study shows people will seek facts to support beliefs
* Positive emotional appeals can counter the effect
Thursday, August 27, 2009
Jeddah during Ramadan
I am now in Jeddah, Saudi Arabia. It is the month of Ramandan. The city is quiet and many business activities are scaled down. The fitness center in the hotel opens only at 9.30 am. The hotel coffee house is closed. Breakfast has to be taken through room service.
Regular update of bank deposit rates
A FISCA volunteer updates the bank interest rate on a regular basis. The latest update is shown here. I hope that you find it useful.
Asset share of your life insurance policy
The Monetary Authority of Singapore has stated that insurance companies are required to compute the asset share for each cohort of participating policies and that the insurer needs to have a "governance framework" to ensure that the bonuses are distributed fairly to policyholders. They also declared that the law has stated that all the assets in the participating funds belong to the policyholders and that there is no "orphaned money".
This approach has a fundamental weakness. It is possible for the insurer to under-declare the bonus or to pay less than a fair value to the policyholder of a terminated policy, and to accumulate the "surplus" (although known as the "estate" or "orphaned money") in the life insurance fund. This has been the practice over the past decades, prior to the introduction of the concept of "asset share".
The MAS approach relies on a "governance framework" involving the appointed actuary and the board of directors, who are made responsible for the "fair treatment of policyholders". There is no independent party representing the interest of the policyholders in this arrangement. Some people refer to this arrangement as appointing the fox to guard the hen house.
The regulator in Malaysia has adopted the concept of "asset share" in a simple and fair way. The key elements are:
a) The asset share has to be computed for each policy, taking the actual premium and investment income and deducting the actual expenses, based on the actual experience of the policy.
b) The insurer is free to declare the bonus in any appropriate manner, to ensure its future solvency.
c) The asset share has to be paid to the policyholder on the termination of the policy after a certain number of years, and on maturity.
I hope that MAS will adopt the approach used in Malaysia. It can be done quite easily and will produce fair results that do not rely on the honesty of the "governance framework".
Tan Kin Lian
This approach has a fundamental weakness. It is possible for the insurer to under-declare the bonus or to pay less than a fair value to the policyholder of a terminated policy, and to accumulate the "surplus" (although known as the "estate" or "orphaned money") in the life insurance fund. This has been the practice over the past decades, prior to the introduction of the concept of "asset share".
The MAS approach relies on a "governance framework" involving the appointed actuary and the board of directors, who are made responsible for the "fair treatment of policyholders". There is no independent party representing the interest of the policyholders in this arrangement. Some people refer to this arrangement as appointing the fox to guard the hen house.
The regulator in Malaysia has adopted the concept of "asset share" in a simple and fair way. The key elements are:
a) The asset share has to be computed for each policy, taking the actual premium and investment income and deducting the actual expenses, based on the actual experience of the policy.
b) The insurer is free to declare the bonus in any appropriate manner, to ensure its future solvency.
c) The asset share has to be paid to the policyholder on the termination of the policy after a certain number of years, and on maturity.
I hope that MAS will adopt the approach used in Malaysia. It can be done quite easily and will produce fair results that do not rely on the honesty of the "governance framework".
Tan Kin Lian
Whistleblower tells of America's hidden nightmare for its sick poor
Wednesday, August 26, 2009
Travel to Jeddah, Saudi Arabia
I will be in Jeddah in Saudi Arabia over the next four days. Jeddah is a city quite close to Mecca, where millions of Muslims visit each year on the pilgrimage.
On the banks of the Red Sea, Jeddah is a key port in Saudi Arabia and the world’s largest open-air art gallery. Landscaped with natural art depicting Arabic culture, the city is decorated with sculpture throughout the city.
Although I will be away for the next few days, I have created several postings which will appear in my blog on the days that I am away. I shall also log in at convenient times to moderate the comments in my blog.
On the banks of the Red Sea, Jeddah is a key port in Saudi Arabia and the world’s largest open-air art gallery. Landscaped with natural art depicting Arabic culture, the city is decorated with sculpture throughout the city.
Although I will be away for the next few days, I have created several postings which will appear in my blog on the days that I am away. I shall also log in at convenient times to moderate the comments in my blog.
Join FISCA
I like to ask all visitors to my blog to join FISCA. Please give your support to this new association.
FISCA website
FISCA application
FISCA website
FISCA application
Low wages and purchasing power in Singapore
Read this article.
Conclusion
The high cost of living coupled with low wages and domestic purchasing power condemns the average Singapore worker to an ignonimous, monotonus and stressful working life. Singapore workers have to work harder to earn the same amount of money and save for a longer period to purchase the same product.
In 1991, then Prime Minister Goh Chok Tong promised Singaporeans that we will be able to achieve the “Swiss standard of living” within a decade. Ten years later, we have a living standard which is closer to Russia than Switzerland.
Like Singapore, the Russians has a low wage and domestic purchasing power and Russia, especially the city of Moscow, has one of the highest cost of living in the world.
Conclusion
The high cost of living coupled with low wages and domestic purchasing power condemns the average Singapore worker to an ignonimous, monotonus and stressful working life. Singapore workers have to work harder to earn the same amount of money and save for a longer period to purchase the same product.
In 1991, then Prime Minister Goh Chok Tong promised Singaporeans that we will be able to achieve the “Swiss standard of living” within a decade. Ten years later, we have a living standard which is closer to Russia than Switzerland.
Like Singapore, the Russians has a low wage and domestic purchasing power and Russia, especially the city of Moscow, has one of the highest cost of living in the world.
Petition to the Prime Minister (2)
Some people were disappointed that the hard work in organising the Petition had been wasted, if the Prime Minister does not care and just passes the Petition to the Monetary Authority of Singapore.
We should look at this matter from a different angle. 777 people have studied the issue and signed the Petition. These people now know the issue more clearly. Other people who did not sign the Petiton (because they were not directly involved) also understand the issue better.
We should be patient and continue to find ways to put our views across. We should not expect miracle results. The bigger goal should be to change how things are run in Singapore. Every situation, such as this, add to the process of change.
Tan Kin Lian
Petition.
We should look at this matter from a different angle. 777 people have studied the issue and signed the Petition. These people now know the issue more clearly. Other people who did not sign the Petiton (because they were not directly involved) also understand the issue better.
We should be patient and continue to find ways to put our views across. We should not expect miracle results. The bigger goal should be to change how things are run in Singapore. Every situation, such as this, add to the process of change.
Tan Kin Lian
Petition.
Review of National Service
This letter was sent to the Straits Times Forum on 11 August, and placed under consideration for over 2 weeks (pehaps waiting for clearance from somewhere up there). I assume that it has been rejected, although there was no formal reply.
Editor
I refer to the letter by Xiao Fuchen entitled “NS for adult new citizens not practical” (ST 11 Aug).
I agree with Xiao Fuchen from another angle. If this is made mandatory, very few foreigners will want to take up citizenship, precisely for the reason that it will disrupt their careers and earning power. This is a burden that is now being shouldered by male Singaporeans, who are not given any choice on this matter.
After 44 years of independence and prosperity, I hope that it is time to review the role of national service. Perhaps we should now have a professional army to defend our nation. Already, we are spending a large budget on the purchase of military hardware. The current budget could be re-allocated to allow payment of competitive salaries to career soldiers. Modern defence does not require a large number of infantry soldiers anyway.
If there is still the need to continue with a citizen army, I argue that the citizens serving full time National Service should be paid an adequate allowance, similar to what they would earn in the private sector. They should not be required to shoulder an unfair burden to defend the nation, when citizenships are offered to foreigners without a similar responsibility.
If this increases the defence budget, I suggest that the Government considers adopting the Swiss model which requires residents exempt from the compulsory military service to pay a 3% additional annual income tax, popularly known as the “defence tax”, until the age of 30.
Tan Kin Lian
Editor
Straits Times
I refer to the letter by Xiao Fuchen entitled “NS for adult new citizens not practical” (ST 11 Aug).
I agree with Xiao Fuchen from another angle. If this is made mandatory, very few foreigners will want to take up citizenship, precisely for the reason that it will disrupt their careers and earning power. This is a burden that is now being shouldered by male Singaporeans, who are not given any choice on this matter.
After 44 years of independence and prosperity, I hope that it is time to review the role of national service. Perhaps we should now have a professional army to defend our nation. Already, we are spending a large budget on the purchase of military hardware. The current budget could be re-allocated to allow payment of competitive salaries to career soldiers. Modern defence does not require a large number of infantry soldiers anyway.
If there is still the need to continue with a citizen army, I argue that the citizens serving full time National Service should be paid an adequate allowance, similar to what they would earn in the private sector. They should not be required to shoulder an unfair burden to defend the nation, when citizenships are offered to foreigners without a similar responsibility.
If this increases the defence budget, I suggest that the Government considers adopting the Swiss model which requires residents exempt from the compulsory military service to pay a 3% additional annual income tax, popularly known as the “defence tax”, until the age of 30.
Tan Kin Lian
Challenges for the Free Market
The English Premium League (EPL) likes the telcos to compete for the rights to their shows, as the competition will increase the fees payable to them. SingTel and Starhub had been competing against each other for the rights, leading to higher charges payable by the viewing public.
There is some suggest that SingTel and Starhub will work together to submit a joint bid. EPL will object and may reject it. More importantly, is this a monopoly in reverse, where the combined buying power will bring down the price?
A similar situation has happened in the pricing of iron ore and other mineral products. China is a big buyer of these products. Two companies in Australia are big producers. There has been some dispute on the pricing of these products.
These are examples of the failure of the free market to determine the correct prices. When certain producers or buyers have a dominant share of the market, they can exercise pricing power to the detriment of the other party.
It is quite dangerous to rely on the free market for pricing, when it can be subject to many practical challenges. There must be some other ways to ensure a fair price, rather than depending on the free market blindly. The new approach requires the people in charge to exercise their judgement, using a more transparent process where all the affected parties are able to present their views.
There are many aspects of life in Singapore, where the reliance on the free market to determine prices has not worked well. They are in the public transport, power, water, health care and financial services. I hope that a new approach can be taken on these matters.
Tan Kin Lian
There is some suggest that SingTel and Starhub will work together to submit a joint bid. EPL will object and may reject it. More importantly, is this a monopoly in reverse, where the combined buying power will bring down the price?
A similar situation has happened in the pricing of iron ore and other mineral products. China is a big buyer of these products. Two companies in Australia are big producers. There has been some dispute on the pricing of these products.
These are examples of the failure of the free market to determine the correct prices. When certain producers or buyers have a dominant share of the market, they can exercise pricing power to the detriment of the other party.
It is quite dangerous to rely on the free market for pricing, when it can be subject to many practical challenges. There must be some other ways to ensure a fair price, rather than depending on the free market blindly. The new approach requires the people in charge to exercise their judgement, using a more transparent process where all the affected parties are able to present their views.
There are many aspects of life in Singapore, where the reliance on the free market to determine prices has not worked well. They are in the public transport, power, water, health care and financial services. I hope that a new approach can be taken on these matters.
Tan Kin Lian
End of life issues need to be addressed
What is the difference between:
a) suicide
b) euthanasia
c) prolong life
d) prolong death?
Read this article.
Petition to the Prime Minister
I have sent the Petition to the Prime Minister. It is dated 26 August and contained 777 signatures. The Prime Minister's Office has acknowledged the letter and sent it to the Monetary Authority of Singapore. I hope that they will pay attention to the Prime Minister's request.
Petition.
Petition.
Tuesday, August 25, 2009
St Times: Tan Kin Lian launches new consumer body
A NEW consumer body that aims to help educate retail investors and keep close tabs on financial institutions was launched yesterday.
Formed by former NTUC Income chief executive Tan Kin Lian, the Financial Services Consumers Association (Fisca) is an independent not-for-profit organisation.
Mr Tan, who has come out of retirement to act as president of Fisca, said the new association will focus on researching financial and investment products that are distributed here, and educating the public about saving and investing.
'The key aims of Fisca are to educate consumers on financial matters and to help them select financial products that give good value for their savings and investments,' said Mr Tan.
Fisca's formation comes after thousands of local investors lost millions of dollars from complex structured products that were linked to collapsed United States investment bank Lehman Brothers. These included DBS High Notes 5, Minibonds, Jubilee Linkearner and Pinnacle Notes.
Mr Tan said Fisca's aim will be to drive investor attention away from such glamourous products and encourage them to understand diversification, low-cost investing and the merits of looking for long-term returns.
The association, however, will not guide investors in their selection of stock or in their timing decisions, but instead will provide access to educational resources via its website and through workshops or short courses.
Fisca also plans to produce a white-list of financial products that have low charges, are well diversified and suitable for long-term investment.
'Our strategy is to educate consumers on the practical questions that face them every day like: How much should they save? Where should they put their money? Which are the safe and fair products?' added Mr Tan.
To join Fisca, individuals will have to pay an annual membership fee of $36 that will allow them to access the association's online resources and take part in the programmes.
A recent Fisca survey found that investors wanted a truly independent consumer watchdog that was not funded by any financial institution so as to avoid conflicts of interests.
To maintain its impartiality, Fisca will not seek funding from financial organisations and hopes instead to raise money from like-minded government agencies and philanthropic organisations.
The Fisca president said that the association, now run by a group of 12 volunteers, would need about 100 paying members to remain viable.
He added that Fisca plans to engage graduate volunteers and train them to become Fisca facilitators to help run upcoming financial literacy programmes.
Noting that Singapore already has a number of consumer bodies for investors such as the Consumers Association of Singapore and Securities Investors Association of Singapore, Mr Tan said he hopes to work with all of them in the future.
'We recognise that the needs of consumers are diverse and that the combined effort of all these bodies may still be insufficient to meet these needs,' he added.
franchan@sph.com.sg
Formed by former NTUC Income chief executive Tan Kin Lian, the Financial Services Consumers Association (Fisca) is an independent not-for-profit organisation.
Mr Tan, who has come out of retirement to act as president of Fisca, said the new association will focus on researching financial and investment products that are distributed here, and educating the public about saving and investing.
'The key aims of Fisca are to educate consumers on financial matters and to help them select financial products that give good value for their savings and investments,' said Mr Tan.
Fisca's formation comes after thousands of local investors lost millions of dollars from complex structured products that were linked to collapsed United States investment bank Lehman Brothers. These included DBS High Notes 5, Minibonds, Jubilee Linkearner and Pinnacle Notes.
Mr Tan said Fisca's aim will be to drive investor attention away from such glamourous products and encourage them to understand diversification, low-cost investing and the merits of looking for long-term returns.
The association, however, will not guide investors in their selection of stock or in their timing decisions, but instead will provide access to educational resources via its website and through workshops or short courses.
Fisca also plans to produce a white-list of financial products that have low charges, are well diversified and suitable for long-term investment.
'Our strategy is to educate consumers on the practical questions that face them every day like: How much should they save? Where should they put their money? Which are the safe and fair products?' added Mr Tan.
To join Fisca, individuals will have to pay an annual membership fee of $36 that will allow them to access the association's online resources and take part in the programmes.
A recent Fisca survey found that investors wanted a truly independent consumer watchdog that was not funded by any financial institution so as to avoid conflicts of interests.
To maintain its impartiality, Fisca will not seek funding from financial organisations and hopes instead to raise money from like-minded government agencies and philanthropic organisations.
The Fisca president said that the association, now run by a group of 12 volunteers, would need about 100 paying members to remain viable.
He added that Fisca plans to engage graduate volunteers and train them to become Fisca facilitators to help run upcoming financial literacy programmes.
Noting that Singapore already has a number of consumer bodies for investors such as the Consumers Association of Singapore and Securities Investors Association of Singapore, Mr Tan said he hopes to work with all of them in the future.
'We recognise that the needs of consumers are diverse and that the combined effort of all these bodies may still be insufficient to meet these needs,' he added.
franchan@sph.com.sg
FISCA website: www.fisca.sg
Survey: Political Party Blogs
You can read the blogs of the political parties using the links on the right panel. Please give your views about these blogs. Survey.
Orphan money at NTUC Income
Someone, posting anonymously, has attacked me a few times for my views on the treatment of orphaned money. He asked if there were orphaned money in NTUC Income during the time that I was the CEO.
During my time, we adopted a different approach. We distributed a high rate of reversionary bonus to each class of policy that could be supported by the actual long term investment yield of the fund. We kept a portion of the surplus to be paid as special bonus on the maturity or termination of the policy.
More importantly, we were able to distribute to the policyholders an attractive rate of return, which is now used by the new management in their advertisement. This attractive return was possible due to low expenses and a high payout to policyholders, i.e. not retained as orphaned money.
I became alarmed when NTUC Income decided to cut the reversionary bonus recently. Under the new structure, it is difficult for a policyholder to know if he or she is getting a fair payout on the maturity or termination of the policy. It now becomes important for an asset share should be calculated for each policy, to guide the final payout.
I decided to study the concept of asset share in more detail. I like the approach adopted in Malaysia. It requires an asset share to be calculated for each policy based on the actual experience of the fund. It credits the premiums paid and investment income earned and deducts the actual expenses and other charges. The regulator requires that the full asset share should be paid to the policyholder on the termination of the policy, after it has been in-force for a certain number of years.
This method is simple, transparent and fair. I hope that MAS will adopt this approach in Singapore.
During my time, we adopted a different approach. We distributed a high rate of reversionary bonus to each class of policy that could be supported by the actual long term investment yield of the fund. We kept a portion of the surplus to be paid as special bonus on the maturity or termination of the policy.
More importantly, we were able to distribute to the policyholders an attractive rate of return, which is now used by the new management in their advertisement. This attractive return was possible due to low expenses and a high payout to policyholders, i.e. not retained as orphaned money.
I became alarmed when NTUC Income decided to cut the reversionary bonus recently. Under the new structure, it is difficult for a policyholder to know if he or she is getting a fair payout on the maturity or termination of the policy. It now becomes important for an asset share should be calculated for each policy, to guide the final payout.
I decided to study the concept of asset share in more detail. I like the approach adopted in Malaysia. It requires an asset share to be calculated for each policy based on the actual experience of the fund. It credits the premiums paid and investment income earned and deducts the actual expenses and other charges. The regulator requires that the full asset share should be paid to the policyholder on the termination of the policy, after it has been in-force for a certain number of years.
This method is simple, transparent and fair. I hope that MAS will adopt this approach in Singapore.
Monday, August 24, 2009
Analogy - there are no poor people in Singapore
There is a debate in the Straits Times Forum about the existence of "orphaned money" in the participating fund of a life insurance company.
In my letter, I gave an example of a life insurance fund with assets of $15 billion and liabilities of $13 million (calculated from the individual liabilities of all individual policies), leaving "orphaned money" of $2 billion.
The reply of the Monetary Authority of Singapore, Life Insurance Association and Singapore Actuarial Society, is that under the law, all money in the participating fund belongs to the participating policyholders, hence the question of "orphaned money" does not arise.
This is similar to the argument that as Singapore is a wealthy nation, and as all the wealth of the state belongs to the people, there are no poor people in Singapore. Tell that to the people who cannot pay their electricity bill or buy food.
Orphaned money in Life Insurance Fund
There is some debate in the Straits Times Forum about "orphaned money" in the participating fund of a life insurance company.
The Monetary Authority of Singapore has stated that the insurance companies are required to use the concept of asset shares in the distribution of bonuses on participating policies and to follow an approved "governance framework" involving the appointed actuary and the top management.
I hope that the MAS can clarify how this arrangement works, and how the interest of the policyholders are protected under this framework. If the life insurance companies pays less than the asset share on the termination of the policy, what recourse does the policyholder have? Does the policyholder even know about this fact, as the asset share is not disclosed to him (i.e. lack of transparency).
Some jurisdiction requires the asset share to be calculated for each policyholder and for the full asset share to be paid to the policyholder on termination of the policy after it has been in force for a certain number of years. I suggest that Singapore should adopt this approach.
The Monetary Authority of Singapore, Life Insurance Association and the Singapore Actuarial Society have stated that under the law, all money in the participating fund belongs to the participating policyholders and, therefore, the existence of orphaned money does not arise.
I am not able to follow this reasoning. We know that there are orphans in Singapore. These are children whose parents are no longer around. Can we say that as these orphans are being cared for by the state, they are no longer "orphans"?
I am inclined to follow Larry Haverkamp's reasoning that money in the participating fund that is taken from the asset share of terminated policies should be termed as "orphan money". In actuarial literature, the term used is the "estate".
However, I wish to raise the following fundamental issues:
a) Currently, there is no legal requirement that the asset share attributed to an individual policy should be paid to the policyholder on the termination of the policy, even on maturity. It is possible for a policyholder, on maturity, to receive less than the asset share, on the reasoning that the money is required to "smooth" the bonus for the remaining participating policyholders?
b) Why is there a need to penalise the policyholder of a surrendered policy by paying less than the asset share, when the high expenses and other charges have already been deducted from the asset share of the policy? Already, the asset share for a policy in the early years may be less than half of the total premiums paid.
I hope that the Monetary Authority of Singapore will address these fundamental issues that affects the long term savings of over one million policyholders and their families.
Tan Kin Lian
Watchdog thinks $20m is in bag for Lehman fund
Phila Siu
Tuesday, August 25, 2009
The Consumer Council is confident it will get HK$20 million from the government to beef up its litigation fund as it prepares to take its first Lehman Brothers minibond case to court. The extra cash will increase its litigation fund to HK$35 million.
Chief executive Connie Lau Yin- hing said the Consumer Legal Action Fund will also be used for other litigation.
The first minibond case seeks to recover HK$500,000, but the council declined to name the bank involved and would not provide any information about the investor.
The council has received 11,919 minibond complaints so far and resolved 1,169 cases.
Lau said 20 cases were originally ready to proceed to litigation, but were settled out of court. She said the extra HK$20 million is needed because more cases will emerge if the test case is satisfactory. "Feedback from the government about the application is very positive. We are waiting for the approval," Lau said.
She said looking for a suitable lawyer took some time because many have connections with the big banks, and were not willing to represent the minibond investors.
The first case to go to court had to be carefully chosen because it has to be representative of most cases.
She also said staff have been working around the clock because getting the required documents from banks took a long time. "There are constraints, we cannot force the banks to give us the documents and information we need," she said.
But legislator Kam Nai-wai did not accept Lau's reason for the delay. He said the council's slow reaction has given the public the impression that the council is a toothless tiger.
"The council should have applied for funds long ago. It should have known Chief Executive Donald Tsang Yam- kuen has promised the government will do everything it can to help the minibond investors," Kam said. But he said he knew getting the documents from banks can be a headache as he had dealt with many angry investors.
Tuesday, August 25, 2009
The Consumer Council is confident it will get HK$20 million from the government to beef up its litigation fund as it prepares to take its first Lehman Brothers minibond case to court. The extra cash will increase its litigation fund to HK$35 million.
Chief executive Connie Lau Yin- hing said the Consumer Legal Action Fund will also be used for other litigation.
The first minibond case seeks to recover HK$500,000, but the council declined to name the bank involved and would not provide any information about the investor.
The council has received 11,919 minibond complaints so far and resolved 1,169 cases.
Lau said 20 cases were originally ready to proceed to litigation, but were settled out of court. She said the extra HK$20 million is needed because more cases will emerge if the test case is satisfactory. "Feedback from the government about the application is very positive. We are waiting for the approval," Lau said.
She said looking for a suitable lawyer took some time because many have connections with the big banks, and were not willing to represent the minibond investors.
The first case to go to court had to be carefully chosen because it has to be representative of most cases.
She also said staff have been working around the clock because getting the required documents from banks took a long time. "There are constraints, we cannot force the banks to give us the documents and information we need," she said.
But legislator Kam Nai-wai did not accept Lau's reason for the delay. He said the council's slow reaction has given the public the impression that the council is a toothless tiger.
"The council should have applied for funds long ago. It should have known Chief Executive Donald Tsang Yam- kuen has promised the government will do everything it can to help the minibond investors," Kam said. But he said he knew getting the documents from banks can be a headache as he had dealt with many angry investors.
Sunday, August 23, 2009
Letter to MAS - Asset Share
Ms. Angelina Fernandez
Monetary Authority of Singapore
I refer to your reply that is published in the Straits Times today (24 August). I need to follow up with a few clarifications:
1. Can you confirm that the insurance company has specified an asset share for each individual participating policy
2. That the total of these individual liabilities equal to the total assets of the participating fund?
3. Is the insurance company required to pay out the full individual liability on the termination of a policy?
4. If the insurance company is allowed to pay less than the asset share, how is the money allocated to the remaining policyholders?
In my earlier letter, I stated that if the total of the individual liability is $13 billion and the total assets is $15 billion, the difference of $2 billion is "orphaned money". I do not get a clear explanation from your latest reply to this point.
Please call me at 81685485 if you wish to seek clarification to my question.
Tan Kin Lian
Monetary Authority of Singapore
I refer to your reply that is published in the Straits Times today (24 August). I need to follow up with a few clarifications:
1. Can you confirm that the insurance company has specified an asset share for each individual participating policy
2. That the total of these individual liabilities equal to the total assets of the participating fund?
3. Is the insurance company required to pay out the full individual liability on the termination of a policy?
4. If the insurance company is allowed to pay less than the asset share, how is the money allocated to the remaining policyholders?
In my earlier letter, I stated that if the total of the individual liability is $13 billion and the total assets is $15 billion, the difference of $2 billion is "orphaned money". I do not get a clear explanation from your latest reply to this point.
Please call me at 81685485 if you wish to seek clarification to my question.
Tan Kin Lian
A Sense of Duty
We need to re-install in each person a sense of duty.
If you are a doctor, it is your duty to treat and cure the patient. If you are a teacher, it is your duty to teach the students well. You receive a salary or fee for your service. When you accept the job, you accept the terms of your engagement and undertake to carry out your duty to the best of your ability.
In a corrupt society, government officials need to be bribed to do their duty. They may be bribed to break the rules in favour of the briber or just to carry out their duty according to the rules or what is expected of them.
Singapore is fortunate to have stayed clear of corruption and to have a public administration that is largely free of bribery. The few cases of bribery are prosecuted.
However, in recent years, there is a worrying trend. The sense of duty seems to have been eroded. Many people now expect to be incentivised to do a job well.
Corporate executives, who already earn a high remuneration, are now given incentives (through profit sharing or stock options) to increase their company’s profits. If they want to, they can increase the profits in unethical ways, such as over-charging or cheating the customers, delivering a lower quality of product or exploiting the workers.
Financial advisers rush to sell financial products to earn an attractive commission. Many forget that it is their duty to understand the product and ensure its suitability for customers. The lure of earning the attractive commission overcomes the sense of duty. Many neglected their duty and unknowingly mis-represented the product. Some knew but joined the bandwagon anyway. A similar situation applies to the property market.
There has been a serious decline in the standard of protection for consumers and workers. The government authorities are now less active in prosecuting cases of public interest and prefer to leave these matters to be sorted out by free market.
Consumers are asked to take legal action to seek redress. But consumers do not have the financial means to take legal action against large businesses who have access to the best lawyers anyway.
Local workers are also affected by depressed wages due to the influx of foreign workers and are not protected by a minimum wage policy. Many have to accept wage rates that are inadequate to provide a decent standard of living and have to work long hours to make up.
In this pro-business environment, where consumers and workers are not adequately protected, it is not surprising that businesses can rake up high profits, giving million dollar income to their top executives. Successful professionals, such as lawyers and doctors, can also earn million dollar incomes.
It is rather sad that the remunerations of our government leaders are now benchmark against the earnings of these top business executives and professionals. If the leaders are chasing the top dollars, who will look after the interest of the ordinary workers, the consumers and the other weak people in our society?
Tan Kin Lian
If you are a doctor, it is your duty to treat and cure the patient. If you are a teacher, it is your duty to teach the students well. You receive a salary or fee for your service. When you accept the job, you accept the terms of your engagement and undertake to carry out your duty to the best of your ability.
In a corrupt society, government officials need to be bribed to do their duty. They may be bribed to break the rules in favour of the briber or just to carry out their duty according to the rules or what is expected of them.
Singapore is fortunate to have stayed clear of corruption and to have a public administration that is largely free of bribery. The few cases of bribery are prosecuted.
However, in recent years, there is a worrying trend. The sense of duty seems to have been eroded. Many people now expect to be incentivised to do a job well.
Corporate executives, who already earn a high remuneration, are now given incentives (through profit sharing or stock options) to increase their company’s profits. If they want to, they can increase the profits in unethical ways, such as over-charging or cheating the customers, delivering a lower quality of product or exploiting the workers.
Financial advisers rush to sell financial products to earn an attractive commission. Many forget that it is their duty to understand the product and ensure its suitability for customers. The lure of earning the attractive commission overcomes the sense of duty. Many neglected their duty and unknowingly mis-represented the product. Some knew but joined the bandwagon anyway. A similar situation applies to the property market.
There has been a serious decline in the standard of protection for consumers and workers. The government authorities are now less active in prosecuting cases of public interest and prefer to leave these matters to be sorted out by free market.
Consumers are asked to take legal action to seek redress. But consumers do not have the financial means to take legal action against large businesses who have access to the best lawyers anyway.
Local workers are also affected by depressed wages due to the influx of foreign workers and are not protected by a minimum wage policy. Many have to accept wage rates that are inadequate to provide a decent standard of living and have to work long hours to make up.
In this pro-business environment, where consumers and workers are not adequately protected, it is not surprising that businesses can rake up high profits, giving million dollar income to their top executives. Successful professionals, such as lawyers and doctors, can also earn million dollar incomes.
It is rather sad that the remunerations of our government leaders are now benchmark against the earnings of these top business executives and professionals. If the leaders are chasing the top dollars, who will look after the interest of the ordinary workers, the consumers and the other weak people in our society?
Tan Kin Lian
Saturday, August 22, 2009
Protecting citizens
Mr Tan, I signed the online petition and was there yestderday. I want to thank you for taking your time and lead in our cause.
The Government can continue to ignore us and pay lip-service. But I am sure that a big group of people who vote otherwise in the next general election.
This whole saga has open my eyes - a hard-core supporter of the current government. I am no longer convince that the current government is best when it comes to protecting citizens.
Though my financial position has improve tremendously compare to the lowest point in the crisis, I will never forget how our elected establishment chose to side-step and ignore the very fact that the FIs had indeed sold some very complicated/toxic product that few, perhaps including the FIs, could understand.
The very fact that HK and Taiwan FIs settle the toxic products is a clear testimony and yet our financial regulator continues the wayang!
Let the coming General Election do the talking.
The Government can continue to ignore us and pay lip-service. But I am sure that a big group of people who vote otherwise in the next general election.
This whole saga has open my eyes - a hard-core supporter of the current government. I am no longer convince that the current government is best when it comes to protecting citizens.
Though my financial position has improve tremendously compare to the lowest point in the crisis, I will never forget how our elected establishment chose to side-step and ignore the very fact that the FIs had indeed sold some very complicated/toxic product that few, perhaps including the FIs, could understand.
The very fact that HK and Taiwan FIs settle the toxic products is a clear testimony and yet our financial regulator continues the wayang!
Let the coming General Election do the talking.
Burden of National Service
Someone expressed surprise that Tan Kin Lian considers National Service to be a burden. Lest I be accused of being disloyal to Singapore, I wish to state my position.
A burden is defined as a heavy weight that is difficult to carry. It is a burden when a task is made compulsory; it is not a burden when it is performed voluntarily. Similarly, it is a burden to pay taxes. Like taxes, compulsory military service may be necessary, but it is still a burden anyway.
Any burden has to be shouldered fairly and equally by all parties who benefit from the outcome. It should not be shouldered only by only a segment of the population (i.e. male citizens) while other segments (i.e. females and non-citizens) are exempted. The burden becomes heavier when the burdened people (who are set back by two years or more) have to compete against the exempted people for the same jobs.
The burden can be lightened by reducing the period of compulsory military service or by giving the NS men an adequate pay, allowance or grant (call it what you will) for the duration that they have spent on National Service. Alternatively, the exempted parties can be required to carry out non-combat or community service for the same duration.
The disadvantage suffered by our male citizens have been aggravated in recent years through the large influx of foreign workers and professionals, who are allowed to work in Singapore to compete against them.
National defence is important for the security and prosperity of Singapore. This responsibility has to be shared fairly by all residents. By imposing this responsibility on only on some people and putting them at a disadvantage compared with other people, we face the risk that the people whom we rely to defend our nation will not carry out their duty (due to their feeling of injustice) at the time of need.
A recent survey carried out by me among people who had completed National Service indicated that 72% would not volunteer for this duty, 91% were unhappy with the current arrangement and that 57% would not fight to defend Singapore at the time of war. This are worrying findings, even though the survey may not reflect a representative sample.
I have been writing on this matter for more than twenty years. I have asked for the burden of National Service to be shared more equally or fairly. My suggestions had been rebutted and ignored. I will continue to voice them. I hope that they will be heard and heeded one day.
Tan Kin Lian
A burden is defined as a heavy weight that is difficult to carry. It is a burden when a task is made compulsory; it is not a burden when it is performed voluntarily. Similarly, it is a burden to pay taxes. Like taxes, compulsory military service may be necessary, but it is still a burden anyway.
Any burden has to be shouldered fairly and equally by all parties who benefit from the outcome. It should not be shouldered only by only a segment of the population (i.e. male citizens) while other segments (i.e. females and non-citizens) are exempted. The burden becomes heavier when the burdened people (who are set back by two years or more) have to compete against the exempted people for the same jobs.
The burden can be lightened by reducing the period of compulsory military service or by giving the NS men an adequate pay, allowance or grant (call it what you will) for the duration that they have spent on National Service. Alternatively, the exempted parties can be required to carry out non-combat or community service for the same duration.
The disadvantage suffered by our male citizens have been aggravated in recent years through the large influx of foreign workers and professionals, who are allowed to work in Singapore to compete against them.
National defence is important for the security and prosperity of Singapore. This responsibility has to be shared fairly by all residents. By imposing this responsibility on only on some people and putting them at a disadvantage compared with other people, we face the risk that the people whom we rely to defend our nation will not carry out their duty (due to their feeling of injustice) at the time of need.
A recent survey carried out by me among people who had completed National Service indicated that 72% would not volunteer for this duty, 91% were unhappy with the current arrangement and that 57% would not fight to defend Singapore at the time of war. This are worrying findings, even though the survey may not reflect a representative sample.
I have been writing on this matter for more than twenty years. I have asked for the burden of National Service to be shared more equally or fairly. My suggestions had been rebutted and ignored. I will continue to voice them. I hope that they will be heard and heeded one day.
Tan Kin Lian
Turnout at 22 August Gathering
An estimated 200 people turned up at the Gathering in Hong Lim Park. This was somewhat smaller that I had expected. Someone observed that the camera at Hong Lim Park was responsible for the low attendance.
We were blessed with good weather. BBC and CNBC were present. The major newspapers and Channel NewsAsia did not cover the event, in spite of two letters of invitation.
Petition to PM on credit linked notes (9)
Petition.
Signatures as at 15 August: 734
This is the countdown to the Gathering on 22 August.
I hope that all those who signed the Petition will attend the Gathering, and encourage other people to attend as well.
Date of Gathering: 22 August 2009
Place: Speaker's Corner, Hong Lim Park
Signatures as at 15 August: 734
This is the countdown to the Gathering on 22 August.
I hope that all those who signed the Petition will attend the Gathering, and encourage other people to attend as well.
Date of Gathering: 22 August 2009
Place: Speaker's Corner, Hong Lim Park
Time: 5.00 pm
Activities:
Activities:
1. Recital of National Pledge
2. Speech by Tan Kin Lian
3. Hold placards with messages
4. Sign Petition (for those who did not sign online)
5. Talk to other investors at the Gathering
2. Speech by Tan Kin Lian
3. Hold placards with messages
4. Sign Petition (for those who did not sign online)
5. Talk to other investors at the Gathering
Friday, August 21, 2009
SCMP:Three in eight minibond buyershave taken banks' buy-back offer
22 Aug 2009
Three in eight buyers of Lehman Brothers minibonds have accepted an offer by 16 banks to buy them back in the two weeks since the offer opened, the Hong Kong Monetary Authority said yesterday. Peter Chan Kwong-yue, chairman of a group of aggrieved investors, is not surprised.
It is 11 months since the US investment bank collapsed amid the global credit crisis and many of the investors wanted a resolution, Mr Chan said. "It makes sense that the Hong Kong Monetary Authority wants to put pressure on the remaining investors to quickly take up the offer as well."
A spokesman for the authority said investors needed to "consider carefully the terms of the offer and his or her personal circumstances" in deciding whether or not to accept the offer.
The 9,219 investors who have agreed to sell their minibonds to the banks from which they bought them will get back 60 to 70 per cent of their initial investment depending on their age, and may get more depending on the residual value of the assets underlying the minibonds.
Despite their name, minibonds are not corporate bonds but complex, credit-linked derivatives whose value depends on the performance of their underlying assets.
Investors claim banks marketed them as proxy investments in well-known companies and failed to explain the investment risk.
"The HKMA is just using the fact that so many people accepted the offer to get the rest of us to accept and swiftly close the whole issue. It's outrageous," he said.
More than 20,000 investors complained about the vendor banks and brokerages to the Monetary Authority and the Securities and Futures Commission, which have begun taking action. Of 21,635 complaints the authority has received, it has dismissed 1,851, is seeking more information on 11,853 and is currently investigating 6,346.
The SFC has won a court order for Lehman Brothers Asia to hand over 17 internal documents as part of its investigations. Lehman Brothers Asia is in liquidation.
The commission issued a notice to the investment bank on October 31 requiring the surrender of the documents. But the bank refused, claiming the documents involved confidential information about dealings between lawyers and clients.
Three in eight buyers of Lehman Brothers minibonds have accepted an offer by 16 banks to buy them back in the two weeks since the offer opened, the Hong Kong Monetary Authority said yesterday. Peter Chan Kwong-yue, chairman of a group of aggrieved investors, is not surprised.
It is 11 months since the US investment bank collapsed amid the global credit crisis and many of the investors wanted a resolution, Mr Chan said. "It makes sense that the Hong Kong Monetary Authority wants to put pressure on the remaining investors to quickly take up the offer as well."
A spokesman for the authority said investors needed to "consider carefully the terms of the offer and his or her personal circumstances" in deciding whether or not to accept the offer.
The 9,219 investors who have agreed to sell their minibonds to the banks from which they bought them will get back 60 to 70 per cent of their initial investment depending on their age, and may get more depending on the residual value of the assets underlying the minibonds.
Despite their name, minibonds are not corporate bonds but complex, credit-linked derivatives whose value depends on the performance of their underlying assets.
Investors claim banks marketed them as proxy investments in well-known companies and failed to explain the investment risk.
"The HKMA is just using the fact that so many people accepted the offer to get the rest of us to accept and swiftly close the whole issue. It's outrageous," he said.
More than 20,000 investors complained about the vendor banks and brokerages to the Monetary Authority and the Securities and Futures Commission, which have begun taking action. Of 21,635 complaints the authority has received, it has dismissed 1,851, is seeking more information on 11,853 and is currently investigating 6,346.
The SFC has won a court order for Lehman Brothers Asia to hand over 17 internal documents as part of its investigations. Lehman Brothers Asia is in liquidation.
The commission issued a notice to the investment bank on October 31 requiring the surrender of the documents. But the bank refused, claiming the documents involved confidential information about dealings between lawyers and clients.
Kyodo News:H.K. regulator wins legal backing on Lehman Brothers documents
21 Aug 2009
HONG KONG, Aug. 21 -- Hong Kong's securities regulator said Friday it won a court ruling that forces Lehman Brothers Asia Ltd., a subsidiary in liquidation of the now-defunct U.S. financial firm, to hand over minibond-related documents that it had deemed ''too privileged'' for disclosure.
Some 30,000 local investors claim they were scammed into buying the Lehman Brothers financial product, believing it had a low-risk nature and some invested their life savings.
The Securities and Futures Commission has been investigating the matter and as part of the investigation it has sought documents from Lehman's liquidator since last year that it said are related to the assessment of the minibonds.
The High Court handed down a ruling Wednesday ordering Lehman to hand over the documents in question because they ''were not subject to valid claims of privilege,'' according to a statement issued by the commission.
''It is unfortunate that the SFC would not have obtained any of these documents without having to take these proceedings against Lehman Brothers,'' said Mark Steward, the commission's executive director of enforcement.
A spokesman for the commission declined to say if it has received the documents from Lehman's liquidator yet.
Along with another regulator, the Hong Kong Exchanges and Clearing Ltd., the commission has been criticized by the minibond investors for acting too slowly in the investigation.
Sixteen banks responsible for selling the minibonds agreed last month to a settlement arrangement that will buy back at least 60 percent of the product's worth from eligible investors.
The outstanding value of the minibonds was estimated at about HK$12.6 billion ($1.61 billion).
U.S. securities firm Lehman Brothers Holdings Inc. filed for bankruptcy protection last September.
HONG KONG, Aug. 21 -- Hong Kong's securities regulator said Friday it won a court ruling that forces Lehman Brothers Asia Ltd., a subsidiary in liquidation of the now-defunct U.S. financial firm, to hand over minibond-related documents that it had deemed ''too privileged'' for disclosure.
Some 30,000 local investors claim they were scammed into buying the Lehman Brothers financial product, believing it had a low-risk nature and some invested their life savings.
The Securities and Futures Commission has been investigating the matter and as part of the investigation it has sought documents from Lehman's liquidator since last year that it said are related to the assessment of the minibonds.
The High Court handed down a ruling Wednesday ordering Lehman to hand over the documents in question because they ''were not subject to valid claims of privilege,'' according to a statement issued by the commission.
''It is unfortunate that the SFC would not have obtained any of these documents without having to take these proceedings against Lehman Brothers,'' said Mark Steward, the commission's executive director of enforcement.
A spokesman for the commission declined to say if it has received the documents from Lehman's liquidator yet.
Along with another regulator, the Hong Kong Exchanges and Clearing Ltd., the commission has been criticized by the minibond investors for acting too slowly in the investigation.
Sixteen banks responsible for selling the minibonds agreed last month to a settlement arrangement that will buy back at least 60 percent of the product's worth from eligible investors.
The outstanding value of the minibonds was estimated at about HK$12.6 billion ($1.61 billion).
U.S. securities firm Lehman Brothers Holdings Inc. filed for bankruptcy protection last September.
Compare Canada and Singapore (2)
Here is the reply from Wing Lee Cheong to Eric Brooke's letter printed in the Straits Times.
When insurance is far from assured
Advantages of a public option for health insurance in USA. Read this article.
Gathering at Hong Lim Park - National Pledge
We will start off the Gathering with a recitation of the National Pledge (not Aspiration). It is a Pledge that has bonded Singaporeans for 44 years. Note: We will keep to the wordings of the National Pledge involving the citizens.
We the citizens of Singapore
Pledge ourselves as one united people
Regardless of race, language or religion
To build a democratic society
Based on justice and equality
So as to achieve
Peace, progress and happiness
For our nation.
The National Pledge was recited on our National Day exactly at 8:22 p.m. We will be reciting the National Pledge again at 8:22, i.e. August 22, at Hong Lim Park. This is a good omen.
Remember: our struggle to get fair compensation is based on justice, which is a key value in our National Pledge.
Tan Kin Lian
Hundi Banking system
Watch this video about the misery of migrant workers, who are exploited by the Hundi system.
Thursday, August 20, 2009
Health insurance exchange: the fine print
The article explains the working of the proposed health insurance exchange. It will have impact on how insurance will be sold in the future. I hope that the idea can spread to Singapore.
High Bank Charges
I have to make a remittance of USD 2,000 to a factory in Shenzhen. A check with several banks showed the bank charge to be SGD 40 or more. I find it to be quite high. The actual cost to the bank of making this remittance should be small. They are over-charging customers to make a big profit. What happen to competition in bringing down cost?
US Immigration Form - Moral Turpitude
If you wish to enter the USA, you have to complete a form that includes the question, "Have you ever been convicted of an offence involving moral turpitude?"
What is "moral turpitude"? How do you answer this question? Read a tip here.
RED website
I have received several favourable comments about the RED website (Real Estate Data).
* easy to navigate
* layout very neat and clear
* useful information
* useful to show similar projects in the same zone
* give the potential buyer an idea of the prices being transacted for the specific or nearby condo
I do not have the photos and videos yet, and will encourage the owners to upload them into the website. If accepted by me, the owner will get $5 for each set of materials.
Go to www.easysearch.sg (Real Estate Data).
Transparency in insurance
Published in Straits Times Forum page
I REFER to last Thursday's reply by the Monetary Authority of Singapore (MAS), 'Interests of policyholders protected: MAS', in which MAS stated that my letter ('Transparency in insurance: Policyholders underpaid', Aug 6) suggested that insurers have built up 'orphaned money' by under-declaring bonuses to participating policyholders.
I never suggested that. In fact, I said orphaned money comes from a different source: policyholders who leave the fund early, before their policy matures.
Life insurers acknowledge that early surrenders receive less than their full asset share. The underpayments accumulate and form a slush fund commonly known as 'orphaned money'.
MAS claims I believe life insurers under-declare bonuses in order to build up orphaned money, but this would be difficult and I doubt it happens.
Bonuses are cut only in downturns, when the policyholders' fund has suffered losses. They would need to be cut in good times for the bonuses to add to orphaned money. This has probably never occurred.
Whether orphaned money exists depends on just one thing: Do life insurers pay less than the proportionate ownership - called asset share - to policyholders who leave the fund before their policy matures? To give a frame of reference, it would be like a unit trust paying less than the net asset value when investors sell.
If MAS or the life insurers say, 'We pay early surrenders their full asset share and always have', then that is the end of it. I have made an error, orphaned money does not now exist, it never has and I apologise.
The MAS reply, however, talks about the 90:10 insurance rule and the risk-based capital regime. These do not address the question of whether the full asset share is paid to policyholders when they exit the fund. That is the only way to know if orphaned money exists.
It would be easy for MAS or life insurers to disclose if they pay the full asset share. They are the only ones who can answer the question as they are the only ones with the data.
If orphaned money exists, then we can move on to the second step of determining how much it is and where it is held since - at present - no Singapore life insurer carries an account labelled, 'orphaned money'.
Larry Haverkamp
Concept of asset share is fairer to policyholders
Published in Straits Times Forum Page
IN LAST Thursday's reply, 'Interests of policyholders protected', the Monetary Authority of Singapore (MAS) stated that insurers in Singapore are required to record the total amount of assets held in the participating fund as backing liabilities to participating policyholders. It also said the issue of 'orphaned money' does not arise.
I am unable to follow its reasoning. Take, for example, a participating fund with assets of $15 billion and total individual liabilities of participating policies of $13 billion. This leaves orphaned money amounting to $2 billion.
Although this orphaned money is supposed to belong to the policyholders, it is not distributed to any individual policyholder who leaves the fund on termination of his policy.
This is not fair to policyholders who have unwittingly contributed to the orphaned money by receiving lower bonuses than they are entitled to. This has contributed to the poor return received by policyholders on the savings in their life insurance policies made over a lifetime.
The orphaned money is usually used by the insurance company to pay the high marketing expenses to acquire new policyholders and introduce new products. This benefits shareholders.
The recent practice of many insurance companies in reducing their bonus rates will aggravate this problem.
I have terminated most of my participating policies as I felt uneasy with the practice that is now adopted by the insurance company.
Several countries have addressed this problem by mandating that the 'asset share' should be computed for each individual policy. This is the amount that is attributable to each individual policy based on the premiums paid, the investment income earned on these premiums, less the charges for insurance protection and expenses.
There is also a requirement that the full asset share should be given to the policyholder on termination of the policy, after it has been in force for a certain period.
It is timely for Singapore to explore the use of this concept of asset share, to ensure that the interest of the policyholders is truly protected and that they receive a fair return for a lifetime of savings. It will also prevent the accumulation of a large orphaned fund, at the expense of the participating policyholders.
Tan Kin Lian
Bonus cut by 45% in 5 years
Dear Mr Tan
I had insured three 5-year policies taken with X since 2004. They reduced the bonus in April 2009 and reduced the maturity proceeds for my three policies by a substantial sum of $ 12,751 (projected yield at maturity reduced from 2.81% reduced to 1.59%). The maturity returns was cut by almost 45% over the 5-year period.
My appeal case was reviewed twice by X but they were unable to offer the higher maturity values. X stated that the bonus revision is within the policy contract and only the non-guaranteed portion is adjusted.
The poor returns affect my retirement saving. I would like to seek your advice - should I put forward my case to FIDReC for a third partly iassessment in order to get a fairy satisfactory returns.
REPLY
FIDREC is likely to side with X, so there is no point in asking them to adjudicate.
I had insured three 5-year policies taken with X since 2004. They reduced the bonus in April 2009 and reduced the maturity proceeds for my three policies by a substantial sum of $ 12,751 (projected yield at maturity reduced from 2.81% reduced to 1.59%). The maturity returns was cut by almost 45% over the 5-year period.
My appeal case was reviewed twice by X but they were unable to offer the higher maturity values. X stated that the bonus revision is within the policy contract and only the non-guaranteed portion is adjusted.
The poor returns affect my retirement saving. I would like to seek your advice - should I put forward my case to FIDReC for a third partly iassessment in order to get a fairy satisfactory returns.
REPLY
FIDREC is likely to side with X, so there is no point in asking them to adjudicate.
It is unfair for X to cut the bonus by so much, especially as the stockmarket has recovered substantially from since April. I suggest that you write to the newspapers and make a complaint.
Plain English is the best policy
Read this article. It explains why insurance policies have to be written in a form that consumers can understand.
Wednesday, August 19, 2009
US: Consumers to benefit as credit card law debuts
By Juan Lagorio
NEW YORK (Reuters) - U.S. consumers will see on Thursday the first signs of the biggest overhaul of the credit card industry in at least two decades, as companies will be forced to provide customers with more time to pay their bills and be required to give more warning of contractual changes.
From August 20, credit card issuers will have to give clients at least 21 calendar days to pay monthly bills and will have to warn consumers 45 days in advance of major changes in conditions, under provisions of a law signed in May by President Barack Obama.
Now, credit card issuers have to mail bills at least 14 days in advance and provide a 15-day notice of changes in terms.
Consumers will also be able to reject the changes set by credit cards, and arrange a plan to cancel the debt and close the credit card account.
"It evens the amount of power between consumers and credit card companies, but it doesn't prevent credit card companies from charging really significant interest rates if they can find a reason to do it," said Jamie Court, president of consumer advocate group Consumer Watchdog.
Some of the biggest changes to the credit card industry look to limit the ability of companies to impose fees, raise interest rates or sell credit card to students, but those will not go into effect until February.
"Those are the ones the card issuers are trying to grapple with to see how to keep the business profitable," said Jason Arnold, an analyst at RBC Capital Markets.
Credit card firms enjoyed hefty profits earlier in the decade, as cheap money ignited a lending boom. American Express Co, usually considered a credit card company for wealthy consumers, became the fastest-growing firm by expanding among less affluent clients.
Other companies grew aggressively by offering no fees and adjusting interest rates according to customers' performance.
However, the housing slump and the financial crisis sent default rates to record highs in the last year. Since then, credit card companies have been closing accounts and trimming credit lines to cushion losses.
Public anger against credit card companies grew as the same banks that were penalizing customers for late payments started receiving billions of dollars of taxpayer money in federal bailouts.
"If Uncle Sam is giving free money to banks who have already received at least tens of billions of dollars from the federal government as bailouts, then the American taxpayers should know that there is a national cap on how much they can be charged," Court said.
"It is definitely a step in the right direction, but only because we were so far gone in the other direction."
The companies have anticipated that the restrictions of the new law will force them to slash credit lines and raise interest rates, or set annual fees.
Moshe Orenbuch, an analyst at Credit Suisse, estimated available credit lines could be cut by about 20 percent, or $1.2 trillion, as banks adjust to comply with the new credit card law.
American Express, Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp, and Discover Financial Services make up around 80 percent of the credit card industry.
(Reporting by Juan Lagorio, editing by Gerald E. McCormick)
NEW YORK (Reuters) - U.S. consumers will see on Thursday the first signs of the biggest overhaul of the credit card industry in at least two decades, as companies will be forced to provide customers with more time to pay their bills and be required to give more warning of contractual changes.
From August 20, credit card issuers will have to give clients at least 21 calendar days to pay monthly bills and will have to warn consumers 45 days in advance of major changes in conditions, under provisions of a law signed in May by President Barack Obama.
Now, credit card issuers have to mail bills at least 14 days in advance and provide a 15-day notice of changes in terms.
Consumers will also be able to reject the changes set by credit cards, and arrange a plan to cancel the debt and close the credit card account.
"It evens the amount of power between consumers and credit card companies, but it doesn't prevent credit card companies from charging really significant interest rates if they can find a reason to do it," said Jamie Court, president of consumer advocate group Consumer Watchdog.
Some of the biggest changes to the credit card industry look to limit the ability of companies to impose fees, raise interest rates or sell credit card to students, but those will not go into effect until February.
"Those are the ones the card issuers are trying to grapple with to see how to keep the business profitable," said Jason Arnold, an analyst at RBC Capital Markets.
Credit card firms enjoyed hefty profits earlier in the decade, as cheap money ignited a lending boom. American Express Co, usually considered a credit card company for wealthy consumers, became the fastest-growing firm by expanding among less affluent clients.
Other companies grew aggressively by offering no fees and adjusting interest rates according to customers' performance.
However, the housing slump and the financial crisis sent default rates to record highs in the last year. Since then, credit card companies have been closing accounts and trimming credit lines to cushion losses.
Public anger against credit card companies grew as the same banks that were penalizing customers for late payments started receiving billions of dollars of taxpayer money in federal bailouts.
"If Uncle Sam is giving free money to banks who have already received at least tens of billions of dollars from the federal government as bailouts, then the American taxpayers should know that there is a national cap on how much they can be charged," Court said.
"It is definitely a step in the right direction, but only because we were so far gone in the other direction."
The companies have anticipated that the restrictions of the new law will force them to slash credit lines and raise interest rates, or set annual fees.
Moshe Orenbuch, an analyst at Credit Suisse, estimated available credit lines could be cut by about 20 percent, or $1.2 trillion, as banks adjust to comply with the new credit card law.
American Express, Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp, and Discover Financial Services make up around 80 percent of the credit card industry.
(Reporting by Juan Lagorio, editing by Gerald E. McCormick)
Witness - Migrant Dreams
View these videos. It is sad to see the hardship and debts faced by the migrant workers:
http://www.youtube.com/watch?v=J9jdPDgo9bI
http://www.youtube.com/watch?v=6glRTS6QbQk
http://www.youtube.com/watch?v=J9jdPDgo9bI
http://www.youtube.com/watch?v=6glRTS6QbQk
Survey Results - National Service (3)
Here are the survey results, based on 150 replies. The results are similar to the interim report based on 100 replies.
Less than 10% of respondents (male citizens who have completed national service) are happy with the current arrangement. 54% said that they should be paid an adequate, regular salary. 37% prefer other ways to protect the nation (e.g. full time soldiers).
In the event of a war, 57% would not fight and give their life for Singapore. Some of their reasons are stated in the report. This is a worrisome finding and indicate that the morale problem needs to be arrested urgently..
There is a strong view (80%) that permanent residents should have the same NS obligations as citizens. 65% felt that females should also perform NS, but most prefer a non-combat role.
Less than 10% of respondents (male citizens who have completed national service) are happy with the current arrangement. 54% said that they should be paid an adequate, regular salary. 37% prefer other ways to protect the nation (e.g. full time soldiers).
In the event of a war, 57% would not fight and give their life for Singapore. Some of their reasons are stated in the report. This is a worrisome finding and indicate that the morale problem needs to be arrested urgently..
There is a strong view (80%) that permanent residents should have the same NS obligations as citizens. 65% felt that females should also perform NS, but most prefer a non-combat role.
Frenzy in private property market
There is a frenzy in the private property market. People are rushing for the new launches at record prices.
I plan to introduce a website that gives information to the consumers about the prices of private property and condominiums. Buyers can search the website to see what is being transacted for similar properties around the same area. They can also see the amenities and other useful information.
Consumers should carry out their research and understand the market, before committing to a purchase of $1 million or more, that will tie them down over a lifetime.
I plan to introduce a website that gives information to the consumers about the prices of private property and condominiums. Buyers can search the website to see what is being transacted for similar properties around the same area. They can also see the amenities and other useful information.
The website is not ready yet, but you can get a feel about the information that is available by looking at the development version in www.easysearch.sg (Real Estate Data). It will be ready by end August (with past transactions and amenity data).
Consumers should carry out their research and understand the market, before committing to a purchase of $1 million or more, that will tie them down over a lifetime.
Tan Kin Lian
E-mail to Signatories of the Petition
I have sent an e-mail to more than 700 people who signed the Petition to ask them to attend the Gathering at 5 pm at Hong Lim Park on Saturday 22 August. Tentatively, I have asked a former relationship manager to speak at the Gathering, but this is not confirmed yet. I look forward to a large turnout.
Tuesday, August 18, 2009
New books are now available
New books are now available at internet shop. Special price for TKL Sudoku Vol 1 ($3.90 only) and pocket size Sudoku ($7.90 only for 3 volumes).
U.S. Supreme Court to Hear Case on Executive Pay
The Supreme Court will hear the case this fall, as anger over huge bonuses paid to the executives of failing companies continues to grow...
Last summer, Richard A. Posner, a federal appeals court judge, issued a surprising and prescient dissent... “Executive compensation in large publicly traded firms often is excessive,” he added, “because of the feeble incentives of boards of directors to police compensation.” ..
Here is how Warren Buffett analyzed the situation in his 2003 letter to shareholders: “Year after year, at literally thousands of funds, directors had routinely rehired the incumbent management company,however pathetic its performance had been. Just as routinely, the directors had mindlessly approved fees that in many cases far exceeded those that could have been negotiated.”..
Maintenance of my blog
Someone offered to make a donation towards the maintenance of my blog. I replied that this is not necessary.
But, if he (or others) wishes to help, he can buy my books that are sold here (click on Internet Shop). He can also buy copies to give to their friends.
Monday, August 17, 2009
How secure is your credit card info?
Read this report.
Quote
Credit and debit card information is just not incredibly secure ...... But it is counterbalanced by the amount of fraud losses due to cheque fraud and direct debit fraud which is much greater than credit card fraud."
Credit and debit card information is just not incredibly secure ...... But it is counterbalanced by the amount of fraud losses due to cheque fraud and direct debit fraud which is much greater than credit card fraud."
Unquote
Reuters.com - Schwab sued by NY's Cuomo over auction-rate debt
NOTE: This case is similar to the credit linked notes sold in Singapore. The New York Attorney General sued the financial institution for mis-representing the financial product to the retail investors. The Singapore authority should do the same. Tan Kin Lian
By Jonathan Stempel
NEW YORK (Reuters) - Charles Schwab Corp was sued by New York Attorney General Andrew Cuomo, who accused the discount brokerage of fraudulently misleading investors about the safety of auction-rate securities.
The civil lawsuit filed Monday in New York State Supreme Court in Manhattan was expected, after Cuomo's office announced its intent to sue Schwab on July 20.
It represents an escalation of Cuomo's efforts to punish brokerages and force them to repurchase the debt at face value from investors who were misled into believing the securities were as solid as cash.
Much of the debt became illiquid in February 2008 when dealers stopped supporting the $330 billion market. Cuomo has already gotten more than a dozen other banks and brokerages to buy back more than $61 billion of the debt.
"This may be a strategic move to get Schwab to agree to a more pro-investor settlement," said James Cox, a law professor at Duke University in Durham, North Carolina. "Schwab has built a foundation as the broker for the middle-class and would not want its reputation harmed by letting the lawsuit fester."
Thousands of customers of San Francisco-based Schwab held about $787.9 million of auction-rate securities as of February 13, 2008, Cuomo's office estimated.
Schwab said the lawsuit lacks merit.
"The New York Attorney General's lawsuit casts blame for a bad situation in the wrong direction," spokeswoman Sarah Bulgatz said. She said Cuomo should instead punish underwriters that deceived brokers on the safety of auction-rate debt.
"GREAT" ALTERNATIVE TO CASH, BROKER SAYS
According to the complaint, which cited recordings of brokers' conversations with clients, one broker labeled auction-rate securities "great alternatives to cash, frankly."
Another called an investor who was planning to buy a home and had been keeping cash in a money market fund. Expressing a "humble opinion," the broker told the investor that auction-rate debt would be a "very safe" place for that money.
"Schwab owed its customers a duty to properly understand and make accurate representations," Cuomo said. "Anyone in the industry who misrepresented the risks of investing in auction-rate securities will be held accountable."
Two brokerages that, like San Francisco-based Schwab, only sold the securities, Fidelity Investments and TD Ameritrade Holding Corp, have settled with Cuomo's office.
Underwriters that settled with Cuomo include Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc, JPMorgan Chase & Co and Royal Bank of Canada, among others.
Cuomo charged Schwab with four counts of fraud, including action under the state's Martin Act, which gives Cuomo wide powers to fight financial fraud.
He wants Schwab to buy back auction-rate debt from clients at face value and pay penalties, among other remedies.
"The Martin Act is an extraordinarily broadly written statute," Cox said. "It essentially gives Cuomo carte blanche."
FRAUD ALLEGED
According to the complaint, Schwab sold customers "a product it did not fully understand and could not properly explain," despite "advertisements promising expertise."
The company also knew, or was reckless or negligent in not knowing, of the market's problems in the summer of 2007, when auctions began to fail, the complaint said.
In a July 24 letter to Cuomo, released Monday, Schwab said it did not actively market or induce the sale of auction-rate debt, and never made any commitment to support that market.
Cuomo's demand that Schwab "act as an insurer against an unprecedented market collapse that it did not cause and could not predict is legally unsound," wrote Faith Gay, a partner at the law firm Quinn Emanuel Urquhart Oliver & Hedges LLP.
In afternoon trading, Schwab shares were down 82 cents, or 4.5 percent, at $17.44 on the Nasdaq.
The case is Cuomo v. Charles Schwab & Co, Supreme Court of the State of New York, County of New York.
(Reporting by Jonathan Stempel; Editing by Phil Berlowitz and Gerald E. McCormick)
By Jonathan Stempel
NEW YORK (Reuters) - Charles Schwab Corp was sued by New York Attorney General Andrew Cuomo, who accused the discount brokerage of fraudulently misleading investors about the safety of auction-rate securities.
The civil lawsuit filed Monday in New York State Supreme Court in Manhattan was expected, after Cuomo's office announced its intent to sue Schwab on July 20.
It represents an escalation of Cuomo's efforts to punish brokerages and force them to repurchase the debt at face value from investors who were misled into believing the securities were as solid as cash.
Much of the debt became illiquid in February 2008 when dealers stopped supporting the $330 billion market. Cuomo has already gotten more than a dozen other banks and brokerages to buy back more than $61 billion of the debt.
"This may be a strategic move to get Schwab to agree to a more pro-investor settlement," said James Cox, a law professor at Duke University in Durham, North Carolina. "Schwab has built a foundation as the broker for the middle-class and would not want its reputation harmed by letting the lawsuit fester."
Thousands of customers of San Francisco-based Schwab held about $787.9 million of auction-rate securities as of February 13, 2008, Cuomo's office estimated.
Schwab said the lawsuit lacks merit.
"The New York Attorney General's lawsuit casts blame for a bad situation in the wrong direction," spokeswoman Sarah Bulgatz said. She said Cuomo should instead punish underwriters that deceived brokers on the safety of auction-rate debt.
"GREAT" ALTERNATIVE TO CASH, BROKER SAYS
According to the complaint, which cited recordings of brokers' conversations with clients, one broker labeled auction-rate securities "great alternatives to cash, frankly."
Another called an investor who was planning to buy a home and had been keeping cash in a money market fund. Expressing a "humble opinion," the broker told the investor that auction-rate debt would be a "very safe" place for that money.
"Schwab owed its customers a duty to properly understand and make accurate representations," Cuomo said. "Anyone in the industry who misrepresented the risks of investing in auction-rate securities will be held accountable."
Two brokerages that, like San Francisco-based Schwab, only sold the securities, Fidelity Investments and TD Ameritrade Holding Corp, have settled with Cuomo's office.
Underwriters that settled with Cuomo include Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc, JPMorgan Chase & Co and Royal Bank of Canada, among others.
Cuomo charged Schwab with four counts of fraud, including action under the state's Martin Act, which gives Cuomo wide powers to fight financial fraud.
He wants Schwab to buy back auction-rate debt from clients at face value and pay penalties, among other remedies.
"The Martin Act is an extraordinarily broadly written statute," Cox said. "It essentially gives Cuomo carte blanche."
FRAUD ALLEGED
According to the complaint, Schwab sold customers "a product it did not fully understand and could not properly explain," despite "advertisements promising expertise."
The company also knew, or was reckless or negligent in not knowing, of the market's problems in the summer of 2007, when auctions began to fail, the complaint said.
In a July 24 letter to Cuomo, released Monday, Schwab said it did not actively market or induce the sale of auction-rate debt, and never made any commitment to support that market.
Cuomo's demand that Schwab "act as an insurer against an unprecedented market collapse that it did not cause and could not predict is legally unsound," wrote Faith Gay, a partner at the law firm Quinn Emanuel Urquhart Oliver & Hedges LLP.
In afternoon trading, Schwab shares were down 82 cents, or 4.5 percent, at $17.44 on the Nasdaq.
The case is Cuomo v. Charles Schwab & Co, Supreme Court of the State of New York, County of New York.
(Reporting by Jonathan Stempel; Editing by Phil Berlowitz and Gerald E. McCormick)
How different countries deliver health care
Read this article about the UK, Canada and Swiss models.
Quote
At this point, all that stands in the way of universal health care in America are the greed of the medical-industrial complex, the lies of the right-wing propaganda machine, and the gullibility of voters who believe those lies.
Unquote
Sunday, August 16, 2009
It is easy to be cheated
Here is a reminder about the link on the right panel, which gives you a list of articles on how you can be cheated, and how to avoid being cheated.
Lack of product knowledge
Here is a letter entitled "Appalled at the lack of product knowledge at NTUC Income" published in the Straits Times Online Forum and the comments to this letter.
Quote
There is an enormous gap between what the CEO says in his note to client and the reality of his organization. The apparent post-Tan Kin Lian slippery slope down is steep and inevitable when the top no longer walk the talk, otherwise how do you explain the rot?
End of Quote
Distribution of bonus
Read this letter in the Straits Times entitled, "Policyholders in the dark about how bonus are distributed". A reader has copied two items from my blog written a few months ago and posted in the online forum. I hope that these items now receive more attention.
Quoted from my blog:
Survey results - National Service (2)
This is a popular survey. 97 replies were received within 18 hours. Here are the updated results.
Benefits for citizens and permanent residents
BT Kojak has prepared this table to summarise the benefits for citizens and permanent residents, as taken from the ICA website. The benefits for citizens are not much better than permanent residents, but carries the heavy obligation of National Service. I hope that this imbalance be redressed, so that it does not become a burden to be a citizen.
Names of 10 financial institutions
I have arranged to make the placards showing the names of the 10 financial institutions that sold the credit-linked note and were found by MAS to have failed in compliance with the regulations.
These placards are to help the investors to congregate together and get to know the other investors.
Can someone help me to find the names of the 10 FIs and post them here. You can get them from the MAS report.
Indonesian President gives 13th month bonus to teachers
Read this wonderful gesture from a President does earns only US130,000 a year.
Survey results - National Service
Join this survey, if you are a male citizen who have completed full time National Service.
Saturday, August 15, 2009
Organising the Petition and Gathering - my personal perspective
The past few weeks, since the launch of the Petition, had been difficult for me. I had to face these challenges:
a) Sceptics. These are people who sneered at the effort and declared that there would be no support for the Petition and that the Government would not listen anyway.
b) Enemies. These are people who attacked me through anonymous comments in my blogs and elsewhere. They dislike me for various reasons or may be acting on the instructions of the financial institution or the authority.
c) Fear-mongers. These are people who created unfounded fear and warned me to be careful, giving their advice on how to avoid getting into trouble with the Government.
d) Lack of support from the media. Although I approached about 10 journalists three times, none of them covered the Petition. There was total silence. My emails remain unanswered.
My task was made more difficult by the unwillingness of the investors to step forward to speak. They did not want to be seen as trouble makers or be known that they had lost a lot of money. The installation of the cameras at Hong Lim was another deterrent. A Tan, who is helping me in FISCA, keeps complaining that if the investors are not willing to step forward, why should Tan Kin Lian take the brunt of the personal attacks and sacrifice? He compared the docile attitude of the Singapore investors, with the bravery of the Hong Kong investors.
I considered asking some opposition politicians to speak, but decided against it. I did not want to politicise this issue and make it more difficult for the investors to get the hearing of the Prime Minister.
But Providence is on my side. Two significant events occurred after the launch of the Petition. First, there was the Hong Kong settlement, which was surprising fair and favourable to the investors. It set a benchmark for Singapore to be compared. Second, Great Eastern Life decided to give full compensation to the policyholders who were mis-guided into investing in the Great Link Choice, which is similar to the structured notes.
To my surprise, the Petition collected more than the initial target of 300 signatures. With more signatures on 22 August, I hope that it will surpass the new target of 1,000 signatures.
To the credit of the Government, I did not receive any direct threat or harrassment for my efforts.
We are now counting down to the Gathering on 22 August, which is only 6 days away. I am encouraged by several investors, who thanked me for my efforts, even though they knew that it will be an uphill task. They felt that it was necessary to organise the Petition and Gathering to register the anger of the people who were treated unjustly and were let down by the leaders.
But, who knows? Providence may be on our side one more time. I am always hopeful and positive.
a) Sceptics. These are people who sneered at the effort and declared that there would be no support for the Petition and that the Government would not listen anyway.
b) Enemies. These are people who attacked me through anonymous comments in my blogs and elsewhere. They dislike me for various reasons or may be acting on the instructions of the financial institution or the authority.
c) Fear-mongers. These are people who created unfounded fear and warned me to be careful, giving their advice on how to avoid getting into trouble with the Government.
d) Lack of support from the media. Although I approached about 10 journalists three times, none of them covered the Petition. There was total silence. My emails remain unanswered.
My task was made more difficult by the unwillingness of the investors to step forward to speak. They did not want to be seen as trouble makers or be known that they had lost a lot of money. The installation of the cameras at Hong Lim was another deterrent. A Tan, who is helping me in FISCA, keeps complaining that if the investors are not willing to step forward, why should Tan Kin Lian take the brunt of the personal attacks and sacrifice? He compared the docile attitude of the Singapore investors, with the bravery of the Hong Kong investors.
I considered asking some opposition politicians to speak, but decided against it. I did not want to politicise this issue and make it more difficult for the investors to get the hearing of the Prime Minister.
But Providence is on my side. Two significant events occurred after the launch of the Petition. First, there was the Hong Kong settlement, which was surprising fair and favourable to the investors. It set a benchmark for Singapore to be compared. Second, Great Eastern Life decided to give full compensation to the policyholders who were mis-guided into investing in the Great Link Choice, which is similar to the structured notes.
To my surprise, the Petition collected more than the initial target of 300 signatures. With more signatures on 22 August, I hope that it will surpass the new target of 1,000 signatures.
To the credit of the Government, I did not receive any direct threat or harrassment for my efforts.
We are now counting down to the Gathering on 22 August, which is only 6 days away. I am encouraged by several investors, who thanked me for my efforts, even though they knew that it will be an uphill task. They felt that it was necessary to organise the Petition and Gathering to register the anger of the people who were treated unjustly and were let down by the leaders.
But, who knows? Providence may be on our side one more time. I am always hopeful and positive.
We are now counting down to the Gathering on 22 August, 5 p.m. at Hong Lim Park. See you there.
Tan Kin Lian
Tan Kin Lian
The Quick Buck Just Got Quicker
How greedy can corporate executives be? The corruption and greed shows had bad the free market, capitalist system can be. Read this report.
This type of situation makes socialist principles much more attractive to the ordinary people. It is time for the leaders in Singapore to reflect on its adoration of the capitalist system.
Survey: Will you fight for Singapore?
This survey is for male citizens who have completed full time National Service.
Results of the JUTA Award (1)
Here are the results, based on 24 replies to the JUTA Award, to recognise an organisation or person who "jumps up and take action" to put things right.
I have excluded over 30 responses from the same IP address, giving the same answer in favour of one organisation. This hacker managed to bypass the security feature in the survey software to prevent repeat entries.
The survey is still open. Vote here.
Friday, August 14, 2009
An equal opportunity
God creates Earth with abundant land, forest, oceans, animals, plants and fishes. He gives every person an equal opportunity to make a living as a farmer, hunter, fisherman or craftsman. He is not a capitalist and does levy a charge or rental for using the natural resources.
In a modern society, every person should be given an equal opportunity to have meaningful work for a fair wage, without being exploited by people who take the lion share of the rewards.
In a modern society, every person should be given an equal opportunity to have meaningful work for a fair wage, without being exploited by people who take the lion share of the rewards.
Socialism
A reader commented that Tan Kin Lian is a socialist. I am more inclined to be a social democrat, along the lines of our national pledge to "build a democratic society based on equality and justice".
I have also run a cooperative enterprise for 30 years based on the principles of cooperation. I wish to share this explanation of socialism, which I found in Wikipedia.
Socialism refers to various theories of economic organization advocating state, public or common worker (through cooperatives) ownership and administration of the means of production and distribution of goods, and a society characterized by equal access to resources for all individuals with an egalitarian method of compensation.
Modern socialism originated in the late 18th-century intellectual and working class political movement that criticized the effects of industrialization and private ownership on society, however, socialism itself is not a political system; it is instead an economic system distinct from capitalism. Karl Marx and Friedrich Engels used the terms "socialism" and "communism" interchangeably, and posited that it would be achieved via class struggle and a proletarian revolution.
Vladimir Lenin, perhaps influenced by Marx's ideas of "lower" and "upper" stages of socialism, later used the word "socialism" as a transitional stage between capitalism and communism.
Early socialist thinkers tended to favor an authentic meritocracy combined with rational social planning, while many modern socialists have a more egalitarian approach.
Socialists mainly share the belief that capitalism unfairly concentrates power and wealth among a small segment of society that controls capital, creates an unequal society, does not provide equal opportunities for everyone to maximize their potentialities and does not utilize technology and resources to their maximum potential nor in the interests of the public. Therefore socialists advocate the creation of a society that allows for the widespread application of modern technology to rationalize the economy by eliminating the anarchy in production of capitalism, allowing for wealth and power to be distributed more evenly based on the amount of work expended in production, although there is considerable disagreement among socialists over how and to what extent this could be achieved.
Socialism is not a concrete philosophy of fixed doctrine and program; its branches advocate a degree of social interventionism and economic rationalization, usually in the form of economic planning, sometimes opposing each other. Another dividing feature of the socialist movement is the split between reformists and the revolutionaries on how a socialist economy should be established. Some socialists advocate complete nationalization of the means of production, distribution, and exchange; others advocate state control of capital within the framework of a market economy.
Social democrats propose selective nationalization of key national industries in mixed economies, while maintaining private ownership of capital and private business enterprise. Social democrats also promote tax-funded welfare programs and regulation of markets. Many social democrats, particularly in European welfare states, refer to themselves as "socialists", introducing a degree of ambiguity to the understanding of what the term means.
Tan Kin Lian
I have also run a cooperative enterprise for 30 years based on the principles of cooperation. I wish to share this explanation of socialism, which I found in Wikipedia.
Socialism refers to various theories of economic organization advocating state, public or common worker (through cooperatives) ownership and administration of the means of production and distribution of goods, and a society characterized by equal access to resources for all individuals with an egalitarian method of compensation.
Modern socialism originated in the late 18th-century intellectual and working class political movement that criticized the effects of industrialization and private ownership on society, however, socialism itself is not a political system; it is instead an economic system distinct from capitalism. Karl Marx and Friedrich Engels used the terms "socialism" and "communism" interchangeably, and posited that it would be achieved via class struggle and a proletarian revolution.
Vladimir Lenin, perhaps influenced by Marx's ideas of "lower" and "upper" stages of socialism, later used the word "socialism" as a transitional stage between capitalism and communism.
Early socialist thinkers tended to favor an authentic meritocracy combined with rational social planning, while many modern socialists have a more egalitarian approach.
Socialists mainly share the belief that capitalism unfairly concentrates power and wealth among a small segment of society that controls capital, creates an unequal society, does not provide equal opportunities for everyone to maximize their potentialities and does not utilize technology and resources to their maximum potential nor in the interests of the public. Therefore socialists advocate the creation of a society that allows for the widespread application of modern technology to rationalize the economy by eliminating the anarchy in production of capitalism, allowing for wealth and power to be distributed more evenly based on the amount of work expended in production, although there is considerable disagreement among socialists over how and to what extent this could be achieved.
Socialism is not a concrete philosophy of fixed doctrine and program; its branches advocate a degree of social interventionism and economic rationalization, usually in the form of economic planning, sometimes opposing each other. Another dividing feature of the socialist movement is the split between reformists and the revolutionaries on how a socialist economy should be established. Some socialists advocate complete nationalization of the means of production, distribution, and exchange; others advocate state control of capital within the framework of a market economy.
Social democrats propose selective nationalization of key national industries in mixed economies, while maintaining private ownership of capital and private business enterprise. Social democrats also promote tax-funded welfare programs and regulation of markets. Many social democrats, particularly in European welfare states, refer to themselves as "socialists", introducing a degree of ambiguity to the understanding of what the term means.
Tan Kin Lian
Bus arrival times
The Land Transport Authority is spending a lot of money to upgrade the bus arrival time shown in 50 bus stops. There is a better way to spend this budget to improve the bus service. My suggestion is listed here.
Thursday, August 13, 2009
Strategy - how government approaches a problem
The tribal wisdom of the Dakota Indians, passed on from generation to generation, says that, "When you discover that you are riding a dead horse, the best strategy is to dismount." However, in government more advanced strategies are often employed, such as:
1. Buying a stronger whip.
2. Changing riders.
3. Appointing a committee to study the horse.
4. Arranging to visit other countries to see how other cultures ride dead Horses.
5. Lowering the standards so that dead horses can be included.
6. Reclassifying the dead horse as living impaired.
7. Hiring outside contractors to ride the dead horse.
8. Harnessing several dead horses together to increase speed.
9. Providing additional funding and/or training to increase the dead Horse's performance.
10. Doing a productivity study to see if lighter riders would improve the dead horse's performance.
11. Declaring that as the dead horse does not have to be fed, it is less costly, carries lower overhead and therefore contributes substantially more to the bottom line of the economy than live horses.
12. Rewriting the expected performance requirements for all horses.
And, of course...
13. Promoting the dead horse to a supervisory position.
1. Buying a stronger whip.
2. Changing riders.
3. Appointing a committee to study the horse.
4. Arranging to visit other countries to see how other cultures ride dead Horses.
5. Lowering the standards so that dead horses can be included.
6. Reclassifying the dead horse as living impaired.
7. Hiring outside contractors to ride the dead horse.
8. Harnessing several dead horses together to increase speed.
9. Providing additional funding and/or training to increase the dead Horse's performance.
10. Doing a productivity study to see if lighter riders would improve the dead horse's performance.
11. Declaring that as the dead horse does not have to be fed, it is less costly, carries lower overhead and therefore contributes substantially more to the bottom line of the economy than live horses.
12. Rewriting the expected performance requirements for all horses.
And, of course...
13. Promoting the dead horse to a supervisory position.
Contributed by A Tan
Adjudication by FIDREC
Dear Mr Tan,
I will be facing a legal counsel from X (the financial institution) and one of the 5 other listed representatives in my adjudication. Further, the RM who sold me the minibond is named as a witness. As mentioned to FIDReC and MAS, I do not understand why for instance, a robber can be named as a witness instead of the 'Accused'. The arrangement has the effect of X sending three representatives including one legal counsel against me alone.
FIDReC stand since March (I sent in my complaint in Nov 2008) when I was told of adjudication procedures has been that I have to accept this arrangement if the Adjudicator did not reject.
I am wondering if others are facing similar unjust arrangement? Did they share their solutions with you? Appreciate if you can provide some advice. Thank you.
REPLY
Many investors have expressed unhappiness with the FIDREC arrangement and the outcome.
I suggest that you bring up this matter to the Consumer Association (CASE) to ask for consumers to be given a fair hearing. CASE is represented on FIDREC. You can send your letter to Mr. Seah Seng Choon at seahsc@case.org.sg
I will be facing a legal counsel from X (the financial institution) and one of the 5 other listed representatives in my adjudication. Further, the RM who sold me the minibond is named as a witness. As mentioned to FIDReC and MAS, I do not understand why for instance, a robber can be named as a witness instead of the 'Accused'. The arrangement has the effect of X sending three representatives including one legal counsel against me alone.
FIDReC stand since March (I sent in my complaint in Nov 2008) when I was told of adjudication procedures has been that I have to accept this arrangement if the Adjudicator did not reject.
I am wondering if others are facing similar unjust arrangement? Did they share their solutions with you? Appreciate if you can provide some advice. Thank you.
REPLY
Many investors have expressed unhappiness with the FIDREC arrangement and the outcome.
I suggest that you bring up this matter to the Consumer Association (CASE) to ask for consumers to be given a fair hearing. CASE is represented on FIDREC. You can send your letter to Mr. Seah Seng Choon at seahsc@case.org.sg
Petition to PM on credit linked notes (7)
Petition.
Signatures as at 1 August: 650
The signing of the online petition has slowed down during the past weeks. An average of 10 people sign each day.
With the recent decision by Great Eastern Life to buy back their structured products, there is some hope of getting the banks and financial institutions to adopt the same settlement given in Hong Kong.
I urge all investors to put in a renewed effort to get more people to sign the petition and reach the target of 1,000 signatures.
Update as at 9 August: 716 signatures (average of 10 per day)
Signatures as at 1 August: 650
The signing of the online petition has slowed down during the past weeks. An average of 10 people sign each day.
With the recent decision by Great Eastern Life to buy back their structured products, there is some hope of getting the banks and financial institutions to adopt the same settlement given in Hong Kong.
I urge all investors to put in a renewed effort to get more people to sign the petition and reach the target of 1,000 signatures.
Update as at 9 August: 716 signatures (average of 10 per day)
Whole life and endowment with low rates of commission
Someone asked me why I am against whole life and endowment plans, and why I offered these plans during my tenure as CEO of NTUC Income.
I have covered these issues on several occasions in my blog during the past two years. I shall repeat what I have said earlier.
I do not like life insurance plans that have these features:
a) Pays high rate of commission
b) Pays a low rate of bonus (i.e. less that what has been earned)
c) Gives a poor return
During my tenure as CEO of NTUC Income, the whole life and endowment plans had the following features:
a) Pays a modest rate of commission (i.e. about half of the market rate)
b) Pays a high rate of bonus
c) Gives a fairly attractive return, i.e. more than 5% p.a for policies taken in the earlier yeras.
During the last three years of my tenure, I encouraged the agents to sell term insurance and to sell an investment linked plan with low rates of commission (i.e. 15% for 3 years only).
After I left, the marketing strategy has changed.
Tan Kin Lian
I have covered these issues on several occasions in my blog during the past two years. I shall repeat what I have said earlier.
I do not like life insurance plans that have these features:
a) Pays high rate of commission
b) Pays a low rate of bonus (i.e. less that what has been earned)
c) Gives a poor return
During my tenure as CEO of NTUC Income, the whole life and endowment plans had the following features:
a) Pays a modest rate of commission (i.e. about half of the market rate)
b) Pays a high rate of bonus
c) Gives a fairly attractive return, i.e. more than 5% p.a for policies taken in the earlier yeras.
During the last three years of my tenure, I encouraged the agents to sell term insurance and to sell an investment linked plan with low rates of commission (i.e. 15% for 3 years only).
After I left, the marketing strategy has changed.
Tan Kin Lian
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