Monday, October 13, 2008

Singapore's Distraught Investors of Structured Products Need Help Now! (Forum Letter)

Addendum (16.10.08): A second version of this was printed by My Paper on 16.10.08 ( see below in italics)

October 12, 2008

Dear Editor,

I applaud Mr. Tan Kin Lian, the ex-CEO of NTUC Income, for helping to organize the obviously distraught holders of the many structured financial products. (see link here) These credit linked securities are now in real danger of vanishing into thin air.

Thousands of Singaporeans, many of whom are retirees, had sunk their complete life savings into the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacle Notes and Merrill Lynch Jubilee Notes. They are justified in being upset that they may see little or none of their monies again. ( see links here & here)

Their frustrations are multiplied when these investors hear reports that DBS Hong Kong might pay full compensation to Lehman Minibond investors there if they can prove they were misled during the sales process. It is natural that they expect DBS to act likewise in Singapore, its home base.

For the sake of these people, let us get beyond the blame game about why they are in such dire straits as a result of buying products that they were not 100% certain about. Buzzwords like “caveat emptor”- buyer aware, are meaningless to them now when they face a bleak future without any financial resource. They need real help- not just words.

How is the government or its elected representatives going to help these Singaporeans?

Doing nothing is hardly an option.

Dr.Huang Shoou Chyuan

PS: Since submission of this letter to the forum editor, DBS has finally come out to take responsibility if there is any evidence of mis-selling here in Singapore. It will be on a case-by-case basis. This letter was not published.



16.10.08 :Second version of this letter (Published in My Paper 16.10.08) ( just for the records)

Dear Editor,

I applaud Mr. Tan Kin Lian, the ex-CEO of NTUC Income, for stepping forward to champion the cause of desperate holders of the many structured financial products.

Thousands of Singaporeans, many of whom are retirees, had sunk their complete life savings into the Lehman Minibonds, DBS High Notes, Morgan Stanley Pinnacle Notes and Merrill Lynch Jubilee Notes. Their desperation is understandable as these credit linked securities are now in imminent danger of vanishing into thin air.

Furthermore these investors feel that they have been neglected by the authorities. The banks who sold these products to them, were also deemed extremely slow in initiating help. How could investors think otherwise when it was many days after DBS Hong Kong had offered to pay full compensation to Lehman Minibond investors there (if they could prove there was mis-selling) before DBS Singapore offered the same here? Are Singaporeans less worthy of help? Is this just poor PR or a case of double standards?

For those of us who are fortunate not to have invested in these products, let us not be smug and judgmental. Let us get beyond the blame game about why they are in such dire straits as a result of buying products that they were not 100% certain about. Buzzwords like “caveat emptor”- buyer aware, are meaningless to them now when they face a bleak future without any financial resource. They need real help- not just words.

How is the government and its elected representatives going to help these Singaporeans?

Doing nothing is not an option.

Dr.Huang Shoou Chyuan

9 comments:

LuckySingaporean said...

Dr. Huang,
After this structured products episode, there is going to be the recession...which will be more widespread in terms of impact.

The govt ran a system in which a large segment of the population couldn't save up during the good times due to the income gap and rising cost of living. When the recession hit, there will be many people going into dire straits fast.

The reactive way the PAP handled the minibonds issue - the 1st casualties of this crisis...makes me really worried about how

nofearSingapore said...

Hi Lucky,
I think none of us know how these folks feel unless we also put in hard-earned money into these same structured products.

The govt will be thinking:
1. If we bail out the investors, the people will always want us to bail them out in the future.
We must continue with our time-honoured philosophy of not helping people 100% or else these people will get used to it and develop the dreaded and incurable “crutch mentalities”
2. If we do nothing, maybe no one would notice ( esply if SPH journalists ahem..do their jobs properly)
3. Worse case, when push comes to shove, we will say we will do something but only on a case-by-case basis. Divide and rule. Make those we help sign confidentiality clauses or else they get zilch!
4. If they want class-action suit let them do it- but they still remember Raffles Town Club where the plaintiff win against RTC but got nothing ( except worthless vouchers) and the owners allegedly were still quite well off ( or so the recent court case showed)

I think the govt is at Item 3.

Dr.Huang

step up and bat said...

The Sin govt must look beyond their mindset that the people will look to them for bail outs should they set a precedent.

The most important objective is to reinforce the credibility of our finacial institutions. I believe it is the HK govt's main purpose.
The recent collective measures by various govts show it is imperative to calm the markets and give confidence to investors.
I fully agree that doing nothing is not an option and this govt has done the country a disfavour when other govts have taken the lead.

Worldclass govts have demonstrated what it takes to be one. It is about stepping up to the plate in a crisis.

Are the people from the PAP govt watching and learning ?
Don't take too long, it is time to act!

Daniel Tan said...

It is extremely stupid to continue to keep your money in the very same bank that you had perceived to cheat you, your friends and/or your family. Withdrawing your funds from DBS/POSB may even get you a better deal elsewhere in Singapore. For example, Maybank charges 0.5% interest higher for their current accounts.

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/382531/1/.html

Don´t fall for this nice-sounding divide-and-conquer strategy.

DBS has said it would take responsibility if customers are able to give evidence of mis-selling in relation to products affected by the collapse of Lehman Brothers on a case-by-case basis.

Whatever success all collective efforts Singaporeans had put up was because we have unity. By loosing that unity, we will loose the ability to challenge financial institutions. Once you loose that ability, you, your friends and your affiliates will loose all your money.

Don´t be a fool.

Anonymous said...

If the clob shares experience is anything to go by, I won't be too optimistic about their assurances, even as they appear to be addressing the issue. In any case, trying to prove mis-selling is not going to be easy, and watch the way they crafted their reply where compensation, if any, is going to be on a case by case basis.

nofearSingapore said...

Hi guys:
A second version of my letter was sent as there was some response from DBS after I wrote the first one. This is published in MyPaper on 16.10.08.

A short comment on Class Action:
There was a comment from a lawyer that investors should consider this to seek redress. My advice ( from a painful and bad experience in Raffles Town Club case): Don't. Only the lawyers will potentially gain. In RTC case, we won but actually lost. I only got promises of stupid vouchers. In the end, I just resigned from RTC and stopped paying suscriptions to the club.

Does any legal eagles out there know if in the recent case of PeterLim et al against owners of RTC, it can be proven that that the owners ( from China) had knowingly avoided paying the successful plaintiffs of the Raffles5000 ( or whatever) by saying RTC was broke but yet paid themselves tens of millions directors fees/dividends, we can get authorities to investigate for purgery or ...?

Dr.Huang

Anonymous said...

Lawyers, erh, even if you have little chance of winning, will tell you there is a 50-50 chance.

My former employers got into the 50-50 trap many years ago. They not only lost the case, they had to pay fabulous legal fees for queen's counsel etc. Not only did the case drag on for years, in the end the amount they paid was about twice the amount of the claim, which if they had just paid up. Talk about mis-selling, or mis-representation. Proving is not easy.

SHIMURE said...

Why invest in something you know nothing of?

It is the new question which everyone should ask when requested or solicted in investment....

When the sub prime matter started.... it was 1 year ago....

This minibonds would be the 1st of many products to be affected...

Unit trusts and other investment products will follow....

Lesson most important here....

Buy what you know.

Final note.... the government would try to put the above to the population.... Hey we are all adults.... you know the risks in the investments rite?

But did you know that the same investment bankers would not bear the responsibilities of the loss?

BUY AT YOUR OWN RISK..... but not the risk of the bank, the owners of the funds... Hey it is non of my business, i only sell the products.....?

SHIMURE said...

Remember Baring's bank and Nick Leeson?

He served time... but now he is back?