Tan Kin Lian and Glenn Knight initiate to sue the banks and petition MAS for support

[Zombie]

Re: Tan Kin Lian and Glenn Knight initiate to sue the banks and petition MAS for supp

because only singaporeans thinks the government owes it to them ot recover money on a risky investment.

If you can, please tell TKL your view.

 

[chinkangkor]

Re: Tan Kin Lian and Glenn Knight initiate to sue the banks and petition MAS for supp

"Deposit" is defined in the Banking Act.

MAS did insist that all products that are not deposits, to have the word "deposit" removed from all informations pertaining to the products.

But it does not mean that products without the name "deposit", are not deposits.

So is 'structured deposit product' a deposit?

 

[Zombie]

Re: Tan Kin Lian and Glenn Knight initiate to sue the banks and petition MAS for supp

So is 'structured deposit product' a deposit?

By definition, yes.

Edited:

Traditional deposits and structured deposits are all classified as deposits.
In Banking Act, deposit is something that you will eventually get back the capital or principal.
Following this definition, Minibond should not be a structured deposit, but some form of notes.
In the Securities and Futures Act,
- notes is known as debentures
- debentures is known as securities
- securities is known as capital market product
In the Financial Advisers Act,
- capital market product is known as investment product

Then, Section 27 of FAA talks about recommendation of investment product, therefore Minibond must be covered by this section; And investors should find it easy to seek compensations simply by looking at the mismatch of risk. But in reality, it would be difficult, as I have mentioned in earlier post.

 

[Porfirio Rubirosa]

Re: Tan Kin Lian and Glenn Knight initiate to sue the banks and petition MAS for supp

With regard to my comments on "Structured Products: Let's not forget about personal responsibility" in TODAY on 2008/10/30, I would like to clarify that I was asked to express my views on our PM's statement on the two approaches the government can take after the debacle on structured products and the general duty of investors themselves. I was not asked to comment on whether there was any alleged mis-sellings or misrepresentations by the banks or their agents nor whether the banks had covered themselves adequately, which are separate issues altogether.

In addition, for the investors, I was talking about the normal investors and not our senior citizens whom I even mentioned to the reporter that the government can consider imposing a total ban or at least some form of restriction on the selling of such complex structured products to them. These senior folks will never understand the complex intricacies of these products no matter how many times you explain to them. It was also in that context that I mentioned that I never invest in things I don't understand, because many of these structured products are really, really very complex and they vary from one to another and no two products are the same (well, this part was omitted from the report:-).

As for whether I agree with PM's statement on the two approaches our government can take after this debacle, one which is essentially going for more regulation and back to the paternalistic or merit-based regime or the other which is the current disclosure-based and less regulation regime, my comment was that I do not think that a general increase in regulations is the way to go and I would advocate for the current regime to remain as this is the only way we can move forward. More regulation will only make us less competitive in comparison to HK and other developed markets.

However, there can be regulation on a need basis esp. on the protection of the older folks who may not be financial literate. That said, in order for a disclosure-based regime to be effective, the government has the duty to ensure that there are more enforceable laws on disclosure such that there is increase transparency and more information flow to the public. In addition, banks and the financial industry have the duty to educate the general public as to the products they are selling. The key points I emphasised are disclosure and education.

I also mentioned that there should be more stringent requirements as to the qualifications of these financial managers -- from the Lehman episode, it can be seen that quite a number of them did not even understand the products that they were selling (which was what I found out as well when I talked to some of them on many previous occasions).

I told the reporter that for the selling of highly sophisticated engineering or medical equipments, we general require trained engineers or qualified medical personnel to sell them. It should therefore be the same for sophisticated financial products. Bank and financial institutions should only hire business or accounting graduates or at least graduates who have the requisite financial literacy rather than fresh graduates from disciples with no prior financial education to sell these products.

Although I understand that many of these financial managers are required to go through related financial courses and tests (and that these tests are not necessary easy to clear), the fact that there can be so many alleged mis-selling incidents may indicate that some of these people themselves might not have been adequately trained.

Under these circumstances, the normal investors who are supposed to be savvy and understood the products they bought cannot complain subsequently when the products turn bad. In Lehman's case, actually many might know about the risk (i.e. they may stand to lose all if the banks collapse), but who would have heard of 6 months ago that any American bank, esp. one as strong as 158-year old Lehman, would go into liquidation? This is generally the worst risk -- almost like an unthinkable apocalypse -- and in this case, it materialized. So barring all the talks about misselling etc., people who knew the risk but just thought that it would never materialized cannot complain.

Warmest regards,

Dr Lan Luh Luh

 

[scroobal]

Re: Tan Kin Lian and Glenn Knight initiate to sue the banks and petition MAS for supp

With regard to my comments on "Structured Products: Let's not forget about personal responsibility" in TODAY on 2008/10/30, I would like to clarify that I was asked to express my views on our PM's statement on the two approaches the government can take after the debacle on structured products and the general duty of investors themselves.

Sounds like back tracking to me. What over regulation is he referring to. I clearly got the impresssion that the banks were pretty much operating on caveat emptor environment.

Yet after all that, he nows says that it is a complex product and requires graduates from certain fields to sell.

kind of lu lu to me.

 

[kakowi]

Re: Tan Kin Lian and Glenn Knight initiate to sue the banks and petition MAS for supp

Referring to the letter by Dr Lan Luh Luh (hopefully there is no mispelling):

(1) he/she forgotten that the bank earned on the commission of the sales of minibonds and other structured products. Therefore the bank is in the business of selling, not education. More sales more profit.

(2) having financially literate graduates does not remove the quota system imposed by the bank. There had been many reports in the past two years about how lucrative is the RM career and how high the quotas that were imposed on them. So if the bank imposed a quota on minibonds, then it will have to be filled regardless of the level of financial literacy;

(3) having financially literate graduates will not lead to a situation where graduate A will say this is high risk whilst graduate B will say low risk. Rather it is the bank who tell these graduates what is the risk rating. So if the bank says it is low risk, the graduates will also say it is low risk, unless they are looking for an academic career;

IF the issue is to make sure that suitably qualified personnel can explain the intricacies, then the bank must allocate time for the personnel to do the explaining, not push for quotas at the expense of education, allow the customer to think it over for a few days, encourage the customer to shop around, read up and discuss in sammyboy.com;

NOW which bank will do that?

Far better to say "This product is not suitable for retirees. If you do not understand the prospectus, then this product is also not suitable for you." And get them to sign a disclaimer form "I insist on buying this. It's my choice, what!"

It is a free world. You buy and the profits or losses are yours, wholly yours.


Note: The issue is not about more regulation or less regulation. The issue is correct classification of the risk and the type of clientele to which this product is to be sold. There is no need to throw the baby out with the water. Maybe a greater accountability (?) on the part of MAS to vet the risk rating and recommended clientele. MAS or the banks, at the last resort, can always restrict the clientele to finance graduates, in particular, those whose theses are on structured products.

 

[Porfirio Rubirosa]

Re: Tan Kin Lian and Glenn Knight initiate to sue the banks and petition MAS for supp

Dr Lan Luh Luh – your further clarification is required.

Firstly, it is heartening to note that Dr Lan is cognizant, from her own experience [she “talked to some of them on many previous occasions”], that “quite a number” of the financial managers [RMs?] had no understanding of the products they were selling. A good start for you, Dr Lan.

But we do not know how many RMs she had spoken to, on those “many previous occasions”, and whether they were the same persons or different persons. “Some” here can mean two or three only and if Dr Lan had spoken to only two or three people, it would not be accurate to say “quite a number of them did not even understand…” Furthermore, an extrapolation from the past may not be an accurate reflection of the present; the ones she spoke to may not be the ones who are doing the selling today; the latter may be more knowledgeable or better educated.

Secondly, Dr Lan commented: “Although I understand that many of these financial managers are required to go through related financial courses and tests (and that these tests are not necessary easy to clear), the fact that there can be so many alleged mis-selling incidents may indicate that some of these people themselves might not have been adequately trained.” There is no question that mis-selling has occurred, with regard to the so-called structured products linked to Lehman Brothers. Would Dr Lan agree with this statement, taking into account that several distributors have begun making restitution for having mis-sold?

Would Dr Lan also agree that when these products were being flogged to the public, the distributors made no distinction as to whom the products should be sold? In other words they were selling to every Tan, Lim and Chua, male or female, elderly or young, educated or illiterate? Would she agree that some of the sales measures, including promotion advertising material, adopted by some, if not all, distributors were clearly out of sync with the inherent risks of the products? Would she agree that these products were high-risk investments?

I refer now to the last paragraph of Dr Lan’s clarification: “Under these circumstances, the normal investors who are supposed to be savvy and understood the products they bought cannot complain subsequently when the products turn bad. In Lehman's case, actually many might know about the risk (i.e. they may stand to lose all if the banks collapse), but who would have heard of 6 months ago that any American bank, esp. one as strong as 158-year old Lehman, would go into liquidation? This is generally the worst risk -- almost like an unthinkable apocalypse -- and in this case, it materialized. So barring all the talks about misselling etc., people who knew the risk but just thought that it would never materialized cannot complain.”

The last sentence seems to be the lynchpin of the entire paragraph. So, am I right in saying that Dr Lan is not excluding the right of “normal investors” to seek restitution for mis-selling, provided they can prove that they had been mis-sold, through misleading adverts and other misrepresentations made by the RM? Would Dr Lan discount the possibility that any distributor having mis-sold to A could also have mis-sold to B, or X or Y?

Finally, Dr Lan, [1] how do you define “normal investors”? and [2] whether there is anything in law that distinguishes “normal investors” from other investors?

BTW, to all those who have mistakenly assumed Dr Lan as a male, Dr Lan is a “she”.

Richard Woo