Wednesday, September 24, 2008

LATEST on DBS High Notes: And things start to move......

Battlelines are getting drawn. Banks have begun to engage lawyers to prepare for lawsuits.
Banks sold $500M worth of these products to Singaporeans. Whatever happens I hope this is the nail in the coffin for structured products. It is a wonder why they are ever allowed in the first place - selling products that can never be understood by investors can only end in disaster. What is the purpose of these products except to generate more profits for banks. They serve no purpose and make investors take big risks they cannot possibly fathom for a disproportionately small return.

"Investors may find it more difficult to get legal recourse as they would have signed iron- clad contracts"

"Are we going to let contracts protect these greedy banks who acted against the interests of their customers?" - Lucky Tan

In the recent case involving misrepresentation by several American financial institutions for marketing auction rate securities to investors, the New York Attorney took action against these institutions and forced them to buy back these securities from investors. There are many ways to punish financial institutions for wrong doing. The HKMA is willing to go as far as suspending the license of banks who have been found guilty. No contract can protect a bank from punishment for selling high risk securities to old ladies who cannot possibly understand what they are buying and who were clearly misled to think that these products are safe.
-------------------
Move to help Lehman 'victims' gathers pace
MAS asks banks to see what can be done for Minibond, High Notes investors
By SIOW LI SEN

(SINGAPORE) Efforts are underway to see if anything can be done to help angry investors, who claim that they were misled into buying the now worthless Lehman structured products.

Picking up the pieces: MAS says it is 'in close contact with financial institutions that sold or issued structured products linked to Lehman, and has asked them to expedite their assessments of how investors will be affected'
The Monetary Authority of Singapore (MAS) is believed also to be involved in heavy-duty discussions with the financial institutions (FI) that were involved in selling the Minibonds and High Notes arranged by Lehman Brothers, which went bankrupt last week.
'MAS is in close contact with the FIs that sold or issued structured products which are linked to Lehman Brothers, and has asked them to expedite their assessments of how investors will be affected,' an MAS spokeswoman said last night.
As a regulator, MAS can punish FIs if there is evidence of a breach in regulations though it cannot force them to pay compensation.
Meanwhile, banks worried about their liability have begun consulting lawyers. A number of law firms including Wong Partnership, Drew & Napier and KhattarWong are acting for the nine banks, brokers and Hong Leong Finance, which had sold the structured products.
Over half-a-billion dollars worth of these products were sold over the last two years. But investors may find it more difficult to get legal recourse as they would have signed iron- clad contracts.In Hong Kong, a lawmaker is leading the charge on behalf of investors there who too have lost HK$12.7 billion (S$2.3 billion) in Lehman Minibonds. Albert Ho, chairman of the Democratic Party and a lawyer, told the media that investors will meet Hong Kong's Consumer Council tomorrow to see if they can get legal and financial assistance to try and recoup their losses.
Meanwhile, in Singapore, Tan Kin Lian, former NTUC Income chief executive, is trying to arrange a meeting with aggrieved investors to discuss taking collective action.
'I've not decided what to do for them yet,' he said last night.
There are several aspects to consider. 'It'll be pretty messy because the products were bought from different people. How to pull it off?' said Martin Lee, who had bought $10,000 worth of Minibonds.
'Banks are going to say 'look at the contracts',' said Subhas Anandan, president of the Association of Criminal Lawyers of Singapore. 'If a lot of investors came forward and there is some sort of pattern - despite the contract - it may help,' said Mr Anandan.
Lawyers say investors can band together and collect fees from everyone to take representative action - similar to the Raffles Town Club case, where 5,000 members each paid $300 to sue for compensation.
But that involves a lot of work, said Alan Lee, who spent more than four years getting members together to fight the Raffles Town Club case.
MAS has said investors can bring their complaints to the Financial Industry Disputes Resolution Centre. From 2005 to 2007, out of 130 cases which were adjudicated, 25 monetary awards were in favour of consumers.
Some banks told BT they are working hard to help investors.
DBS spokeswoman Karen Ngui said the bank 'has devoted additional resources to deal with customer concerns and we are treating this matter with the priority and importance it deserves'

43 comments:

Anonymous said...

deception of riches. who led the deception? talents?

talent for what? at best, you can say they are a bunch of over paid and over educated SELF SERVING idiots! lol now in hot soup.

but not to worry, the law is on the rich side, just like that fleece club hehe

Challenger said...

its always prudent to read, read and read carefully the terms of any financial product before buying.

Anonymous said...

I never believe in those so-called 'sophisticated' investment instruments.

'Sophisticated' is just another word for not knowing a clue of how the investment product really works.

8 banks tied to a single product? One bank goes belly-up, and the entire principal goes kaput? Doesn' this mean that the low-risk minibonds are in fact very high risk - risk is multiplied 8 times!

Those investors had been taken for a ride.

Anonymous said...

The man with the comforting smile in a sharp suit and tie, with the diamond cuff links is just a glamorised law protected daylight robber.

Q: why is your hair always short?
A: Because I always ask my barber
if I need a haircut.


Cheers,

Economist that cuts his own hair :)

Anonymous said...

"you can say they are a bunch of over paid and over educated SELF SERVING idiots!"---anony 8:49PM

sounds like you are talking about the PAP.

Anonymous said...

Food for Thought : What if HK finds the FI's guilty and here it's being brushed aside as caveat emptor? Same bond, just different jurisdications?
The SS

Zhong said...

If DBS top management is sincere and responsible enough, they just need to arrange meeting seasons for every respective RM and their corresponding investors. In this way they can verify on the spot whether their RMs has misled the investors into buying the products. There is no point to lodge complains here or there.

Anonymous said...

I hope HK find the FIs guilty.
This will put a lot of pressure on this govt and its court to match HK. This govt's obsession to be a respected financial centre cannot be discounted.

Anonymous said...

"Whatever happens I hope this is the nail in the coffin for structured products. It is a wonder why they are ever allowed in the first place". Unquote.

Dear Lucky;

if only MAS has ever wondered like You! AND AS REGULATOR, IT(MAS) SHOULD BE EVER DILIGENT.

patriot

Anonymous said...

Our self proclaimed div one govt is looking more and more stupid with each saga. I believe ordinary blokes like Lucky are a lot streetsmart.
The biggest crooks or biggest idiots are usually those who look the most impressive, but actually boh liao, no substance.

Donaldson Tan said...

The MAS Press release reads ¨While MAS cannot order FIs to pay compensation, we are committed to ensuring a fair resolution process for all affected investors.¨

It now appears that MAS is a toothless tiger, unlike the Hong Kong Monetary Authority. MAS even conveniently delegated the responsibility to FIDReC.

Although FIDReC exists for investment dispute resolution, its limitations favour the financial institutions (FI):

1. payout is limited to S$50,000.
2. investors must approach FIDReC on an individual basis.
3, Collective action is prohibited by FIDReC.
4. FIDReC orders are not binding

This means the FIs can seat behind the protection of well-paid in-house lawyers while investors are prohibited to pursue this advantage by pooling their resources. If the FI were to disagree with FIDReC┼Ť ruling, it can still choose not to do anything.

Alternative response can include boycotting DBS. Singaporeans should not discount the effect of boycott and protest. If so many investors are affected by the DBS High Notes 5, they can respond by transferring their bank accounts to another bank. The collective effect of closing down your DBS bank accounts can send down chills not only down the spine of DBS´ board of directors, but also MAS for being a toothless tiger. It is not illegal to close down your DBS bank account.

Anonymous said...

I think people shouldn't discount the effect of an organised boycott.

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