Hi Kin Lian,
Please post the latest valuation (July24)of the following series of Pinnacles Notes. The situation is now very critical for holders of these notes.
Series 9 & 10 are already kaput, 1 & 3 may be gone too, and 2,6 & 7 are almost worthless at 0.3% or less(they were at 2% a fortnight ago!) and Series 5 at 1.8%, barely alive and hanging by their skin.
Only remaining 4 Series are fairly safe at this time.
Yet MAS unlike its HK counterpart is expecting each and every investor to fight it out on a case-by-case basis with his FI distributor when it has already found the FIs guilty of near-systemic or firm-wide errors and faults. MAS is indeed prescribing a slow and painful death for the investors who are the victims in toiling through processes of complaints, FIDREC and/or legal actions, while the guilty are merely given what is effectively an enforced but cost-free and painless holiday.
In the light of the latest empathetic resolution led by HK's authority, I think the Petition ought to updated appropriately to add more punch.
SB
Thursday, July 23, 2009
CPF Life - does it need to be compulsory?
Hi Mr Tan,
Thanks for willing to spend time to write on CPF Life. We all understand the NEED to have CPF Life. But I would like to have an unbiased view on this plan which is made compulsory for everybody.
Our government is taking a significant portion of our hard-earned CPF money and place us on this plan. Is this a reasonable deal for us or simply we have no choice but to swallow this bitter pill?
Among the options available in this CPF Life, is it just choose based on "whether I want to leave some money for our younger generation" and thus opt for "receive minimum payout when I am alive"?
Is it really true that since CPF Board will be administering this annuity plan, it is better and reliable than those offered by insurers which definitely have more experience in this area?
JL
Thanks for willing to spend time to write on CPF Life. We all understand the NEED to have CPF Life. But I would like to have an unbiased view on this plan which is made compulsory for everybody.
Our government is taking a significant portion of our hard-earned CPF money and place us on this plan. Is this a reasonable deal for us or simply we have no choice but to swallow this bitter pill?
Among the options available in this CPF Life, is it just choose based on "whether I want to leave some money for our younger generation" and thus opt for "receive minimum payout when I am alive"?
Is it really true that since CPF Board will be administering this annuity plan, it is better and reliable than those offered by insurers which definitely have more experience in this area?
JL
SCMP:Minibond decision heartens investors similarly burned
24 July 2009
The watershed decision forcing banks to pay more than HK$6 billion compensation to Lehman minibond victims has given hope to thousands of investors burned in meltdowns of similar structured products.
The Securities and Futures Commission (SFC) ordered 16 banks, including Bank of China (Hong Kong) and Bank of East Asia, to return up to 70 per cent of money invested in minibonds to investors because bank staff sold the complex derivatives as low-risk.
The banking regulator, the Hong Kong Monetary Authority, will now deal with 9,000 other complaints of mis-selling of structured products. These are likely to include gripes about worthless Constellation Notes, sold by DBS Bank, and Octave Notes, sold by 17 banks and designed by Morgan Stanley.
"We will investigate if there is any mis-selling in these complaints. Our target is to complete all the cases by March," HKMA executive director Raymond Li Ling-cheung said.
Democratic Party chairman Albert Ho Chun-yan said: "Octave Notes and Constellation investors now have a stronger case for compensation."
Like minibonds, Constellation Notes were derivative products - financial bets - linked to the financial health of Lehman Brothers. Their buyers wagered that no companies in a group that included Lehman would go bust.
Investors were wiped out when the US bank failed last September.
Out of a series of 18 derivative-based Octave Notes, three required buyers to strike similar bets that Lehman would not fail. Buyers lost everything after the bank's demise.
Many investors who attended meetings organised by the Democratic Party claimed they had no idea they were buying derivatives. Instead, they claimed they were told the notes were comparable to time deposits or simple corporate bonds.
Shelley So, a Constellation investor, said DBS staff told her the notes were "for extra income, because we do not earn very much". In 2006, she and her husband poured US$130,000 into the product. The couple had instructed lawyers to try to get their money back.
DBS declined to comment.
About 4,000 Hong Kong people bought HK$2.4 billion worth of Constellation Notes. Octave Notes were sold to more than 8,000 people, who invested HK$1.8 billion.
Meanwhile, dozens of Lehman minibond investors protested outside the SFC yesterday, saying the new payout proposal was not acceptable and they wanted all of their investment principal back.
The watershed decision forcing banks to pay more than HK$6 billion compensation to Lehman minibond victims has given hope to thousands of investors burned in meltdowns of similar structured products.
The Securities and Futures Commission (SFC) ordered 16 banks, including Bank of China (Hong Kong) and Bank of East Asia, to return up to 70 per cent of money invested in minibonds to investors because bank staff sold the complex derivatives as low-risk.
The banking regulator, the Hong Kong Monetary Authority, will now deal with 9,000 other complaints of mis-selling of structured products. These are likely to include gripes about worthless Constellation Notes, sold by DBS Bank, and Octave Notes, sold by 17 banks and designed by Morgan Stanley.
"We will investigate if there is any mis-selling in these complaints. Our target is to complete all the cases by March," HKMA executive director Raymond Li Ling-cheung said.
Democratic Party chairman Albert Ho Chun-yan said: "Octave Notes and Constellation investors now have a stronger case for compensation."
Like minibonds, Constellation Notes were derivative products - financial bets - linked to the financial health of Lehman Brothers. Their buyers wagered that no companies in a group that included Lehman would go bust.
Investors were wiped out when the US bank failed last September.
Out of a series of 18 derivative-based Octave Notes, three required buyers to strike similar bets that Lehman would not fail. Buyers lost everything after the bank's demise.
Many investors who attended meetings organised by the Democratic Party claimed they had no idea they were buying derivatives. Instead, they claimed they were told the notes were comparable to time deposits or simple corporate bonds.
Shelley So, a Constellation investor, said DBS staff told her the notes were "for extra income, because we do not earn very much". In 2006, she and her husband poured US$130,000 into the product. The couple had instructed lawyers to try to get their money back.
DBS declined to comment.
About 4,000 Hong Kong people bought HK$2.4 billion worth of Constellation Notes. Octave Notes were sold to more than 8,000 people, who invested HK$1.8 billion.
Meanwhile, dozens of Lehman minibond investors protested outside the SFC yesterday, saying the new payout proposal was not acceptable and they wanted all of their investment principal back.
The Standard:Protests ease, investors come to terms with offer
24 July 2009
Regular investors started coming to terms with the Lehman minibond compensation offer yesterday, with only a handful of elderly investors protesting outside the Securities and Futures Commission offices.
Some of those protesting said they were inclined to accept the offer, although they held out a sliver of hope that they would get more.
``I have no money to use. My wife and I only have this pension, I can only accept the 60 percent compensation and use it,'' said an investor surnamed Chan.
Another investor said he prefers to reinvest the settlement amount to make more money. ``It's better to get back some money to invest in stocks. As the entanglement goes, chances are you won't be able to get it back some five years later,'' he said. ``Making up for the loss from stocks now is just the same.''
Consumer Council chairman Anthony Cheung Bing-leung advised investors to evaluate their individual situations before deciding whether or not to accept the buyback proposals by the regulators and banks. ``If the investors are willing to accept it, we will be pleased. But we also respect whatever decisions the investors make in the end,'' Cheung said. The council has received about 12,000 complaints from investors so far, including about 50 cases applying to the legal fund.
Customers of DBS Bank (Hong Kong), who bought Constellation credit-linked notes linked to Lehman, are still fighting for more compensation from the bank. They are not covered under the repurchase scheme as what they bought was not minibonds.
Bank shares surged yesterday as investors were relieved that the uncertainty on the minibond compensation plan was removed. Bank of East Asia (0023) jumped 3.3 percent to HK$25.10, while Bank of China (Hong Kong) (2388) rose 2.5 percent to HK$15.54.
Bank of Communications (3328) said yesterday it would have to pay a total of HK$204.54 million in investor compensation. It said the minibond repurchases will have ``minimal impact'' on financial results.
Dah Sing Banking Group (2356) said it would need to pay up to HK$444 million in compensation, plus HK$20 million in ``top-up payments'' and HK$22 million in legal-fund contributions.
Regular investors started coming to terms with the Lehman minibond compensation offer yesterday, with only a handful of elderly investors protesting outside the Securities and Futures Commission offices.
Some of those protesting said they were inclined to accept the offer, although they held out a sliver of hope that they would get more.
``I have no money to use. My wife and I only have this pension, I can only accept the 60 percent compensation and use it,'' said an investor surnamed Chan.
Another investor said he prefers to reinvest the settlement amount to make more money. ``It's better to get back some money to invest in stocks. As the entanglement goes, chances are you won't be able to get it back some five years later,'' he said. ``Making up for the loss from stocks now is just the same.''
Consumer Council chairman Anthony Cheung Bing-leung advised investors to evaluate their individual situations before deciding whether or not to accept the buyback proposals by the regulators and banks. ``If the investors are willing to accept it, we will be pleased. But we also respect whatever decisions the investors make in the end,'' Cheung said. The council has received about 12,000 complaints from investors so far, including about 50 cases applying to the legal fund.
Customers of DBS Bank (Hong Kong), who bought Constellation credit-linked notes linked to Lehman, are still fighting for more compensation from the bank. They are not covered under the repurchase scheme as what they bought was not minibonds.
Bank shares surged yesterday as investors were relieved that the uncertainty on the minibond compensation plan was removed. Bank of East Asia (0023) jumped 3.3 percent to HK$25.10, while Bank of China (Hong Kong) (2388) rose 2.5 percent to HK$15.54.
Bank of Communications (3328) said yesterday it would have to pay a total of HK$204.54 million in investor compensation. It said the minibond repurchases will have ``minimal impact'' on financial results.
Dah Sing Banking Group (2356) said it would need to pay up to HK$444 million in compensation, plus HK$20 million in ``top-up payments'' and HK$22 million in legal-fund contributions.
China Daily:Investors continue minibond fight
24 July 2009
HONG KONG: A complaint arising from the sale of Lehman Brothers minibonds is headed for the courts. At the same time the Consumer Council will continue assisting those hit hard when the minibonds and other dicey financial instruments became worthless.
The watchdog has received about 12,000 related complaints since the US investment bank collapsed last September causing astronomical losses to investors.
Apart from the one case that has been set for litigation, about 50 other cases are under review for possible legal action.
Investors burnt in the minibonds collapse have accused local banks of malpractice and deception in their efforts to sell the complex investment tools. Many of those who were hurt are elderly. Many don't have education sufficient to provide them a clear grasp on what happened to their money.
Speaking at a Consumer Council seminar yesterday, Secretary for Financial Services and the Treasury Chan Ka-keung urged sellers and financial consultants to expound fully the risk of investment products to investors and to assess actual needs in order to protect the consumers' rights.
They should not "hard sell" products, Chan said.
Meanwhile, Consumer Council chairman Anthony Cheung reminded consumers that it is they who must decide whether to accept the buy-back scheme.
Regulators and 16 banks set up the compensation package which was announced on Wednesday. Investors could receive between 60 and 70 percent of the principal they invested. But "experienced" and "professional" investors will not be eligible.
"The package is proposed by the Securities and Futures Commission (SFC), the Hong Kong Monetary Authority and banks. It is up to consumers to make final judgment. Everyone is under different circumstances," he said at a seminar yesterday.
Lawmaker Kam Nai-wai who has helped to champion the cause of investors pressed for the 16 banks to disclose the valuation of minibond collateral for investors in order to help the investors to consider whether they should accept the buy-back package.
Some minibond holders staged a sit-in at the headquarters of the SFC yesterday expressing their dissatisfaction with the compensation package. The protestors demanded full restitution, not partial.
Some said they had no alternative but to accept the offer. They need money to live. Some were confused, saying they had no idea whether they are entitled to compensation.
Local actress Meg Lam Kin-ming invested about HK$10 million in the minibonds and other investment tools. She may not be able to get back the principal, as a "professional investor" is one with over HK$8 million investment portfolio.
"What is the judgment of an investor as 'professional'? Does it mean buying lots of investment products before? I have no idea at all," said Lam.
HONG KONG: A complaint arising from the sale of Lehman Brothers minibonds is headed for the courts. At the same time the Consumer Council will continue assisting those hit hard when the minibonds and other dicey financial instruments became worthless.
The watchdog has received about 12,000 related complaints since the US investment bank collapsed last September causing astronomical losses to investors.
Apart from the one case that has been set for litigation, about 50 other cases are under review for possible legal action.
Investors burnt in the minibonds collapse have accused local banks of malpractice and deception in their efforts to sell the complex investment tools. Many of those who were hurt are elderly. Many don't have education sufficient to provide them a clear grasp on what happened to their money.
Speaking at a Consumer Council seminar yesterday, Secretary for Financial Services and the Treasury Chan Ka-keung urged sellers and financial consultants to expound fully the risk of investment products to investors and to assess actual needs in order to protect the consumers' rights.
They should not "hard sell" products, Chan said.
Meanwhile, Consumer Council chairman Anthony Cheung reminded consumers that it is they who must decide whether to accept the buy-back scheme.
Regulators and 16 banks set up the compensation package which was announced on Wednesday. Investors could receive between 60 and 70 percent of the principal they invested. But "experienced" and "professional" investors will not be eligible.
"The package is proposed by the Securities and Futures Commission (SFC), the Hong Kong Monetary Authority and banks. It is up to consumers to make final judgment. Everyone is under different circumstances," he said at a seminar yesterday.
Lawmaker Kam Nai-wai who has helped to champion the cause of investors pressed for the 16 banks to disclose the valuation of minibond collateral for investors in order to help the investors to consider whether they should accept the buy-back package.
Some minibond holders staged a sit-in at the headquarters of the SFC yesterday expressing their dissatisfaction with the compensation package. The protestors demanded full restitution, not partial.
Some said they had no alternative but to accept the offer. They need money to live. Some were confused, saying they had no idea whether they are entitled to compensation.
Local actress Meg Lam Kin-ming invested about HK$10 million in the minibonds and other investment tools. She may not be able to get back the principal, as a "professional investor" is one with over HK$8 million investment portfolio.
"What is the judgment of an investor as 'professional'? Does it mean buying lots of investment products before? I have no idea at all," said Lam.
Parliament Answers to Lehman Structure Products - 20 July 2009
Dear Mr. Tan,
QUOTE: MAS’ role is not to judge the merits of the product being offered. Rather, MAS checks that the issuer discloses the features and risks of the product, and that there are no false or misleading statements. MAS does so based on the information provided by the issuer and its advisers.
The most significant point from the above statement of the Deputy Chairman is "MAS does so based on information provided by the issuer and its advisers".
If subsequently the court find that the prospectus and pricing statements:
* fail to disclose the features and risks of the product and
* there are false and misleading statements
the investor is able to claim for full recovery of the investment.
QUOTE: MAS’ role is not to judge the merits of the product being offered. Rather, MAS checks that the issuer discloses the features and risks of the product, and that there are no false or misleading statements. MAS does so based on the information provided by the issuer and its advisers.
The most significant point from the above statement of the Deputy Chairman is "MAS does so based on information provided by the issuer and its advisers".
If subsequently the court find that the prospectus and pricing statements:
* fail to disclose the features and risks of the product and
* there are false and misleading statements
the investor is able to claim for full recovery of the investment.
SCMP:Some sympathy for the devils
24 July 2009
It's deeply unfashionable to feel any sympathy for bankers these days.
In Hong Kong, they have been exposed as no better than back-alley thieves, cruelly mugging harmless old grannies, stealing their savings and leaving them with purses stuffed with nothing but worthless Lehman Brothers minibonds.
That's pretty much the narrative as it's been told to us. But you have to wonder how accurate that interpretation of the minibond story is. And you have to doubt whether Wednesday's settlement, in which 16 banks agreed to pay minibond investors back at least 60 cents in the dollar, is really as great a deal as it's been made out.
With minibonds sold to senile, illiterate and mentally handicapped savers, there were clear breaches of the regulations in some cases. Those investors should be paid back at 100 cents in the dollar, not 60, and the offending banks should be hammered with stiff penalties to boot, not allowed to escape additional punishment.
But those cases are in the minority. For the most part, minibonds were bought by people who went into their banks with eyes open and who knew exactly what they were after: higher returns.
As the first chart below shows, interest rates on bank time deposits have collapsed in recent years, falling from double-digit levels in the early 1980s to rates as low as zero in the early years of this decade.
As a result, depositors turned into eager buyers of complex structured instruments that promised a higher rate of return than plain vanilla time deposits.
Yet as anyone who isn't senile, illiterate or mentally handicapped can work out for themselves, a product that offers a yield of 5 per cent or more when interest rates are at zero must come with considerably more risk of loss than a simple time deposit. You don't need to understand one-touch options or credit default swaps to work that one out. It's a clear case of caveat emptor: buyer beware.
There is a strong argument to be made that savers who bought minibonds because they demanded higher returns should have to bear their losses. They invested in risky securities and were unlucky enough to have them blow up in their faces. That's tough. But it is hard to see why one group of investors - the banks' shareholders - should be forced to bail out another - the minibond buyers - simply because the second group made a bad decision.
On the other hand, the banks were hardly blameless. Until the mid-1990s, profits were relatively easy to come by. Demand for loans was brisk, and Hong Kong's loan to deposit ratio rose as high as 180 per cent.
The 1997 Asian crisis changed all that. As the second chart below shows, loan demand dried up even as deposits kept mounting. The loan to deposit ratio tumbled, falling to within a whisker of 50 per cent in recent years, brutally squeezing bank's interest income.
In response, Hong Kong banks ramped up their sales of securities, pushing structured products like minibonds to their depositors in order to capture lucrative commission income. Many went for the hard sell, sacrificing long-term customer relationships to boost short-term profits.
Yet although that's dumb and although many of the instruments sold were wildly unsuitable for ordinary retail investors, what the banks did - for the most part - was perfectly legal. It is unclear why they should be punished for it.
But the real problem with the minibond settlement is not so much its injustice, but the precedent it sets.
Securities and Futures Commission chief Martin Wheatley called Wednesday's deal "a watershed in the regulation of financial services in Hong Kong". He's not kidding. In pushing for a blanket bail-out of minibond investors, the regulators have served notice that from now on investors who lose money will be bailed out if only they make a loud enough noise about it.
So, expect a flood of compensation demands from investors who have taken losses on other structured products, on warrants or hedge funds. The list is endless.
Worse, Wednesday's agreement will only encourage investors to take excessive risks in the future, safe in the knowledge that if they end up out of pocket, they will be able to cry "mis-selling" and force the banks to refund their money. The minibond deal badly skews the balance of risk and reward for investors, introducing a hefty dose of moral hazard that stands to inflict severe damage on Hong Kong's financial services industry.
So although it's not fashionable to feel sorry for bankers, perhaps they do deserve some small sympathy in this case.
It's deeply unfashionable to feel any sympathy for bankers these days.
In Hong Kong, they have been exposed as no better than back-alley thieves, cruelly mugging harmless old grannies, stealing their savings and leaving them with purses stuffed with nothing but worthless Lehman Brothers minibonds.
That's pretty much the narrative as it's been told to us. But you have to wonder how accurate that interpretation of the minibond story is. And you have to doubt whether Wednesday's settlement, in which 16 banks agreed to pay minibond investors back at least 60 cents in the dollar, is really as great a deal as it's been made out.
With minibonds sold to senile, illiterate and mentally handicapped savers, there were clear breaches of the regulations in some cases. Those investors should be paid back at 100 cents in the dollar, not 60, and the offending banks should be hammered with stiff penalties to boot, not allowed to escape additional punishment.
But those cases are in the minority. For the most part, minibonds were bought by people who went into their banks with eyes open and who knew exactly what they were after: higher returns.
As the first chart below shows, interest rates on bank time deposits have collapsed in recent years, falling from double-digit levels in the early 1980s to rates as low as zero in the early years of this decade.
As a result, depositors turned into eager buyers of complex structured instruments that promised a higher rate of return than plain vanilla time deposits.
Yet as anyone who isn't senile, illiterate or mentally handicapped can work out for themselves, a product that offers a yield of 5 per cent or more when interest rates are at zero must come with considerably more risk of loss than a simple time deposit. You don't need to understand one-touch options or credit default swaps to work that one out. It's a clear case of caveat emptor: buyer beware.
There is a strong argument to be made that savers who bought minibonds because they demanded higher returns should have to bear their losses. They invested in risky securities and were unlucky enough to have them blow up in their faces. That's tough. But it is hard to see why one group of investors - the banks' shareholders - should be forced to bail out another - the minibond buyers - simply because the second group made a bad decision.
On the other hand, the banks were hardly blameless. Until the mid-1990s, profits were relatively easy to come by. Demand for loans was brisk, and Hong Kong's loan to deposit ratio rose as high as 180 per cent.
The 1997 Asian crisis changed all that. As the second chart below shows, loan demand dried up even as deposits kept mounting. The loan to deposit ratio tumbled, falling to within a whisker of 50 per cent in recent years, brutally squeezing bank's interest income.
In response, Hong Kong banks ramped up their sales of securities, pushing structured products like minibonds to their depositors in order to capture lucrative commission income. Many went for the hard sell, sacrificing long-term customer relationships to boost short-term profits.
Yet although that's dumb and although many of the instruments sold were wildly unsuitable for ordinary retail investors, what the banks did - for the most part - was perfectly legal. It is unclear why they should be punished for it.
But the real problem with the minibond settlement is not so much its injustice, but the precedent it sets.
Securities and Futures Commission chief Martin Wheatley called Wednesday's deal "a watershed in the regulation of financial services in Hong Kong". He's not kidding. In pushing for a blanket bail-out of minibond investors, the regulators have served notice that from now on investors who lose money will be bailed out if only they make a loud enough noise about it.
So, expect a flood of compensation demands from investors who have taken losses on other structured products, on warrants or hedge funds. The list is endless.
Worse, Wednesday's agreement will only encourage investors to take excessive risks in the future, safe in the knowledge that if they end up out of pocket, they will be able to cry "mis-selling" and force the banks to refund their money. The minibond deal badly skews the balance of risk and reward for investors, introducing a hefty dose of moral hazard that stands to inflict severe damage on Hong Kong's financial services industry.
So although it's not fashionable to feel sorry for bankers, perhaps they do deserve some small sympathy in this case.
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