Thursday, October 9, 2008

To be fair to DBS

I think most of us in Singapore have heard of the investors stung by investments in Lehman mini-bonds who are now petitioning the Monetary Authority of Singapore (MAS) for help to recover their money.

I’ve heard that these investors, frustrated with replies from financial institutions over their investments, are now trying to organize a protest at the Speaker’s Corner. Taking a leaf out of the investors in Hong Kong, the investors are claiming that they were wrongly sold the structured products and want MAS to ask DBS, the issuer of DBS High Notes 5, to return their principal.

I’m not too sure if this protest will take place but to be fair, I don’t think DBS should be asked to return money when it’s hardly their fault Lehman Brother are undergoing liquidation right now. It is very sad and unfortunate for the investors that their money is gone, but we have to accept that there’s always an amount of risk in any investment. A month ago, who would have guessed that Lehman Brothers would wind up?

I might be in the minority here in Singapore but the basic thing is this: You cannot ask DBS to return money when they are not the ones that lost it! It’s like telling your stock broker to buy stocks, and then asking the broker to repay your losses when the market turns against you. It’s hardly your broker’s fault this happen and that is the case here. DBS is nothing but the broker here.

It is unfortunate but the money was lost when Lehman Brothers went into bankruptcy due to the credit crunch, so it is Lehman Brothers the investors should be looking at, not DBS. When you put a deposit in Bank A and then the bank collapse, can you ask Bank B to return you the deposit?

I’m afraid the answer to that is clear to everyone.

11 comments:

Anonymous said...

You have missed the point, pls refer to the comments in Tan Kin Lian's Blog :

zhummmeng said :
"......You also seem to miss the point here too.. the victims are gullible, ignorant,clueless, uneducated old folks and it was a decision of the moment that RMs required them to exercise. The fingers are pointing at the regulators, the vendors , the banks and RMs and all these people colluded to fleece this poor folks called the investors who happened to be the aggrieved party in the deal.You mean the fingers should be on the poor victims without whose role in the equation the crisis would not have happened, right? Even the investors were at fault their fault is miniscule.Their loss is disproportionate.
To stop the 'burn', stop all the other parties from burning the investors up.
The RMs MUST be qualified and HONEST and comply with section 27 of the FAA.The banks MUST stop producing or distributing bad and complicated products. The regulators, MAS must START regulating and enforce them strictly.Over regulating is better than under regulating."
http://tankinlian.blogspot.com/2008/10/people-to-be-blamed.html

Pls also refer to what's currently happening globally :
Bank of America, RBC settle securities cases
Wednesday October 8, 6:41 pm ET
By Marcy Gordon, AP Business Writer
Bank of America, RBC agree to buy back auction-rate securities in SEC, state settlements

WASHINGTON (AP) -- Bank of America Corp. has agreed to buy back up to $4.7 billion in auction-rate securities to settle charges it misled thousands of customers about the risky investments, federal and state regulators said Wednesday.

The regulators also announced similar settlements with RBC Capital Markets Corp., which agreed to buy back about $850 million worth of auction-rate securities from roughly 2,200 investors.

The Securities and Exchange Commission, New York Attorney General Andrew Cuomo and a group representing other state regulators announced the settlements with Bank of America, which joins nine other big investment banks that have agreed to buy back a total of more than $50 billion of the securities......

http://biz.yahoo.com/ap/081008/bank_of_america_settlement.html?.v=11

RBC offers to buy back auction-rate securities from Ferris Baker Watts clients
Baltimore Business Journal - by Rachel Sams Staff
As part of a settlement with regulators, Royal Bank of Canada is offering to buy back about $850 million in auction-rate securities from its U.S. retail brokerage clients.....

The RBC offer covers individual investors, charities with $25 million or less in RBC accounts and small institutions and businesses with $10 million or less in RBC accounts.

By Dec. 15, RBC will offer to buy non-performing auction-rate securities at their par value from qualifying investors who bought the securities from or through RBC before Feb. 11. The offer will continue for six months and will apply to all auction-rate securities for which auctions are not taking place. Qualifying investors who sold auction-rate securities below their par value between Feb. 11 and the settlement date will be paid the difference between par value and the sale price they received.

RBC will also continue a program to give retail clients loans for up to the full par value of their auction-rate securities until the buyback offer takes effect. The company will also keep working to help institutional investors who aren’t covered by the buyback offer get fair value for their auction-rate securities. And RBC will participate in a special arbitration process overseen by the Financial Industry Regulatory Authority allowing any retail client who bought auction-rate securities from RBC to make claims for damages.....

http://www.bizjournals.com/baltimore/stories/2008/10/06/daily42.html

RBC offers to buy back auction-rate securities from Ferris Baker Watts clients
Baltimore Business Journal - by Rachel Sams Staff
As part of a settlement with regulators, Royal Bank of Canada is offering to buy back about $850 million in auction-rate securities from its U.S. retail brokerage clients.....

The RBC offer covers individual investors, charities with $25 million or less in RBC accounts and small institutions and businesses with $10 million or less in RBC accounts.

By Dec. 15, RBC will offer to buy non-performing auction-rate securities at their par value from qualifying investors who bought the securities from or through RBC before Feb. 11. The offer will continue for six months and will apply to all auction-rate securities for which auctions are not taking place. Qualifying investors who sold auction-rate securities below their par value between Feb. 11 and the settlement date will be paid the difference between par value and the sale price they received.

RBC will also continue a program to give retail clients loans for up to the full par value of their auction-rate securities until the buyback offer takes effect. The company will also keep working to help institutional investors who aren’t covered by the buyback offer get fair value for their auction-rate securities. And RBC will participate in a special arbitration process overseen by the Financial Industry Regulatory Authority allowing any retail client who bought auction-rate securities from RBC to make claims for damages.....

http://www.bizjournals.com/baltimore/stories/2008/10/06/daily42.html

Ghost said...

That's the thing. They must be honest. The thing is, everything is written on the pages the investors signed on. From what I heard, the investors aren't complaining about what is written on the pages, but that they were not 'explained' to them. Here's a suggestion, "If you don't understand what is it you are signing, don't sign anything!" And not all of these investors signed on the spot, some bought them back home to read. I hardly think DBS is the big bad wolf here. You cannot blame DBS for investments gone wrong, that's why it's called an 'investment'. Despite what Singaporeans like to think, there never is (and never will be) any sure money.

Anonymous said...

Protecting the Small Investors
http://theonlinecitizen.com/2008/09/protecting-the-small-investors/

comments by zhummmeng :

...What is wrong with these RM/FA is that they have not approached the clients correctly. They have not used a need based approach to find out if the products are suitable for these people. They went straight into selling the products and ignore the circumstances and needs of the customers and that is what is wrong.Some could have been seduced to buy. Some could have been cheated and misrepresented.The whole process should have been conducted with any customers and with their needs and financial circumstances in mind..
Section 27 of the FAA stipulates that if the recommendation of the product does not meet the clients’ needs and not of reasonable basis the adviser is guilty of inappropriate advice and lends himself or herself to legal action...

Ghost said...

Is it unreasonable to expect the client to read what they signed? Like I said eariler, "From what I heard, the investors aren't complaining about what is written on the pages, but that they were not 'explained' to them".

Anonymous said...

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財務顧問害人精,只顧避重就輕講基金
主管股東害人精,不顧屬下亂亂賣基金
當年部長是妖精,銀行開放機構亂賣金

Anonymous said...

Excellent comments from ming
Posted: Sun Oct 12, 2008 1:07 pm Post subject: DBS High Notes/Minibonds
http://forum.channelnewsasia.com/viewtopic.php?p=2304336#2304336

"Across the internet an outbreak of abuse has been hurled at the people who have suffered losses because of credit linked notes. The expressed desire to step on others when they are down is simply ugly and I would urge those affected to be strong enough to simply cast such hurtful aspersions aside and find strength to persevere. Even if the money cannot be gotten back in full, we still have a duty to ensure the integrity of our financial system. Honesty is the bedrock of our system, this much we have been taught."

Anonymous said...

ming and zhummmeng , you are two of those few who has the wisdom and compassion to see the reality of the matter with a clear perspective. Your comments are constructive and skillful. Keep up the good work!

Ghost said...

Actually from what I had read, there us more abuse on the internet towards the banks than the investors

Anonymous said...

Why don´t u get a banker to defend her bank on the mis-selling issue?

Anonymous said...

http://www.facebook.com/group.php?gid=29342693574

Anonymous said...

Some of the senior citizens know what they are getting into. Pretend to be so naive and clueless. The fact that its just to troublesome to read regulations and disclaimers and when you read them, they are always in fineprints and law jargons. People just sign because we trust nothing could happen to them especially in Singapore. We always think banks especially with govt links like DBS would be very safe and trustworthy..Anyway, this is still mis-selling because of capital guaranteed funds and most of the RM downplay the risk assessment of the funds.