Why Regulation for Minibonds…?
Posted by: inspir3d in Finance & Investments, tags: Lehman minibondsIn one of the latest developments in Singapore’s Minibond saga, Tan Kin Lian, champion of the burnt minibonds investors, has released a request for proposals to lawyers for services for collective legal action by the minibonds investors against the bankers and brokers who sold them the minibonds products.
Also, the 84-page minibonds prospectus is available on the TOC website, here. A brief browse into the contents of the prospectus reveals some interesting information. On page 17, under “Risk Factors,” we see:
Risks relating to the nature of the Notes
Suitability of the Notes
The purchase of the Notes involves certain risks including market risk, credit risk and liquidity risk. Investors should ensure that they understand the nature of all these risks before making a decision to invest in the Notes. In addition, on the occurrence of a Credit Event (as defined herein) in respect of a Reference Entity, Noteholders could lose all or a substantial part of their investment in the Notes. This Base Prospectus and the Pricing Statement are not and do not purport to be investment advice. You should conduct such independent investigation and analysis regarding the Notes and the other assets on which the obligations of the Issuer under the Notes are secured as you deem appropriate. You should make an investment only after you have determined that such investment is suitable for your financial investment objectives. You should consider carefully whether the Notes are suitable for you in light of your experience, objectives, financial position and other relevant circumstances.
From the outset, the prospectus explicitly states several important points for that investors should do and take note of:
Noteholders could lose all or a substantial part of their investment in the Notes.
It also clearly states,
You should conduct such independent investigation and analysis regarding the Notes and the other assets
In one paragraph alone, the prospectus clearly instructs the investor in what are sound principles of investment analysis. Always do your own homework (independent investigation and analysis).
Ultimately, then, the investors who bought the minibonds cannot fault Lehman brothers with the argument that they depended on the RMs to advise them, as Lehman had clearly stated in the prospectus that the investors need to do their own independent analysis.
So the problem, then, are the RMs & brokers guilty of anything? The investors claim they were deceived and misplaced their trust in the advisors who sold them things they should not have been investing in.
That, my friends, is why regulation is needed – NOT because of some supposed higher cause of justice, but instead to prevent idiots from destroying their retirement accounts with their own stupidity, and also to prevent un-ethical misrepresentation of securities by financial ‘advisors’
The government also can’t really be faulted… because the RMs had a duty to inform the ‘investors’ that they had to do their own homework. This was not the government’s responsibility.
Hence, the best way to protect yourself is to just automatically adopt the attitude that one must do his own homework. And if you find that you do not understand what you are analysing, just stay away. Abdicating the responsibility of investment analysis to someone else is a sure recipe for disaster. If the ‘investors’ (aka fools) had actually bothered to adopt this principle, they would not have been misled by the RMs.
Don’t be a fool. Don’t let ignorance destroy your retirement account. The best way to protect yourself from fraud is to do your own homework!!!
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like that how? cannot trust anybody. want to invest a little money also must go and get a degree in financial planning plus the propectus is sooooo thick, read three years also cannot finish and understand.
Don’t regulate … and one day you will have to do a doctor’s degree before getting that surgery you need.
Don’t regulate … your pigeon hole will collapse because they employed architects with fake degrees to build your house.
Don’t regulate … you get milk with furniture components in it. Minibombs are just the same.
Regulation is to ensure quality. Not necessarily a bad thing. When regulators absolve their responsibility, all will suffer.
Here’s what I wrote:
To those who say these ‘greedy’ investors deserved it.
Well, these ‘investors’ are your ah-kongs and ah-mahs who want to retire more easily in their twilight years where there is no safety net for them at if they are ill.
Is that a crime?
How do you feel if your own parents burden you with financial strains when you hardly have enough for your own family, kids education, mortgage payments, etc.
But I can tell you truthfully – it is a crime to ‘milk’ these elderly monies because they don’t know what they are investing in.
How often have these RMs come to me and have asked me to invest in these products. This is how they usually say (read these words and tell me if you had received the same words), “These minibonds/structured derivatives/investments are similar to fixed deposits. In fact you get higher returns.”
And showing these elderly folks brochures of all these American/European companies, they assured the elderly, “Don’t worry, your capital is safe. Look at these big company names. Do you think they will be bankrupt?”
You tell me how I knew about it?
Because I was present while the RMs were ‘hard-selling’ to 2 elderly persons beside me. I was setting up my fixed deposit account. I rejected the option to go into these investments initially but after consideration, I did put in a very small investment as the economy was doing good.
That was like 5-7 years ago. And I have pulled out even before the maturity as I have no confidence in these RMs. When I call them up, they have absolutely no idea why my investment is losing money.
Are these RM right? Yes – their job is to sell. But if the buyer is not told or made aware of the risks and potential of losing everything, then it is the financial and bank policies that need to be questioned. The consumer protection comes first.
The RM is just a channel to sell these products the bank has put in place. The MAS has the power to approve these products to be released into the public market.
Don’t blame these elderly persons because they don’t have a good life and education like we do. In fact, you should pity them and help them in anyway. One day, it will all come back to you because you will grow old.
Kaffein
Fiduciary duty…
The problem with caveat emptor is this; it assumes ppl will generally make the best decision under a free market system; that as we can all see from this debacle hardly holds true.
However, despite the pain; I am going to go with the free market logic. Regulation = govt and I don’t believe that presages well for the market in the long term, private enterprise should drive this and never govt.
As for those who got burnt, what can I say. If you tell me 100% of the investors got conned, then I am going to take issue with you.
Fact remains even in the West most investor are high and dry so why should these investors in Singapore be treated differently?
You all think about that, all I can say is you sign off on the dotted line that’s it. The story ends there – the dice rolls and whatever comes will come.
The uncomfortable truth that many may never wish to accept is these investors tanked out very much in the way some investors plonked out on a lemon account, thats the way I see it, why should they be treated differently is really beyond me.
What happened to the whole idea of the free market enterprise, was it just a dream?
SD (Internet liaison officer of the brotherhood)
[...] not be in cash even. There will be hordes of minibond customers who would claim that they were misled into thinking that their structured products was as safe as a term deposit. DBS CEO Richard [...]
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