Friday, October 31, 2008

More feedback from HN2 Session

I attended today Fri 31 Oct 11:30am session public forum for Highnote 2 investors. Just to give a quick summary of the main points.

From the many people who spoke it was clear that most if not all the investors are not aware at point of purchase that HN2 carries a CDO risk of 5 credit events out of a basket of 100 companies. In fact this was only made known to investors recently after 3 credit events had occurred. Most were sold on the basis it is a low risk product “designed for defensive investors”.

On the basis that the HN2 was mis-represented to investors as a low risk product but is now known to be extremely high risk which is not what the investors intended to invest in, the group wanted DBS to do the right thing by executing an early redemption and return all investors their capital invested, forgoing any interest. DBS did not give a response.

That Raju guy tried to defend their position by explaining that for an investor with many different types of investments, HN2 would fit in as a “defensive” play. What crap. Someone pointed out that DBS has changed their wordings subsequently in phrases such as “designed for defensive investors”.. So it is highly suspect that DBS realised it mis-sold it as low risk product and is now trying to cover their tracks.

DBS continually stress that investors fill in the form to describe the circumstances under which they were sold the product and they will look into each individual case, which will take about 4 weeks.

The strategy of DBS seems to be (a) divide and conquer, look at the merit of each case individually (b) non committal, not answering the important questions (c) delay tactic, maybe hoping that another credit event will take place and they can then return nothing to investors.

Towards the end the group requested (demanded?) that DBS come back with a policy statement as a whole, not to give separate answer to individual investors. The group requested that DBS get everyone back in a next meeting and to be chaired by people who can make decisions.

I wrote this based on what I can remember. Those who were present please add if anything left out, or amend if anything incorrect.
Also, would be glad to hear what happened in the other public forum sessions.



HNIG Press Release 31st Oct 2008

High Notes Investors Group
Press Release


31st October 2008

1. On Thursday 30th October 2008, in response to a petition by the High Notes Investor Group (HNIG), DBS met up with approximately 400 investors of their DBS High Notes 5 (HN5) product in two separate sessions. Session 1 started at 2.00pm and Session 2 was at 5.00pm.

2. Both sessions were originally scheduled to last one hour, but eventually ran for more than two and a half hours each time.

3. Many attendees urged DBS to treat all investorsas a group rather than go through a case-by-case process on the subject of compensation.

4. To buttress the above argument, the HNIG revealed at the forum that they had requested an industry insider who has experience structuring such products to go through the HN5 pricing statement. After a six-hour preliminary analysis of both the document as well as the real-life experiences of investors, it would seem that in HN5, there appears to be SYSTEMIC Failure on three fronts:

a) Failure in the PRODUCT
i) Product was arranged, issued and sold by DBS
ii) Product was leveraged on Credit Default Swaps
iii) Product was secured on CDOs

b) Failure in the SALES PROCESS
i) Product was sold through a large sales force who were inadequately trained, and
ii) Relationship managers who were and are still not familiar with HN5 and customer’s suitability

i) HN5 was sold to inappropriate customers
ii) HN5 was targeted at customers with little or no knowledge of financial concepts like CDS, CDOs, and Leverage

Because of the failures in the product itself, we are asking DBS to undertake compensation in a blanket or collective manner, and not on a case-by-case basis.

5. DBS was also questioned on the issue of RISK MANAGEMENT – there appears to have been serious lapses in this area that has resulted in a detrimental impact on the customers of HN5.

6. In response to questioning, Mr Rajan Raju, Head of Consumer Banking admitted that the HN5 is “NOT a low risk product”. Further, in response to a pointed question on the actual risks inherent in HN5, Ms Frances Chan, Senior Vice-President revealed that, on a scale of 1 to 10, the HN5 product was a “8 to 9”. We feel that a risk factor as high as this is in no way commensurate with the relatively low returns from HN5 and a locked-in period of 5.5 years. This bolsters our argument of the presence of a Systemic Failure in HN5.

Other Highlights

7. One attendee questioned the rationale for GIC to pump billions of dollars of government reserves into UBS and Citigroup to bail out foreigners while a government-linked bank like DBS is being parsimonious in compensating its customers in a cut-and-dried case of mis-selling and misrepresentation.

8. Many attendees highlighted their long-standing relationships with POSB/DBS, some stretching over a period of more than 30 years. They expressed a deeply felt sense of betrayal by DBS which they said violated their trust in the bank. Many also spoke of their past willingness to buy products from DBS because they saw it as “the national bank” they could have complete trust in.

9. There were detailed questioning on DBS’s ability and competence in giving timely advice on the status of HN5. Attendees referred specifically to a letter dated 31 March 2008 which had actually advised DBS customers to hold HN5 to maturity.

10. At least one attendee made the point that the overall mishandling by DBS of its affected customers will result in an eventual pulling-out of funds from DBS to its competitor banks, with a concomitant negative impact on its share price. The latter had already fallen drastically in recent weeks, a phenomenon which most analysts attributed partly to the fallout from its High Notes 5 debacle.

11. The immediate post-forum reaction of most attendees is that the Thursday sessions have not moved the complaint nor the compensation processes forward in any significant manner. In comments to HNIG, many people expressed the doubt that if DBS had sold HN5 in an irresponsible manner to make money, how seriously could they be taken when they are now in a damage control mode. The basis for such comments arises from bruising encounters customers have had with DBS’s Investor Care personnel in interview sessions where sometimes three to four staffers question a lone customer.

Others felt that DBS in referring Relationship Managers to the Monetary Authority of Singapore (MAS) is missing an important point - in the words of one DBS customer, “If the RM doesn’t know what he is doing, if he is set impossible targets, and if he is rewarded based on commissions, whose fault is it? DBS must teach RMs first”.

12. HNIG is a group of DBS High Notes (HN) investors that has been formed to communicate with DBS and undertake relevant collective actions where and when necessary.

13. HNIG currently has about 300 investors in our contact list and these consist of investors of various HNs. More joined during the dialogue sessions yesterday. HNIG handed out leaflets to request HN investors to turn up at 4.30pm on Saturday 1 November 2008 at Hong Lim Park (Clarke Quay MRT station).

14. For any clarifications, please contact Our blog can be found at

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Hong Kong watchdog may sue banks over Lehman minibond sales

From Channelnewsasia:

HONG KONG - Hong Kong's Consumer Council said Friday it was considering suing banks which allegedly mis-sold minibonds backed by failed US investment bank Lehman Brothers as risk-free investments.

The 50 cases the council was considering backing mostly concerned vulnerable elderly people who said their banks had not fully explained to them the risks involved when selling them the minibonds, a spokeswoman for the council said.

The complainants in the cases, which involved 14 banks, had invested between 100,000 and two million Hong Kong dollars in the controversial financial products.

Full article: Hong Kong watchdog may sue banks over Lehman minibond sales


Feedback from the HN2 Dialogue Session

This is hot-from-the-oven feedback from the HN2 Dialogue session on Friday 31st Oct 2008, which was emailed to us:

Hi All,

I am HN2 investors and had attended the HN2 dialogue this morning. A lot of investors brought out their cases of how they were misled by the RM and bought the product. The DBS VP gave the standard answers in different forms by asking the individuals to sending in complaint and they will investigate case by case. Cases with evidence will be compensated with different amount. Obviously this is "divide and conquer". Everyone complaint about their RM. Nobody complainted about DBS, the creator of the product. As a whole, this dialogue is just a SHOW put up by DBS. I think the VP is very happy that the focus is on the RMs and not DBS. I am very angry and disappointed.

I have brought out the question of whether it is a leverage product and whether it is a suitable product for general public. But no answer from him.

I feel that not many of the investors have realized that this is the DBS fault of creating such a toxic product and well packet it and sell to us who do not have much knowledge in the finance derivative. (In fact even the university lecturer in Business got trapped.) It is regardless of whether you are educated or not, above age 62 or not, speaking only Chinese or not!

I have a suggestion here that shall we revealed to the public via media WHAT HN5 AND HN2 ARE. Show them what the banker had analyzed and showed to us during our Monday Meeting, both in the technical and layman terms. Only in this way that can make everyone understand how toxic the products are. Only in this way that can tell those people who are un-empathized, “don't know head and tail” and obviously not directly involved to shut their mouths.

We must not only be united within us, we must reveal everything to all Singaporeans and get all Singaporeans who have conscience to be united and don't get bullied by such an entrusted business giant.


DBS Dialogue Forum - Aftermath Feedback

Posted by an investor:

I learnt a lot from the dialog session: there were so much risks attached to High Notes 5, some that I only heard and understand today.

As mentioned by Mr. Rajan today, if he were to put High Notes 5 risk on a scale of 1 to 10, then it is least 8.

I am also glad that I attended, because I learned that many people has the same perception over High Notes 5 as what I had - a safe bond funds of 8 highly rated entities.

I also learned that there are many people who are more knowledgeable and more experienced than me who fell into the same hole, unaware like me.

Having said that, I hope that the petition to MAS to handle complaint on collective basis get through - as I checked it is still short of 20+ signatures. If you are HN investors, and have not signed it please do so!

Petition #4 - Review Complaint Handling Process


Thursday, October 30, 2008

So, what did you think about the DBS Forum you have attended?

There are 2 sessions arranged by DBS for Thurs 30th Oct 2008 at Suntec:


There are also sessions for HN2 on Friday 31st Oct 2008, and another HN5 session on Tuesday 4th Nov 2008

What is your impression about the session you attended? Write to us with your feedback at We would love to hear what you think.


Why Structured Products are Harmful to Retail Investors

Some of you are not even aware that the DBS High Notes you were sold by your RMs is a Structured Product. To you, you have invested wisely and conservatively in a safe and low-risk product. Most likely this was because this sort of investment product has a bad name, as far as retail investors are concerned, and would a salesperson tell you they want your money to buy a lemon (or would that be a Lehman)?

Here is a succinct post about why Structured Products are really bad for your financial health:

Tuesday, October 28, 2008

Nature and risk of the structured product
Hi Mr. Tan,

You said, on many occasions, that the investors have been mis-informed about the "nature and risk" of the structured product. Can you explain what you mean and what actually happened?

If you invest in a bond of a company, you stand the risk of losing your investment if this company goes bankrupt. To reduce this risk, you can spread your investment over 6 bonds. If any one company goes bankrupt, you only lose 1/6 of your investment. This is called diversification and is a sound investment strategy.

If you invest in a structured product with 6 "first to default" swaps, you stand to lose all of your capital if any one of these 6 swaps failed. You stand the chance of losing your capital 6 times. Instead of reducing your risk to 1/6, you are multiplying your risk 6 times. It is highly risky. It is madness.

Many people were misled into thinking that they are reducing their risk by diversifying their investment into 6 entities. The actual situation is that they are increasing their risk 6 fold by the "first to default" swaps on these 6 entities.

This actual "nature and risk" of the structured product has not been properly explained in the prospectus and in the explanation given by the sales representative.

Posted in:
Tan Kin Lian: Nature and risk of the structured product


Wednesday, October 29, 2008

Where to send your complaints

We have gotten quite a lot of emails that runs similar to this post:

"I am an investor of DBS High Notes. I have already wrote a formal complain letter about the mis-selling. However, I do not know where to send this letter to. Must be it a hardcopy letter or an email will suffice? What is the address? Awaiting for your enlightenment. Many thanks!!"

You can send your complaints to:

DBS Bank
6 Shenton Way
DBS Building Tower One
Singapore 068809

and copied to:
Monetary Authority of Singapore
10 Shenton Way MAS Building
Singapore 079117

We advise that your letter to DBS should be sent via Registered Post.


Tuesday, October 28, 2008

Hidden Risks in Prospectus

Diary of A Singaporean Mind: Why all DBS HN5 investors should be fully compensated!

Lucky Tan looks at Dr Money's analysis of HN5 published in the New Paper on Mon 27th Oct 2008.

"A product with such a high risk sold marketed to risk adverse investors as a low risk product must have been wildly profitable for DBS. How much did DBS take in through markups in initial pricing, early surrender charges, market making margins, initial commissions and management fees? These are important questions to ask because it will tell us if DBS passed on a disproportionate amount of risks to customers in exchange for high profit margins."


HNIG holds a Closed-door Forum

As reported in Channelnewsasia:

DBS High Notes 5 Series investors form committee to seek compensation
By Liang Kai Xin/Margaret Perry, Channel NewsAsia | Posted: 27 October 2008 2153 hrs

SINGAPORE: Some 250 DBS investors who lost money in the bank's High Notes Five Series minibonds held a closed-door meeting on Monday afternoon.

Their aim is to discuss how to ask for compensation from the bank in a more organised way.

The investors formed a 17-member committee, ahead of their scheduled meeting with DBS on Thursday.

A spokesperson for the group said she welcomed Prime Minister Lee Hsien Loong's comments on Sunday about banks needing to engage customers on the matter.

- CNA/yt


Monday, October 27, 2008

Only a thorough investigation by MAS will reveal the Worms!

A comment posted on the HNIG blog:


Hi. I'm Lucky Tan.
I run the blog :

It is good you guys get together to solve your problems collectively.

The DBSHN has an "incredible structure". My gut feel is that the product yield far higher margins/returns that what was passed on to investors. Only the internal computation in DBS can tell you how much the bank knew about the risk in this product reflected in the real returns.

That is why my opinion is that it is better for MAS to do direct investigation so that all these facts can come out. What did the bank know about underlying risk when they sold these products?

I believe for the minibond holders at least everything will be thoroughly investigated on the HK side and what ever resolution will filter through.

October 27, 2008 7:14 AM


Sunday, October 26, 2008

BBC Radio Documentary:

Have a listen to this BBC World Service radio documentary:

It looks at how banks like Merrill Lynch, Lehman Bros and Barclays set out deliberately to defraud their customers of millions of dollars. The documentary raises the issue of how these banks successfully moved whole chunks of non-performing (or toxic) investments off their portfolios, and repackaged them for sale to unsuspecting customers (thereby avoiding losses in their books, and at the same time, generating profits from the sales).


High Notes Investors Group (HNIG)
Press Release


23 October 2008

1. We are a group of DBS High Notes (HN) investors that has been formed to communicate with DBS and undertake relevant collective actions against the bank where and when necessary.

2. On Wednesday 22nd October 2008, we have submitted a petition letter to DBS urging them to convene a meeting with our group of HN investors. At the time of the submission, three of our representatives also met with Mr Rajan Raju the Head of DBS’s Consumer Banking Group. Our group wants DBS to:

a) Provide all HNs investors with a detailed statement of account for each series of the High Notes

b) To hold a meeting of the investors to give an explanation on the performance of each series of the High Notes and to allow us ask questions and seek clarification. The group also requested the presence of the 2 independent consultants.

Mr Rajan welcomed the move, and he said DBS would quickly look at fulfilling the request.

3. With regards to the DBS offer of $80m to be made to some HN5 investors, we feel there is too little information released to judge if the offer is fair. However, we would like to put these questions and comments to DBS:

a) What percentage of the $80m is earmarked for Hong Kong investors?

b) When will DBS make similar offers to the investors outside of the 'vulnerable' group?

c) How will DBS handle the cases of investors who have funds in other High Notes series?

d) DBS should resolve all HN cases expeditiously

4. Our group currently has 230 investors in our contact list and this consists of investors of various HNs and representing close to $15 million.

5. For any clarifications, please contact

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Saturday, October 25, 2008

Join Our Group. Fight for Your Money!

We are a group of bank customers who have put money in the DBS High Notes 5 and 2, and have been affected seriously by the bankruptcy of Lehman Brothers. We have also members who have invested in other products in the same series.

We have come together to seek a solution to remedy the current situation we are facing. Most, if not all, of us are faced with the loss of all of our hard earned money. As of now, we have have over 300 members. We hope that you can join our group so as to take remedial action collectively.

To join us, you can email us with your name, contact details (mobile no. and email), and the product you have invested in. At a suitable time, we will need to verify these details with you in person. Rest assured that all information provided will be treated with the strictest confidence.

We may contact you and arrange for you to meet up with other investors and with the committee. If you would like to join our group, you can also email us at: Thank you so much for your cooperation.

We sincerely hope we can collectively urge DBS to provide us all with the fair and proper compensation due to us.