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.
.
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16 comments:
I would like to know what HN5 and HN2 are, perhaps you should reveal how toxic the asset really are.
This is really lack awareness among singaporean, about the type of toxic finanacial product that are offered by bank to small time investor.
Poor HN2 investors, you have falled into the trap of DBS again and again. Blamming the RM is the manipulated trick of DBS. The actual masterind DBS top bosses walk away freely and laughing until their pents drop.
The whole saga is orchestrated by DBS very smart top man : package a highly toxic product as a low risk product, ask untrained and hungry RMs, sell to DBS loyal and obedient customers. Then push the blame to the innocent RMs when the unfotunate event happens. Master mind walk away with multimillon dollars, left behind the distraught investors and the lost RM pointing fingers at each other.. May be Jack Neo can make it as a new movie show? Who knows this show can win a Golden Horse price for Singapore.
I think there is surely element of mis- selling of these toxic asset, if you view what the people say in HK, it is the same in Singapore. All the people in this saga is cheated.
http://www.youtube.com/watch?v=VhV0_w2OHMM&feature=related
Good idea,
Anyone has Jack Neo's email address?
Dear shafted investors,
You guys sound like an intelligent bunch, and I had gone through the prospectus myself, with exception of the obvious case of misselling to the elderly and vulnerable, I can't really comprehend how you guys brought these duds not knowing the risk. I did note that a 'credit event' was indeed clearly defined.
It is true that banks like DBS/POSB has brought upon a ruinous route toward their reputation by showing lack of expediency, knowing how very important trust is.
But can anyone cite e.g. 'how' they are missold these products?
I am not affected by this saga but I am disappointed with DBS in the handling of this crisis. How can the top guns blame the RMs who are just merely doing what they are told to do ie 'Ensure that you meet your monthly sales target otherwise you will be fired'! DBS, please do not run away with your accountability!
Dear unshafted Alphaville
I shall ignore the ever so slightly superior attitude of yours. Do you know that CPAs, lawyers and the Dean of the NUS business school were also persuaded to invest in these products. Makes you think, doesn't it? By that I mean the sales techniques of banks.
Incidentally if you have a prospectus, congratulations. Why? Because those are rare commodities rarely given out by banks. But I suspect what you have is a pricing statement, not a prospectus. These have been known to be issued, but quite often only after signing.
Wasn't being smug, I couldn't understand why an intelligent person would seek such risky products not knowing what lies within (it is indeed very complicated), hence those who brought the product must by the way understood the undertaking, unless they were mis-sold, which then makes a citation terribly valuable.
This is where I downloaded the prospectus and the pricing statement.
http://www.lioninvestor.com/minibonds-update/
My apologies then.
As opposed to the unsuspecting investor from last year (when none of these things have imploded yet), your spider sense was already set to tingle mode. Don't forget that for most people, their guard was down because they were dealing with DBS, that NATIONAL BANK.
If DBS doesnt make a full refund to the HN investors, I think its safe to say that a law suit will surely ensue... Most of us know tat law suit can drag on for a year or two... A law suit is a LOSE-LOSE situation for DBS. If they win the suit, HN investors will still not give up and Sporeans will see DBS as a truly merciless blood sucker... If DBS lose the suit, they still have to compensate the investors and worse still, give people an impression tat DBS is a bank which need a court ruling to admit its own horrendous mistake... DBS is not only losing Sporean customers. The wealthy Indonesians and Malaysians will definitely not trust DBS anymore too...
Dear AlphavilleSG,
I hope you understand that these money are hard earned money, though i am not involved in this mini bond, but i myself have purchased some structured product from the bank. The reason why i bought them was because each time my FD expired, the teller will keep asking me to invest this and that. I have many times rejected their offer citing that i am a low risk investor. But relented finally, after being promised that the product was capital guaranteed and protected and very safe.
But it is up till now i realized that even capital guarantee or protected, my sum of money will still be lost if the institution that is guarantee my product collapse. Should i know that i will not have invest in them, and this i can tell you that the RM did not tell me this.
i hope you can be more understanding.
Thank you
I support the idea of exposing the
mechanics in simple-to-understand ways (e.g. cartoons, diagrams, analogies) to the public, except that I do not not have the talents to do so.
The purpose is show that such products are un-ethical, & the reference entities are just smoke screens to divert our attention from the "underlying securities", i.e. CDO.
More important, is this a means for the arranger to pass the toxic CDO it owns to the general public?
My main point: the intention to mislead starts from the design of the product. We should target the "arranger", and not just RM.
Another good point is: Hongkongers will probably bring DBS to Court first. Hope that the product will be dissected in the Court over there as well.
Let's just image what will happen to DBS and our government if that are 100+ cases of lawsuit against DBS. If these 100+ cases drag on for 1-3 years, what will be the impact on DBS? I am very sure DBS will kneel in front of us even before reaching court hearing. So the game to play is to get as many as possible cases to suit against DBS. DBS WILL BUCKLE! THEIR CUSTOMERS WILL RUN AWAY,THEIR REPUTATION WILL GO DOWN TO THE DRAIN. So if this scenario happens, will our PAP government sit easy? I doubt so.
Chong
Hi C.S Chan,
HN2 and HN5 are leverage products.
Give you an example of how a leverage product work.
Your $1 of investment, it is used as deposit which can help the bank to invest in multiple times of a finacial derivatives. say 9 times. if the price goes up to $1.10, 9 times means 90cents of profit. If the price goes down to $0.90, 9 times means a loss of 90cents. Your $1 of investment is left only 10 cents.
I have invested in HN2. Know my exposure to reference entities but the 100 companies exposure was completely new to me. Worst, DBS still use "wrapper" in their communication to us by referring them as "Senior Notes". The CDOs are toxic derivatives (i think more like CDS). That's why only a few company default is needed to bring down the portfolio value.
We need to stay as one group to have ONE resolution. Never let DBS "divide and conquer". Worst come to worst, we can all contribute some money and bring the case to court.
The following is an article I received about the expanation of the machnics of Minibonds. If you read the Minibonds as HN2, the issuer Lehman Brothers as DBS, the 6 reference banks as 8 reference banks in HN2, the Minibonds Ltd as Constellation Investment Ltd in HN2, the 150 entities with 11 defaults as 100 entities with 5 dafaults in HN2, you will get the picture of HN2 is created and worked.
After reading, you will know how we are deceived. As 9 37AM said, "the intention to mislead starts from the design of the product".
Here is the article:
MINIBOND SAGA In BETTER EXPLAINED FORM.....
The name "Minibonds" itself is a misleading word for investors. Whatever money you have invested in this "Minibonds" are not invested in bonds of the six reference banks or bonds issued by Lehman Brothers. This is how it works. Lehman Brothers may or may not buy any bonds from the six reference banks but it is just using these banks as "reference entities", some sort as a "bet" with Minibonds holders. There are basically 5 entities involved in the Minibonds arrangement.
1)First of all, its Lehman Brothers as the credit risk swap partner.
２）Secondly, Lehman Brothers has created an empty shell company Minibond Ltd which will issue the Minibonds to investors.
３）Third, the investors.
４）Forth, the money taken from investors will be invested in a basket of AA financial products from 150 companies which includes CDOs which is basically collateral debts obligations, some of them are related to SubPrime debts.
5) The reference banks which has nothing to do with investors' investment other than being a betting reference: i.e. if any one of them failed, it would be a credit event that make investors lose money to Lehman Brothers.
For simplicity to understand the whole arrangement, just take it that Lehman Brothers has bought some bonds from these six reference entities (banks) and it needs somebody to insure its risk of exposure to these banks. It did not insure its risks from insurance companies like AIG but instead, via this Minibonds arrangement, bought insurance from investors like you.
Through the Credit Risk Swap, you as an investor has agreed to sell insurance to Lehman Brothers with regards to the reference entities. In order to become an insurance agents of Lehman Brothers, you will need to come up with money as collateral. This money is collected from you via the financial institutions that you bought the Minibonds and given to Minibond Ltd to invest in a basket of CDOs issued by 150 companies.
Whatever returns from these CDOs issued by these 150 companies (variable returns) are given to Lehman Brothers. In return, Lehman Brothers will give Minibonds Ltd a FIXED premium (most probably higher than 5.1%) and Minibonds Ltd will give investors 5.1% returns for their investment. Now, the variable returns from the Collateral Assets may be higher or lower than 5.1% but investors will only get back 5.1%. It means that Lehman Brothers will take the risk of variable returns from these Collateral Assets in return for your risk taking on the reference entities. This complete the Credit Risks Swap, swapping your risks of variable returns for a fixed returns, while you in return, insured Lehman Brothers for their risk exposure to the Six reference entities.
The problem is that Minibonds Ltd, under the control of Lehman Brothers, may choose to invest in a higher risk instruments or CDOs because it would be very profitable if the returns from these investment is higher than 5.1% that Lehman Brothers promised you. Especially so, when they do not need to bear the risks of defaults these CDOs or any of the assets in the basket of Collateral Assets. The returns from these Collateral Assets, they take but you bear the risks of defaults from these assets. Under the contract, once a CREDIT EVENT happens, the whole arrangement will be liquidated. The Credit Event involves:
1) If any one of the reference banks failed, it is considered as a Credit Event and the investors will have to pay Lehman Brothers for the insurance it bought via the Credit Risks Swap. Meaning, investors will lose all money invested.
2) If more than 11 companies of the 150 companies listed in the Collateral Assets failed, or a certain percentage of the CDOs or credit-linked derivatives held as Collateral Assets go into default, the
whole Minibonds will be liquidated and any loss from these defaults will be born by investors (not Lehman Brothers).
But the definition of Credit Event does not includes the failing of Lehman Brothers as the Credit Risks Swap partner. Thus, at this moment, investors do no face immediate liquidation of the Minibonds and suffer immediate losses. However, investors RISK losing a lot of money due to the fact that the value of the basket of CDOs and other credit-linked derivatives held as Collateral Assets has devalued tremendously due to the present financial crisis. The likelihood of a credit event triggered by the failing of a substantial number of companies within the list of 150 is very high at this moment.
Furthermore, as Lehman Brothers has gone into bankruptcy, it will no longer give you the 5.1% as it promised and in this financial crisis, the variable returns from the basket of CDOs and credit-linked derivatives would be nearly zero as most of them are linked to SubPrime products.
1) What was sold to the unsuspecting and gullible investors ? Is it a Credit Default Swap( CDS ). What is a CDS ?
Credit Default Swap, also commonly known as Credit Risk Swap, is a mechanism whereby two parties "exchange risk". In this case of Minibonds, it is totally an UNFAIR swapping. The "RISK" Minibonds Investors swapped with Lehman Brothers is the VARIABLE RETURNS from the basket of Collateral Assets they implicitly invested via Minibonds Ltd controlled by Lehman Brothers. However, the risk of the failing of the whole basket of Collateral Assets are not insured by Lehman Brothers. Thus, Lehman Brothers will not compensate investors if they lose money due to defaults of the CDOs and
credit-linked assets held in the basket of collateral assets!
This is where the tricky part is. Lehman Brothers could use Minibonds Ltd to invest in many HIGH RISK financial derivatives to get very high variable returns and it will benefit from these returns while only giving back a fixed 5.1% to investors. But if these HIGH RISK derivatives failed, investors will have to bear the brunt. On the other hand, Lehman Brothers has used the Six Reference banks as a risk bet to Minibonds investors. It seems to me that using such reference entities of "Low Risk" nature as Credit Default Risk exchange is MISLEADING as it creates an impression of "LOW RISKS" while in fact, the amount of RISK investors born is very much higher as they are responsible for the risk of the Collateral Assets!
2) What is the purpose of REFERENCE ENTITIES ( REs ) ?
The REs are prominently displayed in the brochure and fooled us into thinking we are investing in their bonds. As explained, the Reference Entities are just a reference of "Risk" that Lehman Brothers is swapping with you. Your money invested did not invest in these banks but rather in a list of 150 companies' credit-linked derivatives which may be of HIGH RISKS nature. The main Risk that investors is taking lies in the basket of Collateral Assets.
3) The money collected from investors, what did they do with it.
The money collected from investors are invested in a basket of HIGH RISK derivatives issued by 150 companies. High risk derivatives may give high VARIABLE returns but the returns from these High Risk derivatives was swapped by the arrangement of CREDIT DEFAULT SWAP, to Lehman Brothers. That means that investors are bearing the HIGH RISKS of this basket of derivatives (not bonds, but CDOs and credit-linked derivatives) but Lehman Brothers has taken all the returns from these derivatives and in return, only promised to give you a FIXED return of 5.1%!
4) The REs have not defaulted,but the value of our investments have plumetted to almost zero. What is the rationale behind this incomprehensible senario?
Although the REs have not defaulted but the basket of HIGH RISK derivatives that your money actually invested in as a basket of Collateral Assets has actually diminished due to the financial crisis that we are facing. Although you as investors have not enjoyed the high returns from these high risk derivatives (which you have swap and given to Lehman Brothers for 5.1% return) but you bear the risks of defaults or devaluation from these financial derivative instruments.
5) Did the distributor :- a) misrepresented this product ; b) concealed the material fact ?
a) From the many descriptions given by investors with regards to the information they received from sales representatives, it is a CLEAR MIS-INFORMATION and MIS-REPRESENTATION of this product. The RISK you faced is not LOW as the failure of any one of the six reference entities. You, as an investor, also face risk of defaults or devaluation of the basket of HIGH RISK financial derivatives issued by the 150 companies and yet, you did not enjoy FULLY the potential high returns from these instruments but taking the risk of these instruments!
Basically it means that, somebody used your money to invest in HIGH RISKS products and keep all the potential HIGH RETURNS from your investment but in return, they only give you back a FIXED 5.1% and you bear all the risks of defaults and devaluation of these products. I believe if this is represented properly to you, many investors would not be investing in this product. I mean, who wants to bear all the HIGH RISK while taking back only a FIXED 5.1%?
b) I am not in the position to say whether "they knew but did not tell you" or they conceal any material facts because I am not vested and would not know whether those front line sales representatives actually know what they are selling in the very first place. I believe not many people really understand this Lehman Brothers Minibonds when it was first sold. If those financial elites at MAS actually study the whole structure carefully, they would realize that this Minibonds is DETRIMENTAL to consumers' interests and it is a totally UNFAIR Credit Default Risk Swap as Lehman Brothers controlled the Swap Party Minibond Ltd.
---End of the article.
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