Sunday, November 23, 2008

Our Reply to Mr Chua


We refer to Mr Chua Sheng Yang’s letter on Saturday, “The aim of my letter was not to question the genuine intent of Mr Tan Kin Lian”. Any reasonable person reading his earlier letter would have come away with the impression that that was exactly what he was doing.

But we are not writing to defend Mr Tan as he is well able to do that himself. Rather we take issue with Mr Chua’s claim that there are many people seeking redress when there has been no injustice done in the first place. We would like to ask Mr Chua how familiar he is with the issues of the collapse of the Lehman-related products such as Minibonds and DBS High Notes.

Recently we have carried out a data gathering exercise among High Notes 5 (HN5) investors. Preliminary findings show a consistent pattern of customers being told at the point of sale that HN5 is low risk and safe, something that does not match DBS’ recent public admission that the product has a risk rating of “8 to 9” on a scale of 1 to 10.

Now, Mr Chua could well say that investors may be asserting this only because HN5 has collapsed. But would he also contend that a reasonable retail customer, if given all correct information, would still risk his entire investment in such a risky product in return for a mere 5% in annual interests? And would Town Councils also knowingly invested public funds, especially given that they are not aggressive investors?

To us, there are systemic failures in the product, in the selling process and in the targeting of customers. Therefore it matters not if the investors were professionals, or business people, or in fact, organizations like Town Councils. All of them have been similarly misled into the nature of what they bought because the risks are not commensurate with the returns.

High Notes Investor Group Committee


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