Opacity from MAS concerning some foreign stock counters
Written by Ng E-Jay
28 May 2010
The Monetary Authority of Singapore (MAS) has been discreetly compelling stock brokers in Singapore to impose trading restrictions on certain foreign stock counters, particularly Exchange Traded Notes (ETNs). Affected counters can no longer be purchased.
ETNs are senior, unsecured, unsubordinated debt securities issued by an underwriting bank. Their value is tied to a certain benchmark, which could be the price of a commodity or precious metal such as gold, or a stock index such as the United States S&P 500 index. ETNs can be structured so as to allow the investor to either go long or short, and can also employ leverage. All ETNs have a maturity date. On maturity, the underwriting bank promises to pay the investor the amount reflected in the index, less management fees. ETNs can be traded on regular stock exchanges just like shares of listed companies.
Since ETNs are debt securities that are backed only by the credit-worthiness of the underwriting bank, and not by any tangible assets, they are subject to risk of default and can become worthless in the event that the underwriting bank goes under.
CPF Board refuses to answer the question of minimum payouts for CPF Life
Short Notes from the Editor
18 January 2010
A Straits Times reader, Mr Manuel Nathan, recently wrote in to ask what are the lowest possible payouts for the CPF Life plans.
He was concerned that the Guide to CPF Life published by the CPF Board had stated in fine print that the payout range based on CPF interest rates of between 3.75per cent and 4.25per cent does not represent the lower and upper limits of the payout.
In its response, Mr Lo Tak Wah, Director (Retirement and Investment) of the CPF Board avoided answering the question altogether, preferring instead to stick to the propaganda that CPF Life is designed to have less volatile payouts and that inflation-indexed payouts are not feasible. (See: CPF Life designed to have less volatile payouts.)
The real reason why the CPF Board avoided answering Mr Nathan’s question is because the lowest possible payout is zero dollars.
Are Singaporeans clueless about retirement, and if so, why?
Written by Ng E-Jay
12 Nov 2009
(This article first appeared in The Online Citizen.)
A recent poll carried out by HSBC Bank revealed that the majority of respondents, aged between 30 and 70, saved only $100 to $200 per month for their retirement [1].
It does not take a financial expert to know that this amount would provide woefully inadequate retirement funding, especially in high cost Singapore.
The same HSBC poll also found that around 30% of Singaporeans were unsure about their retirement plans, including issues like the need for insurance.
Are Singaporeans really that clueless about their own retirement needs, and if so, why?
Jobs Credit Scheme — raising the alarm
Written by Ng E-Jay
15 Oct 2009
On Monday, a Bishan resident approached MP Lim Hwee Hua during a dialogue session at a community club with concerns over possible abuses of the Government’s much-vaunted Jobs Credit Scheme (JCS).
The resident had asked: “What happens if an employer who is given the Jobs Credit misuses or abuses these subsidies?” (CNA, “Concerns raised over possible abuse of Jobs Credit Scheme“, 11 Oct 2009.)
Mrs Lim tried to deflect the question, saying that abuse was hard to define, and that the specifics of each case would need to be looked into.
The resident was right to raise this pertinent question. Mrs Lim’s lackluster response however spoke volumes about the Government’s credibility regarding the JCS.
Preposterous to suggest that Temasek Holdings does not manage citizens’ earnings
Written by Ng E-Jay
10 Sept 2009
In its letter to the Wall Street Journal “Correcting Temasek Misperceptions” (08 Sept), Temasek Holdings stated that they “do not manage Singapore citizens’ earnings“, and that it is factually wrong (for the WSJ) to imply that Singaporeans have no choice but to keep their money with the fund.
I am appalled by the latest stand Temasek Holdings has taken, which seems to suggest that the assets they manage have nothing to do with the productive work of Singapore citizens and the wealth they have created for the nation over the past 5 decades.
Temasek Holdings was responding to an earlier WSJ editorial “Temasek’s Revised Charter” (31 Aug), which argued that Temasek’s latest charter “skirts the basic conflict of interest between the public interest of protecting citizens’ earnings and the private-market imperative of taking risks to seek returns“.
4% interest rate for CPF SMRA and CPF Life funds
Quick Snippets from the Editor
07 Sept 2009
The Government will extend the minimum guaranteed interest rate of 4% for the Special, Medisave and Retirement Accounts (SMRA) until the end of next year.
The Government had in 2007 decided to do away with a fixed rate of 4% for the SMRA. In its place, a market-based rate was introduced in January last year that is pegged to the interest rate of 10-year Singapore Government Securities (SGS) plus 1 percentage point.
The extension of the floor rate of 4% will apply to CPF Life funds as well.
Thereafter however, CPF Life payouts will be subject to changes in prevailing interest rates and mortality experience of the population. Should interest rates continue to remain low or should the population experience better mortality over time, the Government reserves the right to reduce CPF Life payouts at its own whim.
$100 liability cap for lost credit cards
EDITOR’S NOTE: The latest move by banks to protect consumer rights is welcome, but it must be noted that CASE President Yeo Guat Kwang has tried to mislead citizens yet again. The ST quoted him as saying that CASE “had been lobbying for greater protection for credit card holders for some time”. Is that really true? As recent as a month ago, Mr Yeo had in fact supported the view that consumers can walk away if they are unsatisfied with the terms that banks offered, saying “Consumers can choose to take cards from banks that offer them terms they are satisfied with.” SEE: Grossly inadequate protection for credit card users.
Source: Straits Times, 04 Sept 2009
BANKS have decided to change a long-standing policy which made credit card holders liable for all charges incurred on lost or stolen cards before they are reported missing.
From Nov 1, cardholders’ liability will be capped at $100, provided they are not negligent or fraudulent and notify the banks as soon as they discover the loss.
Temasek updates its charter, but any difference in accountability and transparency?
(Temasek’s updated charter is attached below.)
Quick Snippets from the Editor
27 Aug 2009
Temasek Holdings recently updated its charter to distance itself from the role of managing investments on behalf of the Government.
Temasek now portrays itself as an investment holding firm operating purely on commercial interests whose role is no longer focussed on diversifying away from local companies. Its updated charter also states that it seeks to create and deliver sustainable long-term value for stakeholders, as opposed to the old charter which states that it manages investments for the long-term benefit of Singapore.
Amidst all these cosmetic changes, we should ask: Will there any difference in Temasek’s level of accountability and transparency?
We need a minimum wage in Singapore
(This is an elaboration on a recent article by the Singapore Democrats, which I have attached below.)
Quick Snippets from the Editor
26 Aug 2009
The issue of whether Singaporeans should be entitled to a minimum wage has cropped up from time to time and sparked heated debates.
Some people have argued that the presence of a minimum wage may paradoxically lead to an increase in unemployment, due to the fact that the profit margins of companies employing low wage workers will be reduced, forcing them to either close down or relocate.
Allegedly, in response to larger labor costs, businesses will then try to compensate for the decrease in profit by simply raising the prices of the goods being sold, thus causing inflation and hurting consumers.
But in my opinion, such arguments fail to take into account the responsibility of a Government to provide for its citizens by making sure there is always a level playing field for all, including working class Singaporeans. Such arguments also neglect to consider the unique circumstances Singapore is in and the failed economic policies of the PAP.
Finance Minister remains evasive on Temasek Holdings and former CEO Charles Goodyear
Written by Ng E-Jay
19 Aug 2009
Finance Minister Tharman Shanmugaratnam was so evasive about questions posed in Parliament in Tuesday concerning Temasek’s short-lived CEO Charles “Chip” Goodyear that one cannot be blamed for thinking he could have been hiding some private secret that he does not want dragged into the light of day.
According to a Channel News Asia report, Mr Tharman was grilled for nearly 20 minutes by MPs who raised various questions pertaining to Temasek Holdings, including whether it should be headed by a foreigner, as well as the reasons for the sudden departure of Mr Goodyear after he had obtained the ringing endorsement of the Government only months ago.
Mr Tharman told Parliament that the Government will leave the decision to Temasek on when to appoint a new successor, but he added the next CEO should ideally be a Singaporean.
However, when he was asked for more details on why Mr Charles Goodyear left Temasek Holdings recently after having held the job for only 5 months, Mr Tharman flatly refused to divulge anything, saying it “serves no strategic purpose” for the public to know.
MAS bans 10 firms from selling structured notes, but is this merely a slap on the wrist?
Written by Ng E-Jay
08 July 2009
The Monetary Authority of Singapore (MAS) has announced that it has imposed temporary bans on the sale of structured notes by 10 financial institutions (FIs) which had distributed toxic structured notes linked to the collapsed US financial institution Lehman Brothers.
The bans, which took effect from 01 July 2009, apply to ABN Amro Bank, CIMB-GK Securities, DBS Bank, DMG and Partners Securities, Hong Leong Finance, Kim Eng Securities, Maybank, OCBC Securities, Philip Securities and UOB Kay Hian.
MAS revealed that during its investigations into the sale of the failed structured products last year, it found inconsistencies in the level of due diligence and internal controls applied by the FIs, resulting in various forms of non-compliance with MAS’ guidelines on the sale and marketing of these investment products.
The hell of tax havens
Source: Michel Morkos, Dar Al-Hayat, 21 April 2009
Are tax havens responsible for the world economic crisis and the proliferating high risk money instruments? Or are they just loopholes through which taxpayers keep their money instead of pumping them into state treasuries?
Early April, the G20 leaders agreed during the London summit on a series of stringent decisions to curb these tax havens. But their goal was not to lift and weaken banking secrecy as much as it was to seize financial resources that would give the needed leverage to high expenditure economic stimulus plans.
Every accused country was apparently complying with the lifting of bank secrecy, within specific conditions that require legally proving incidences of tax evasion. Anything other than that remains within the banking standards in anti laundering measures against the proceeds derived from crime and smuggling.
In the opinion of the American expert Raymond Baker, tax havens get 5% of their resources from crime proceeds, 30% from corruption, while the remaining percentage comes from embezzlement, fraud and tax evasion. Hence, tax havens are not only open to outlaws and mafia gangs, but also to the elite and highly educated customers. Among them are the multinational high-income people who refuse to pay their due taxes and prefer that senior wage earners in their companies do so instead. From this standpoint, tax havens have been considered as tools that helped globalization in the expansion of inequality.
These havens, as experts estimate, incur every year around a billion dollars in lost tax revenues in Europe, or up to ten percent of all tax revenues. This is while these countries need to redress their budget deficits with at least a 3 % margin.
Singapore Economy in Free Fall Disaster
Source: The Huffington Post, 18 April 2009
The city state of Singapore, Venice of the 21st century in terms of its mercantile prowess, has as its national anthem the refrain, “Onward, Singapore.” With the data that has recently emerged on the Q1 performance of Singapore’s economy, however, it may be time to change the national anthem to “Backwards, Singapore.” The numbers are that bad.
This tiny Island republic, sitting at the tip of the Malay Peninsula, covers only 274 square miles, with a population of under five million. Yet through innovation, industriousness and the entrepreneurial environment facilitated by a pro-business if somewhat authoritarian government, Singapore has become a powerhouse within the global economy. Indeed, no less an authority than the World Bank has graded Singapore as the most business friendly economy in the world. However, amidst the tectonic shifts occurring as a result of the Global Economic Crisis, Singapore has discovered that it is an exceptionally vulnerable and fragile geopolitical space.
Global trade is the engine that drives the Singapore economy. The tiny nation has a vast manufacturing sector, which includes electronics, petrochemicals and engineering. With its small population, Singapore must export the products it manufactures. That export trade has led Singapore to being the fourth largest port in the world. The Global Economic Crisis, however, has sent international trade into a tailspin. All major exporters are hurting badly; Singapore is bleeding.
Temasek licking wounds
(Source)
Singapore’s Temasek, like other Asian and Middle Eastern sovereign wealth funds, is digging for deals in mining and oil, as it licks its wounds from financial sector investments.
The state investor is eyeing “aggressively sized” resource assets and could do a deal in the $5 billion range, a source familiar with the situation told Reuters, declining to be identified due to the sensitive nature of such deals.
Energy and resources make up just 5 percent of Temasek’s portfolio, worth S$127 billion ($84 billion) at end-November.
The portfolio, bulging with banks such as Standard Chartered and Bank of America, slid 31 percent between March and November. Investments in Merrill Lynch and other financials — which account for 40 percent of its assets — are rapidly losing value.
Temasek’s shift toward resources will be helped by the experience of Chip Goodyear, former chief of miner BHP Billiton, who succeeds Ho Ching, wife of Singapore’s prime minister, as CEO in October.
MAS’ consultation paper on enhanced regulation in the financial industry — key issue of MAS’ own accountability not addressed, amongst other issues
Written by Ng E-Jay
18 March 2009
In an attempt to shore up the faltering reputation of Singapore as a financial hub and to beef up regulations governing the marketing and sale of investment products, the Monetary Authority of Singapore (MAS) released a draft consultation paper last Thursday outlining what is acceptable sales practice and what crosses the line into mis-selling and deception. (See here and here.) The draft consultation paper is open for public feedback until 23 April.
Some of the key recommendations include:
- requiring that all investment products come with a three- to four-page summary sheet called the “Product Highlights Sheet” clarifying the risks and returns, including what would happen in the worst case scenario and how investors can exit their investment;
- introducing a new product category called “complex investment products”, which will be defined as any investment product that has derivatives embedded in it, whose disclosure materials will alert potential investors to the risks involved, and which will also be subjected to more regulatory requirements such as permitting financial institutions to sell them only after they have provided comprehensive advice and determined that the investor is suitable for such a product;
- requiring financial institutions to undertake an enhanced product due diligence process before selling new investment products, and requiring Representatives to enhance the quality of information obtained from their customers, provide customers with more details in their basis for recommendation, and set out more clearly in a formal document why the products are suitable for them;
- disallowing bank tellers from steering customers queueing in bank branches towards Representatives selling investment products;
- strengthening MAS’ powers to investigate and take regulatory action through several measures, including the introduction of a civil penalty regime under the Financial Advisers Act (FAA).
However, three issues remain inadequately addressed, which I discuss below.
HK investors sue Lehman
Associated Press, 13 March 2009
HONG KONG – A GROUP of Hong Kong investors sued Lehman Brothers and HSBC in the US in their fight to recoup as much as US$1.6 billion (S$2.46 billion) in losses after the collapse of the Wall Street firm left their bond holdings possibly worthless.
Lawyers in the US said the plaintiffs are mostly retired people and retail investors who bought US$2 billion worth of structured products that originated with Lehman and which HSBC marketed as low-risk ‘minibonds’.
They say Chinese investors, who have a high savings rate, are drawn to conservative investments. Calling the investments minibonds drew more interest but investors have since complained that was misleading.
A unit of HSBC Holdings PLC sold the minibonds to the plaintiffs, many of whom did not realise they were exposed to risk of Lehman’s failure.
Strict rules to protect investors proposed
Straits Times, 13 March 2009
ST link
Following Lehman fiasco MAS drafts measures to curb mis-selling
By Francis Chan
A BIG shake-up in the way investment products are sold is on the way, with beefed-up rules and tough new laws to drive shoddy and aggressive merchants out of the industry.
The Monetary Authority of Singapore (MAS) released a draft consultation paper yesterday outlining what is acceptable practice and what crosses the line into mis-selling and deception.
Its move comes after months of controversy over the way complex investment products were sold to people, including many elderly and lowly educated folk.
The proposals centre on two broad approaches – shining more light on what may seem to be dauntingly complicated products and strengthening a culture of accountability among financial advisers.
20 in Minibonds limbo
ST Online, 12 March 2009
ST link
ABOUT 20 investors in Lehman Brothers’ Minibonds appear to have fallen through the cracks of the complaints resolution process set out by the Monetary Authority of Singapore (MAS).
The investors – mainly clients of the former American Express (Amex) Private Bank, acquired by Standard Chartered early last year – claimed that the British bank did not offer them the same complaints resolution process as 10 other financial institutions in Singapore that sold similar investments.
‘We bought Minibonds from Amex but they were acquired by StanChart. And as StanChart did not sell the products to us, we were not accorded the same complaints resolution process as the other banks that sold Minibonds,’ said Mr C.L. Pang, whose family sank more than $500,000 into Minibonds.
‘After the saga broke, we wrote in to complain, but all we got was a two-minute telephone interview and a letter denying our allegations and that’s it – no other option was provided,’ he said.
Ridiculous to allow more unsecured personal loans when credit card debts and delinquencies are ballooning
Written by Ng E-Jay
04 March 2009
In this harsh economic environment where jobs losses are mounting by the day, it is no surprise that unsecured liabilities such as credit card debt is ballooning and defaults are on the rise. Yet, the Monetary Authority of Singapore (MAS) and Ministry of Law have seen it fit to allow more people access to unsecured credit facilities.
In a joint press release last Wednesday, MAS and the Law Ministry announced that from March 1, the minimum annual income requirement for unsecured bank credit facilities will be $20,000, down from $30,000. Individuals will be able to borrow up to twice their monthly income.
The minimum annual income requirement for credit cards remains unchanged at $30,000 for individuals aged 55 or younger and $15,000 for those over 55.
Until now, individuals earning below $30,000 per year have been able to seek unsecured loans only from non-bank lenders such as GE Money and SingPost or other licensed moneylenders.
Larger group of Minibond investors plans suit
Straits Times, 26 Feb 2009
ST link
A SECOND group of Lehman Minibond investors has announced plans to take the distributors and trustee of the failed product to court.
This group of investors – who call themselves the Minibond Investors Action Group or MIAG – appears to be larger than a 250-strong group that threatened legal action last week. It also seems to have a more concrete legal strategy.
The organisers hope to get about 1,000 investors to commit between $2,000 and $3,000 each for a $2.5 million war chest. It will be used to fund court action, possibly in May, against the various Minibond distributors and the products’ trustee, HSBC Trustee.
The group started a new blog online yesterday stating that lawyer Conrad Campos of Conrad Campos & Company ‘will be the lead lawyer in the proposed class action’.
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