Tan Kin Lian gives update on class action lawsuit and speaks about another flawed financial product

December 14, 2008 by admin
Filed under: Chief Editor, Financial Matters 

Written by Ng E-Jay
14 December 2008

On Saturday, Mr Tan Kin Lian gave an update at Speaker’s Corner on the possibility of a class action lawsuit being initiated by investors of failed Lehman-linked structured products and credit notes, and also warned investors about another flawed and potentially dangerous financial product that has been floating around in the marketplace for quite some time.

Mr Tan said that he has approached a senior lawyer to seek  the advice of a Queen’s Counsel on whether it is feasible for investors to proceed with a class action lawsuit against financial institutions. In particular, the Queen’s Counsel has been tasked to look into whether any of the tenets of the Securities and Futures Act or the Financial Advisers Act had been violated and if there had indeed been mis-selling. Of special interest is the issue of whether, according to investors’ testimonies, the investors had been given sufficient time at the point of sales to read and understand the prospectuses of the various Lehman-linked structured products.

Mr Tan commented that he has read those prospectuses, even he as a financial expert cannot comprehend them. This drew an applause from the audience.

The legal advisory services of the Queen’s Counsel is currently paid for by a friend of Mr Tan. If eventually a class action lawsuit does materialize, it is hoped investors will contribute to cover the fees of the Queen’s Counsel.

There is currently one lawyer who is actively in contact with Lehman-linked credit notes investors (DBS High Notes investors are excluded), and so far around 260 investors have agreed to appoint him to act for them in a potential class action lawsuit. However, some investors have expressed concerned that this lawyer is young and inexperienced. Mr Tan met up with the lawyer, who assured him that he is receiving assistance from a couple of senior counsels in Singapore. The lawyer plans to organize a meeting sometime in January 2009 to brief investors. This meeting will be open to all.

A group of Lehman Minibond investors plan to organize a separate briefing on possible avenues of legal action. Yet another group of DBS High Notes investors are also in the midst of considering the possibility of taking separate legal action.

Mr Tan expects that any decision on whether to proceed with a class action lawsuit will probably be made near the end of January 2009. It is estimated that in such a lawsuit, each participating investor may have to pay as much as $4,500 in legal fees. Mr Tan advised investors to consider this potential fee in relation to their total investment amount in deciding whether it is worthwhile taking up the class action lawsuit.

Mr Tan then gave an update on other lawsuits initiated by investors around the world.

Hong Kong investors who were allegedly mis-sold Lehman Minibinds have been invited to mount a lawsuit against the institutions involved by US lawyers who presented them a proposal for a legal action in a US court. Their proposed action will be to sue some of the US institutions involved in the handling of the Minibonds for a breach of duty according to American law. (The China Post, “HK investors invited to sue in US”, 06 Dec)

However, Mr Tan pointed out that from his consultation with a lawyer, such a lawsuit targetted at US institutions cannot be mounted by Singapore investors, because of the way our local laws are structured with respect to jurisdiction issues. Mr Goh Meng Seng said later in his mandarin speech that he would be flying to Hong Kong to further investigate this issue.

Two former Singapore residents have also sued DBS Hong Kong for selling them Lehman-linked structured products. The retired couple, Mr Stephen Tou Kwok Woon and his wife Wong Fung Chun, filed a writ on Monday against the bank in the Hong Kong High Court. They are seeking to recover the US$1.26 million (S$1.89 million) they had invested in DBS Constellation Notes in July 2006 and April 2007. In their lawsuit, the couple have alleged misrepresentation and breach of duty of care. (ST Online, “Couple sue DBS bank”, 11 Dec)

According to Mr Tan Kin Lian, this couple were told by their Relationship Manager at DBS Hong Kong that their money was invested in 8 different reference entities, and that even if one failed, there were 7 others to make up the losses. This is a clear case of misrepresentation because in reality, if any one of the reference entities went under, the entire note would be rendered worthless.

Next, Mr Tan went on to warn investors about another potentially dangerous investment product — dual currency deposits. His advice was that this product should be avoided.

In a dual currency deposit, the investor is exposed to two international currencies, and his account is credited with the weaker currency at the end of the investment period. The investor is also paid interest on his investment throughout its duration. Mr Tan pointed out this was not a fair investment, as the investor could, in this highly volatile trading environment, lose as much as 10% to 30% of the value of his original investment due to wide fluctuations in the forex market, whilst only being compensated at a low interest rate for agreeing to accept the weaker currency at the end of the investment period. Such large losses have been sustained by investors because the weaker currency (such as the Australian dollar) declined greatly against the Singapore dollar.

Mr Tan said that if people wished to gamble, they should instead go to casinos. His remark again drew an applause from the crowd.

One female Indonesian investor previously wrote to Mr Tan Kin Lian about being approached by her Relationship Manager concerning this dual currency investment. She decided to go ahead with it. After just one month, her initial investment of half a million dollars had evaporated. She was told by the Relationship Manager that she had to top her account up with an additional half a million dollars in order to keep her position in the market.

Does this sound suspiciously like a bucket-shop operation?

How could a currency investment lose 100%? A currency can never go to zero unless the country is wiped out in either a war or a complete obliteration of its financial system.

The bank never got back to the female investor.

Later, Mr Tan learnt that a Singaporean investor and his wife put in $200,000 in a dual currency deposit at a local bank. Their bank Relationship Manager explained to them that in this investment, the bank would lend them an additional $800,000 to invest in the forex market.

This was when Mr Tan learnt the cold truth. The dual currency deposit is in fact a leveraged forex trade. That is why if the investment goes sour, the investor can potentially lose his entire principal sum.

In the case of this Singaporean couple, they lost 75% of their investment.

Many people had reflected to Tan Kin Lian that they had lost their trust in the banks. Insurance companies are also not viewed in any better light, as they habitually lock up their money for as long as 20 years but post mediocre returns.

Someone had approached Mr Tan to set up an association to educate consumers on financial services. That was before the Lehman products crisis erupted. At that time, Mr Tan was too pre-occupied to consider this. But now that these financial scandals have surfaced, he is willing to look into the idea.

Mr Tan has formed a pro-tem committee to see how an association of this kind can be established. It should ideally be independent and not receive any funding from banks or the Government. Mr Tan will do a survey to ask citizens if they are willing to fund such an association, which will need to hire 3 to 5 people to do the necessary research.

After Mr Tan’s speech, Mr Goh Meng Seng gave an abbreviated mandarin translation of the speech.

Read Also reports filed by Wayang Party Club including videos:

Dwindling crowd at minibond rally as Tan Kin Lian proceed with legal action suit against the banks

Mr Tan Kin Lian’s speech at Hong Lim Park, 13 December 2008 (Part 1)

Mr Tan Kin Lian’s speech at Hong Lim Park, 13 December 2008 (Part 2)

Mr Tan Kin Lian’s speech at Hong Lim Park, 13 December 2008 (Part 3)

Mr Tan Kin Lian’s speech at Hong Lim Park, 13 December 2008 (Part 4)

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Comments

4 Comments on Tan Kin Lian gives update on class action lawsuit and speaks about another flawed financial product

  1. Tan Kin Lian gives update on class action lawsuit and speaks about another flawed financial product « The Wayang Party Club of Singapore on Sun, 14th Dec 2008 1:09 pm

    2. [...] Read full article here [...]

  2. The Singapore Daily » Blog Archive » Daily SG: 15 Dec 2008 on Mon, 15th Dec 2008 12:41 pm

    3. [...] Notes and Minibombs – Sgpolitics.net: Tan Kin Lian gives update on class action lawsuit and speaks about another flawed financial product – Tan Kin Lian’s Blog: Speaker Corner, 13 Dec 2008 Speech by TKL – Singapore Enquirer: Mr Tan [...]

  3. The Singapore Daily » Blog Archive » Weekly Roundup: Week 50 on Sat, 20th Dec 2008 11:01 am

    4. [...] Notes and Minibombs – Sgpolitics.net: Tan Kin Lian gives update on class action lawsuit and speaks about another flawed financial product – Tan Kin Lian’s Blog: Speaker Corner, 13 Dec 2008 Speech by TKL – Singapore Enquirer: Mr Tan [...]

  4. Alvin Tan on Mon, 22nd Dec 2008 10:21 pm

    5. Can you please tell me how to get in touch with the lawyer(s) handling class action against DBS on High Notes 5? I have just received a letter from DBS disowning any responsibility and I refuse to accept my $400,000 investment is lost!

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