http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=3B7XNUZV4CY7&linkid=9cd18f02-f626-4a17-a5f9-1bda0d2b7346&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
13 Jan 2009
Enoch Yiu
The two regulators' reports on the Lehman Brothers minibond fiasco have raised many questions but failed to find a solution to prevent a recurrence of the problem.
The 83-page report by the Hong Kong Monetary Authority and the 76-page report by the Securities and Futures Commission have been dissected and analysed since they were published last Thursday.
The stakes were high - the government ordered the two to report on the issue after 43,000 investors suffered losses from minibond products issued or guaranteed by Lehman, which collapsed in September.
But White Collar is disappointed the reports offer too few effective solutions to prevent such events from happening again. In fact, they only raise the prospect of a power struggle between the HKMA and the SFC on how to regulate banks' selling of similar types of products in future.
For one thing, the reports show that the regulators have no intention of banning complicated products such as the Lehman minibonds being sold to retail investors, which White Collar believes is the core of the problem.
A key complaint about the Lehman minibonds was why such a product, which are derivatives of credit-linked notes, could be sold to a 90-year-old housewife or 88-year-old retirees through bank branches as an alternative to time deposits.
Under the current regulatory system they did not need any regulatory approval, just the SFC green light on the marketing material.
Both the HKMA and the SFC say such an approach is good enough as they claim it should be the intermediaries who should see to the suitability of the products for investors. The two regulators also argue that investors may mistakenly believe that products approved by the regulators are safe.
The regulators said this was in line with international practices but White Collar urges our regulatory friends to rethink.
Unlike markets in Australia, Britain or the United States, where retail investors invest through fund products, Hong Kong retail investors are trading all types of investment products. This makes Hong Kong different from other markets.
If the regulators relied on intermediaries to recommend suitable products for clients, it is tantamount to downward delegation and this paves the way for mis-selling.
Such a disclosure approach is only adopted in the stock market - all listed companies in Hong Kong must first get SFC and stock exchange approval for them to go public and sell shares to investors.
Why do other investment products such as Lehman minibonds or derivatives such as accumulators not need regulatory approval before being sold to investors?
Britain is consistent with the disclosure base regulatory philosophy adopted by the Alternative Investment Market (AIM) which allows companies to list without regulatory approval. They only need to disclose information and to have a sponsor support their listing. In Hong Kong, the stock exchange has rejected the AIM model during discussions to reform the Growth Enterprise Market, saying that many retail investors are not ready to move to such a model.
If they are not ready for a Hong Kong version of AIM, they are also not ready for minibonds or accumulators.
What the two reports will surely lead to is a power struggle between the HKMA and the SFC on how to regulate banks' securities departments.
The HKMA said it should be the sole regulator and should take over the SFC's power to investigate and punish bank staff involved in securities dealing.
But the SFC said banks should set up subsidiaries to handle investment sales and let the commission regulate it. Neither proposals are perfect.
If the HKMA proposal is adopted, then it is bound to be opposed by stockbrokers as the HKMA would no longer use the same standards that the SFC applies to brokers. What is more, how can the authority punish banks?
While the SFC can publicly reprimand, revoke or suspend operations of brokers and their staff, such actions would be difficult to impose on a lender as that would affect the public's confidence in the lender, which may well lead to a bank run.
If the government adopts the SFC model, then the HKMA would not have the full picture on all operations of the bank and there may be a danger that losses incurred in the securities subsidiaries may affect its parent banking group.
The two reports have raised more questions than answers.
Monday, January 12, 2009
Sunday, January 11, 2009
Part Time Work
There is strong interest in looking for part time work $6 to $10 an hour, preferably near the home. I will approach someone to create a portal to allow the matching of part time workers and employers.
I hope that this will create a new type of employment. The employer can engage a part time worker initially, and offer full time work if the worker is found to be suitable.
I hope that this will create a new type of employment. The employer can engage a part time worker initially, and offer full time work if the worker is found to be suitable.
TABS - Taxi Automated Booking Service (8202 8866)
You can test TABS now by sending a zone code (from 01 to 82) to TABS 82028866. If a taxi is available, you will get a SMS stating that a taxi will call you on your mobile phone. Actually, you will get a dummy taxi (during this testing period). You will get the SMS, but there is no actual taxi at this time.
If no taxi is available, you will be placed on the queue for the next "dummy" taxi to be available. You should get a SMS within 5 minutes.
Give it a try. The zone should be the first two digit of the postal code of your home, office or wherever you happen to be.
Send ZZ (01 to 82) to 82028866. Test the system now. It is FREE.
If no taxi is available, you will be placed on the queue for the next "dummy" taxi to be available. You should get a SMS within 5 minutes.
Give it a try. The zone should be the first two digit of the postal code of your home, office or wherever you happen to be.
Send ZZ (01 to 82) to 82028866. Test the system now. It is FREE.
Hilarious sayings of George W Bush
And they have no disregard for human life."—Describing the brutality of Afghan fighters, Washington, D.C., July 15, 2008
I remember meeting a mother of a child who was abducted by the North Koreans right here in the Oval Office."—Washington, D.C., June 26, 2008
"We want people owning their home—we want people owning a businesses."—Washington, D.C., April 18, 2008
"How can you possibly have an international agreement that's effective unless countries like China and India are not full participants?"—Camp David, April 19, 2008
More here
http://www.tankinlian.com/articles/wisdom.html
I remember meeting a mother of a child who was abducted by the North Koreans right here in the Oval Office."—Washington, D.C., June 26, 2008
"We want people owning their home—we want people owning a businesses."—Washington, D.C., April 18, 2008
"How can you possibly have an international agreement that's effective unless countries like China and India are not full participants?"—Camp David, April 19, 2008
More here
http://www.tankinlian.com/articles/wisdom.html
Saturday, January 10, 2009
SCMP:Two women sue bank over minibond losses
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=F1QJNO2RI9J2&linkid=d00bf96d-c7e9-49c5-935e-470eb087254e&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
11 Jan 2009
Yvonne Tsui
A 69-year-old woman and her daughter-in-law are seeking a full refund and damages from the Bank of China (Hong Kong) over their losses in Lehman Brothers minibonds.
Chin Yee-ching, a retired woman living in Malaysia, and her daughterin-law Chan Lai-mei, who lives in Po Shan Road, filed a writ in the High Court against Bank of China (Hong Kong) on Friday.
The bank is accused of being negligent in failing to “ correctly and accurately disclose and explain the real nature and structure of the product” and the true risk involved in their minibond investments.
Minibonds are not corporate bonds, but consist of high-risk creditlinked derivatives. They are marketed as a proxy investment in well-known companies.
In the writ, the pair also allege the bank failed to provide sufficient information and time for them to consider and make investment decisions about the products.
It said that Ms Chin and Ms Chan were approached by Cheng Kit-yee, a bank officer at a branch in Connaught Road Central, and Ms Cheng persuaded them to buy a series 35 minibond.
The claim said Ms Cheng told Ms Chan that the minibond was very low risk and the interest yield was good. Ms Cheng allegedly told her that the product was just like a time deposit and was very safe, while the interest was a little bit higher.
Ms Chan then agreed to early uplift of her US dollar fixed time deposit of US$ 80,000 so she could buy the minibonds, and Ms Cheng helped her apply for a waiver of the early uplift penalty. The writ said Ms Chan further agreed to use HK$ 400,000 savings to purchase the minibonds.
Having allegedly suggested the product was low risk and a conservative investment, Ms Cheng advised Ms Chin to invest her HK$1.48 million savings in minibonds.
However, another bank officer, Kenneth Lam, informed the pair in late September that the collapse of the American bank on September 15 affected their minibond investments.
11 Jan 2009
Yvonne Tsui
A 69-year-old woman and her daughter-in-law are seeking a full refund and damages from the Bank of China (Hong Kong) over their losses in Lehman Brothers minibonds.
Chin Yee-ching, a retired woman living in Malaysia, and her daughterin-law Chan Lai-mei, who lives in Po Shan Road, filed a writ in the High Court against Bank of China (Hong Kong) on Friday.
The bank is accused of being negligent in failing to “ correctly and accurately disclose and explain the real nature and structure of the product” and the true risk involved in their minibond investments.
Minibonds are not corporate bonds, but consist of high-risk creditlinked derivatives. They are marketed as a proxy investment in well-known companies.
In the writ, the pair also allege the bank failed to provide sufficient information and time for them to consider and make investment decisions about the products.
It said that Ms Chin and Ms Chan were approached by Cheng Kit-yee, a bank officer at a branch in Connaught Road Central, and Ms Cheng persuaded them to buy a series 35 minibond.
The claim said Ms Cheng told Ms Chan that the minibond was very low risk and the interest yield was good. Ms Cheng allegedly told her that the product was just like a time deposit and was very safe, while the interest was a little bit higher.
Ms Chan then agreed to early uplift of her US dollar fixed time deposit of US$ 80,000 so she could buy the minibonds, and Ms Cheng helped her apply for a waiver of the early uplift penalty. The writ said Ms Chan further agreed to use HK$ 400,000 savings to purchase the minibonds.
Having allegedly suggested the product was low risk and a conservative investment, Ms Cheng advised Ms Chin to invest her HK$1.48 million savings in minibonds.
However, another bank officer, Kenneth Lam, informed the pair in late September that the collapse of the American bank on September 15 affected their minibond investments.
Yield during the Great Depression of the 1930s
Dr. Money wrote in The New Paper:
For example, if you bought US shares in 1929, it would have taken 28 years – until 1957 – before you got back all your investment. Other markets have taken even longer.
It is true that stocks earn 10 per cent against 3 per cent for bonds – in the long-run. But that can be very long.
Here is my perspective.
For example, if you bought US shares in 1929, it would have taken 28 years – until 1957 – before you got back all your investment. Other markets have taken even longer.
It is true that stocks earn 10 per cent against 3 per cent for bonds – in the long-run. But that can be very long.
Here is my perspective.
If you buy shares now, when it has dropped 50% and it takes 28 years to reach its previous peak (i.e. 100% gain from the current price), the effective yield is 2.5% per annum. If it takes a shorter time to reach the previous peak, the yield will be higher than 2.5% per annum.
SCMP:Deadline issued for investmen
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=I3SLL39DTVA5&linkid=4f97714b-ad98-4e5a-8667-07964f5d0135&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
10 Jan 2009
Enoch Yiu and Maria Chan
The Hong Kong Monetary Authority told banks yesterday to implement seven consumer protection measures concerning the sale of investment products, and to formulate plans to separate their deposit-taking and retail securities business before the end of March.
The measures are part of a range of proposals suggested in separate reports disclosed on Thursday by the authority and the Securities and Futures Commission on last year’s Lehman Brothers minibond fiasco. On the same day, Financial Secretary John Tsang Chun-wah ordered “an immediate review” of Hong Kong’s financial regulatory structure.
The authority sent a circular to all banks yesterday requiring them to immediately add “health-warning” statements to their sales material on retail derivative products to warn of their risks. It told them to immediately introduce adequate controls to ensure sales staff were not solely rewarded for sales performance.
By the end of March, banks must instal audio systems to record client conversations on investment products sales, as well as introduce a “mystery shopper” programme – in which undercover staff monitor the behaviour of those selling investment products.
In addition, the authority told banks to formulate plans to separate their deposit-taking and investment products sales functions. Both reports said it was a conflict for bank tellers to handle deposits and sales. But the regulators have different ideas on how to solve the problem.
The authority report said banks should use separate counters and staff in a branch to sell investment products. But the SFC suggested banks be banned from using their branch networks at all for these financial instruments. Rather, they should set up a separate subsidiary, using different offices and staff.
The proposed reforms come in the wake of the collapse of the US bank Lehman Brothers in September, a crisis that left 43,700 Hong Kong investors holding derivatives it issued or guaranteed, but which had lost much or all of their value.
Many claimed they were misled by bank tellers, who sold the products as alternatives to time deposits or low-risk bonds when, in fact, they were risky credit-linked derivatives.
Raymond So Wai-man, an associate professor of finance at Chinese University, supported the idea that banks should separate deposit-taking and investment products sales.
“When bank tellers make use of depositors’ financial information and cross-sell them investment products, customers may be confused between investment and deposit taking,” he said. Peter Wong Tung-shun, chairman of the Hong Kong Association of Banks
But Peter Wong Tung-shun, chairman of the Hong Kong Association of Banks, said some banks were very small and it might not be easy to have separate counters.
Mr Wong said banks might face higher operating costs after adopting the suggested proposals. “It’s hard to say whether banks have to pass on the cost to consumers,” he said.
The authority and the SFC reports both noted that Britain, Singapore and Australia had “cooling off” periods of 14 to 30 days on some investment products in which customers can change their minds.
In Hong Kong, there is no such cooling off period. However, the Hong Kong Federation of Insurers does have a cancellation period in which customers can cancel their policies up to 21days after applying.
Chan Kin-por, lawmaker for the insurance sector, said this had helped to reduce complaints. He said 10 to 15 per cent of policies sold were cancelled in the cooling off period.
10 Jan 2009
Enoch Yiu and Maria Chan
The Hong Kong Monetary Authority told banks yesterday to implement seven consumer protection measures concerning the sale of investment products, and to formulate plans to separate their deposit-taking and retail securities business before the end of March.
The measures are part of a range of proposals suggested in separate reports disclosed on Thursday by the authority and the Securities and Futures Commission on last year’s Lehman Brothers minibond fiasco. On the same day, Financial Secretary John Tsang Chun-wah ordered “an immediate review” of Hong Kong’s financial regulatory structure.
The authority sent a circular to all banks yesterday requiring them to immediately add “health-warning” statements to their sales material on retail derivative products to warn of their risks. It told them to immediately introduce adequate controls to ensure sales staff were not solely rewarded for sales performance.
By the end of March, banks must instal audio systems to record client conversations on investment products sales, as well as introduce a “mystery shopper” programme – in which undercover staff monitor the behaviour of those selling investment products.
In addition, the authority told banks to formulate plans to separate their deposit-taking and investment products sales functions. Both reports said it was a conflict for bank tellers to handle deposits and sales. But the regulators have different ideas on how to solve the problem.
The authority report said banks should use separate counters and staff in a branch to sell investment products. But the SFC suggested banks be banned from using their branch networks at all for these financial instruments. Rather, they should set up a separate subsidiary, using different offices and staff.
The proposed reforms come in the wake of the collapse of the US bank Lehman Brothers in September, a crisis that left 43,700 Hong Kong investors holding derivatives it issued or guaranteed, but which had lost much or all of their value.
Many claimed they were misled by bank tellers, who sold the products as alternatives to time deposits or low-risk bonds when, in fact, they were risky credit-linked derivatives.
Raymond So Wai-man, an associate professor of finance at Chinese University, supported the idea that banks should separate deposit-taking and investment products sales.
“When bank tellers make use of depositors’ financial information and cross-sell them investment products, customers may be confused between investment and deposit taking,” he said. Peter Wong Tung-shun, chairman of the Hong Kong Association of Banks
But Peter Wong Tung-shun, chairman of the Hong Kong Association of Banks, said some banks were very small and it might not be easy to have separate counters.
Mr Wong said banks might face higher operating costs after adopting the suggested proposals. “It’s hard to say whether banks have to pass on the cost to consumers,” he said.
The authority and the SFC reports both noted that Britain, Singapore and Australia had “cooling off” periods of 14 to 30 days on some investment products in which customers can change their minds.
In Hong Kong, there is no such cooling off period. However, the Hong Kong Federation of Insurers does have a cancellation period in which customers can cancel their policies up to 21days after applying.
Chan Kin-por, lawmaker for the insurance sector, said this had helped to reduce complaints. He said 10 to 15 per cent of policies sold were cancelled in the cooling off period.
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