9. Credit-linked notes: 'Ironically, the broker who sold me those notes did not invest in this product. How I wish he could have told me that when he was selling it to me.' (ST Forum, 2 Oct) - I REFER to letters by Mr Jag Kuo last Thursday, 'Ultimately it's buyer beware' and Mr Stanley Jeremiah on Saturday, 'Instances where 'buyer beware' is unfair'. As an investor in several Minibond series and Jubilee Notes Series 3, which was affected by a credit event, I want to relate several observations supporting Mr Jeremiah's view. These pertain to the way such financial products are distributed. As an investor in Minibond Series 1, I had the opportunity to attend a launch briefing by Lehman Brothers representatives and facilitated by OCBC Securities. The briefing addressed risks associated with the investment if credit references fail but little was highlighted on other risks related to the arranger or the swap party. I could also recall an answer to the question, 'What happens when there's a credit event?': 'The securities would have to be unwound and investors will get back less than the principal amount invested.' This response oversimplifies the content in prospectus, and the fact that the resulting amount, after adjusting for the sale of collateral and termination of swap arrangement, may be negative or zero. Interestingly, a high proportion of investors present at that briefing were retirees. As this was the first launch of a credit-linked instrument to retail investors, there was significant coverage in major newspapers, including the Chinese media, on April 4, 2006. Quotes from interviewees included: 'The bonds are linked to entities which are solid, stable and very large.

 

10. Under intense pressure to sell (Today, 2 Oct) - Letter from L H Tang. I AM a personal financial consultant in a local bank. Banks state that there is no misrepresentation of products sold, and that products are usually recommended based on consumers’ needs. A financial needs analysis and fact find is usually done to ensure consumers have sufficient funds and have a real need for the product. Often, though, consultants like myself are under pressure to sell certain products so as to hit our sales target. A fresh graduate from the National University of Singapore, I have a contract with the bank for nine months. If I do not pass my probation in six months by hitting my sales target, I will be asked to leave and pay a $3,000 “bond”. So far, I have sold $500,000 of insurance based on consumers’ needs, but I need to sell more investment-linked insurance products. Ten of these will be equivalent to 60 of those I have sold. Consumers should understand that consultants are under immense pressure to think of ways such products can be “beneficial” to them.

 

Products sale to benefit ourselves or the sales ppl? haha...

 

Hee Teck

 

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