Petition to Prime Minister

29 August 2009

Mr. Lee Hsien Loong
Prime Minister
Singapore

We are citizens, permanent residents and friends of Singapore who have been misled into investing in the credit-linked notes by the banks and security firms in Singapore. These notes include the Minibonds created by Lehman Brothers, High Notes created by DBS Bank, Pinnacle Notes created by Morgan Stanley, Jubilee Notes created by Merill Lynch and other similar notes. We have lost substantial amounts of our hard earned savings through these ill-advised investments.

When we made the investments during the past two years, we were told by the sales representatives of the financial institutions that these are safe investments that carry low risk. We trusted the recommendation made by these representatives of the financial institutions that are regulated by the Monetary Authority of Singapore. We believed that it was safe to invest our savings in Singapore due to its high reputation of integrity and honesty.

Many of us had previously invested the savings in the fixed deposits of financial institutions. We were advised by the sales representatives to re-invest these fixed deposits into the credit-linked notes on their assurance that the notes were just as safe.

Most of us were told that our savings would be invested in a basket of investments comprising of the named entities (which are of high credit ratings) and that, if any of these entities failed, we would at worse suffer only a proportionate loss of our investment.

We were shocked to learn about the significant or total loss of our investments following the collapse of Lehman Brothers. We were never advised that the credit-linked notes comprise of credit default swaps that would lead to a total loss of our investment on the occurrence of a credit event involving any one of these named entities or that the savings were actually invested in assets of lower quality.

The nature of these toxic swaps was never explained to us by the sales representatives. If we had been informed about this matter, we would certainly have avoided this investment.

We have lodged our complaint to the financial institution on the bad advice and misrepresentation given to us by their sales representatives that led to our purchase of these credit linked notes. After spending in a lot of effort in presenting our case, we were disappointed to see our request for compensation totally rejected by the financial institution, or to receive an unacceptably low offer, being less than 20\% of the invested amount in most cases.

We understand that the financial institutions had offered different amounts of compensation to different investors in similar circumstances. We are aggrieved to be treated unfairly in getting no or inadequate compensation.

On 7 July 2009, the Monetary Authority of Singapore released its report on the Investigation into the Sale and Marketing of Structured Products linked to Lehman Brothers. MAS investigated 10 financial institutions and 10 licensed financial advisory firms that distributed these products.

The investigations covered the financial institutions due diligence on the Notes, the procedures in place at the point of sale, including how the financial institutions ensured that the Notes were sold to clients whose investment objectives and risk tolerance matched the risk profile of the Notes, and the training and supervision of representatives and licensed financial advisers in relation to the Notes.

The report stated that MAS had identified various forms of non-compliance by the distributors with MAS' Notices and Guidelines on the marketing and sale of investment products. The nature and extent of the non-compliance and their potential impact on the sales processes and clients differed for each distributor.

MAS decided to impose a ban on the 10 financial institutions from selling credit linked notes for a period of 6 to 24 months, depending on the extent of their non-compliance. It is the non-compliance, misrepresentation and/or wrong advice that have contributed largely to our financial loss. There was no recommendation by the MAS to these financial institutions to make a fair amount of compensation to the investors for the loss suffered by them due to the non-compliance.

We read from the news reports that the financial institutions in Hong Kong, who have sold similar products to the investors in Hong Kong under similar circumstances, are discussing with the regulators in Hong Kong to pay an immediate compensation of 60\% of the invested sums and 40\% of the proceeds of the investment on its maturity. We understand that this offer would be made to all investors, as it was recognised that the misrepresentation of the product was systemic and had affected all investors equally. The amounts involved in Hong Kong are several times larger than in Singapore.

We believe that the approach taken by Hong Kong is fair to the investors and recognises that both parties, namely the investor and distributor, have to bear a fair share of the loss.

A general settlement is a better approach as the investigation report from the Monetary Authority of Singapore and a similar report from the Securities and Futures Commissions of Hong Kong have suggested that there is a strong possibility of the systemic mis-selling of these credit linked notes that affected nearly all investors.

There are many investors who have still not lodged their complaint to the financial institution due to ignorance or other reasons. They should also be covered by this general settlement.

We appeal to the honorable Prime Minister to ask the Monetary Authority of Singapore and/or other relevant body to request the financial institutions to make a similar offer of compensation to the investors who are still pursuing their claims for compensation for being ill-advised and/or misrepresented on these products. If offered, we will accept this compensation and will be willing to bear our share of the loss.

The general settlement will help to restore confidence in Singapore as a reputable financial center.