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Lehman debacle: Happy and sad faces as disputes are resolved

By Shuli Sudderuddin

Mr Lee is one happy man.

Last week, the bank from where he had bought $50,000 worth of Lehman Minibonds phoned him and asked to see him.

When he visited its headquarters, he was made to sign a confidentiality agreement and was then given an offer letter. It stated that he would be getting close to the full amount back.

Earlier, the bank's staff had asked for details of how he had come to buy the products last year.

'They handled it very professionally and bore a big chunk of the blame. They were quite proactive, and I'm satisfied,' said Mr Lee, who is in his 50s.

Not so happy is Mr Chan Chee Chong, 61, whose appeal for the $50,000 he lost investing in DBS High Notes 5 has been rejected thrice. He had written to the bank and appealed through his Member of Parliament.

Said the ex-property manager: 'I'm retired, so I just can't afford to lose any money. Now I'm going to take this case to the Financial Industry Disputes Resolution Centre, and I'm very stressed over it.'

Mr Lee and Mr Chan represent the two faces of the Lehman Brothers debacle.

Last Friday, the Monetary Authority of Singapore (MAS) revealed that some 58 per cent - or 2,974 - of the complainants will get full or partial refund from the financial institution that sold them the products. Of these 2,974 people, 1,282 - or about 43 per cent - will be offered full compensation.

Ten financial institutions in Singapore sold over $660 million worth of three Lehman-linked structured investments to more than 10,000 investors. Among them were investors of Lehman Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes.

After Lehman Brothers collapsed, many investors claimed that they were misled into investing in those products. A total of 5,381 complaints were eventually lodged. As at last Wednesday, 5,127 cases had been reviewed and decided on, leaving 254 cases that had yet to be resolved.

The MAS said almost all elderly investors with little income, formal education or investment experience - the group deemed 'vulnerable' - were offered full or partial settlements.

The MAS earlier set out a resolution process to ensure the fair and impartial handling of complaints by the relevant financial institutions.

Financial institutions were required to adopt a consistent and rigorous approach in resolving the cases, and there was oversight by independent parties.

They also had to take responsibility where there were gaps in the selling practices, act fairly in dealing with complaints, and not take an overly technical legal approach.

For their part, investors with the risk appetite and experience with investments also had to take responsibility.

The Sunday Times spoke to 19 investors yesterday.

Those who had been offered compensation were extremely wary about talking to the media, as they had all signed a confidentiality agreement.

None agreed to give his full name, and some did not respond to queries for fear that they would compromise the settlement.

The financial institutions said that the confidentiality undertaking or non-disclosure agreement forms is a standard document.

Said a spokesman for ABN Amro: 'The purpose of the confidentiality undertaking is to encourage the amicable settlement of disputes through frank discussions without the risk that discussions will be disclosed to third parties without mutual consent.'

The financial institutions declined to say what the penalty for breaking such an agreement is.

Those whose appeals were rejected surmised that it was because they were seen as being too highly educated and, hence, should have known what they were investing.

Mr Chua, 40, a financial controller who did not want to give his full name, believes his appeal was rejected by OCBC Securities because he is a degree holder. He lost $140,000 put in Minibonds, Pinnacle Notes and Jubilee Notes. Bastard DBS ! Luckily I'd won the case against them.. f**king dodgy banking

'This is half the value of my flat, and I feel penalised for being educated,' he said.

Most investors said they had been interviewed in person by the banks at least once.

A 56-year-old retired teacher, who wanted to be known only as Mrs Lam, said she spoke with two DBS representatives for about 11/2 hours about the $50,000 she had invested in High Notes 5.

'They walked me through the process and asked detailed questions like what I said, how I felt when I bought the products and whether I had been coerced. They were very apologetic and professional,' she said.

Still, her appeal was rejected.

A housewife in her 40s who was offered some compensation said she was not happy with it because it was 'so low' and was now 'considering other legal options'.

Mr Tan Kin Lian, the former CEO of insurer NTUC Income who took it upon himself to fight for the rights of the affected investors, said the MAS announcement came as good news.

'That over 20 per cent of the people are getting full compensation is much higher than I expected,' he said.

He said, however, that if the numbers were broken down, the majority of them were probably Minibonds investors who invested smaller amounts.

He added that it was important for investors who will receive partial compensation to compare the amount offered with the current market value of the products.

'I think if the compensation is 50 per cent and the loss is shared equally between the notes holder and the financial institution, people should accept it. It's not fair to expect the bank to bear such a large amount,' he said.

MPs who had spoken out on the issue also said that they were happy for investors who received compensation.

Said Jalan Besar GRC MP Lily Neo: 'I'm really happy for them because many of them had their life savings invested. Hopefully, the banks will be more cautious, and investors will be more knowledgeable.'

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