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Perils of being an “atas” investor

In Banks, Financial competency on 20/09/2016 at 1:27 pm

Mom was “medium risk” investor but junk bond sold to her 

When Elaine Tham signed an “accredited investor” form with her bank in Singapore two years ago, she took a fateful step toward losing all the money she had set aside for her children’s education.

Based on her financial profile and investment priorities — her need for S$150,000 ($110,000) to pay university fees — a local branch of HSBC Holdings Plc had initially categorized her as a “medium risk” investor. But because the value of her property and car entitled her to “accredited” status, a category reserved for wealthy investors, Tham says she was persuaded to take a riskier path. She agreed to invest S$250,000 in the bonds of a small Singapore energy-services company, Swiber Holdings Ltd., which said in August that it won’t be able to repay its bondholders.

Tham is one of many Singaporeans who lost money by investing in Swiber, which sold an unusually high proportion of its bonds to the wealthy clients of banks in Singapore. Amid signs last week that more local energy-services companies are being dragged down by the prolonged slump in global oil prices, some are urging quick action to plug loopholes in Singapore’s investor-protection rules.

Man didn’t know he was “accredited investor”

The revisions to the law proposed by the MAS might have helped another Singaporean bondholder, Sandeep Kapoor, who says he is facing losses after buying S$250,000 of Swiber bonds in 2014. The 50-year-old engineer said he only found out he was an accredited investor last month, some two years after the purchase, via his relationship manager at DBS Group Holdings Ltd. 

Under the proposed revisions, he would have been given the chance to opt in to accredited investor status, rather than being automatically assigned to the category because of his wealth.

http://www.bloomberg.com/news/articles/2016-09-19/bond-losses-show-vulnerability-of-singapore-s-not-really-rich

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  1. it is still their decision to invest in the Swiber bonds

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