Based on the letter from Morgan Stanley about a week ago, each Pinnacle Notes Series 3 investor will get back US$152.51 and US99.23 (to be converted to SGD) for tranche A and B respectively.

This redemption value is based on a capital of US$5000 and S$5000 for tranche A and B respectively. This works out to be about 3% of the original investment amount. Unfortunately, for those who did not know about the exact nature of the Pinnacle Notes, they will be in for a nasty surprise.

Briefing Session by Senior Lawyer Mr C Campos on Pinnacle Class Action

To All Pinnacle Investors:

(1) We are pleased to inform you that Conrad Campos (who has already filed a lawsuit for Minibonds investors) has agreed in principle to act for Pinnacle investors as well. With his experience in the Minibonds case, he is eminently well qualified to handle the case for Pinnacle investors. Additionally, we have consulted other legal and financial experts who will provide assistance when/if the proposed class action takes place.

(2) It is estimated that a legal fund of about $4 million is needed for the proposed class action to cover all costs, including adverse costs in the event the case is not successful. To raise this amount we propose that at least 1000 investors join in at $4000/- per investor/per Series. A refund of about 50-70% of the fee of $4000/- can be expected if we win the case. And, if more than 1000 investors join, the fee of $4000/- will be proportionately reduced.

(3) Please note that even if you have received partial compensation from the financial institution (FI) directly, or through Fidrec’s adjudication, you can still join in the proposed class action. This is because the proposed class action will hold only one party responsible – viz. the arranger of the Pinnacle Notes, Morgan Stanley (Singapore). It will not sue any of the FIs.

(4) By doing this, we have legal clarity and a common ground for investors in all the eight Pinnacle Series to sue collectively, regardless of the FI involved. The law protecting investors is clear and opinion received from the experts, suggests that the case has a reasonable chance of success. There is of course no “guarantee” – but it is the only chance we have to seek justice for the enormous loss we have all suffered.

(5) To start the process of getting investors’ support going, Mr Campos has agreed to give a briefing to Pinnacle investors who are keen to form a ‘core group’, so that there can be leadership and coordination as the process gains momentum. An official website for the proposed class action (www.pinnacleclassaction.com) will be launched as soon as the core group is formed.

(6) The briefing by Mr Campos will be held on Friday 30 October, 2009 at 6.00 pm. Venue: Conrad Campos & Company, 30 Cecil Street, Prudential Tower #15-00 Singapore 049712 at the Boardroom.

Kindly indicate your interest to attend by email to: christinatan@camposlaw.com indicating in the subject heading “Pinnacle.”
Attendance will be limited to about 25 people, due to space constraints.

Yours sincerely,
“Pinnacle Action Group”

There will be another gathering this Saturday for affected victims of structured products (Minibond, DBS High Notes, Pinnacle, Jubilee) organised by Tan Kin Lian.

Date of Gathering: 22nd August 2009
Place: Speaker’s Corner, Hong Lim Green
Time: 5.00 pm

Activities:

1. Speech by Tan Kin Lian
2. Hold placards with messages
3. Sign petition (for those who did not sign online)
4. Talk to other investors at the gathering

In a surprise move yesterday, Great Eastern Life (GE) made a voluntarily offer to do an early redemption of their Greatlink Choice (GLC) products from 18,000 of its investors.

The Greatlink Choice products were sold in five tranches between 2005 and 2007, collecting $594 million in premiums. It was marketed as a safe kind of investment with an annual payout of between 3.5% to 4.9% of the capital invested.

It is a similar class of product to the Minibond, DBS High Notes and some of the Pinnacle notes which have been widely sold to other investors. While none of the Greatlink Choice has defaulted yet, their current market valuation ranged from 19% to 61% of the original capital.

Owners of the Greatlink Choice products will now have an option to opt for a full redemption of their Greatlink Choice investment at their original capital less the total payouts they have received to date. This option will be available to them from now till 28th Aug 2009.

GLC policyholders will receive a notice from Great Eastern on the procedure for acceptance of this offer. GLC policyholders who have questions on the offer may also call Great Eastern’s Customer Service Officers at 1800-248-2888 or contact their personal GE life planners.

I applaud this move by GE as it gives investors of the Greatlink Choice products an early exit option. I am sure many of these investors who thought Greatlink Choice was a safe product would have been having sleepless nights seeing the value of their investments plummet. This is especially so for the Greatlink Choice products which are maturing in 2012/2013 and have a higher risk of default.

From the perspective of GE, I am sure this helps to generate tremendous market goodwill. And while they will have to spend $250 million making this early redemption, if you think about it, this $250 million is not exactly a loss at all.

Remember that none of the Greatlink Choice has defaulted yet and if it stays the same way, GE would have to refund 100% of the premiums at maturity back to investors anyway. And in giving this early payout, they would be redeeming at less than 100% of the capital as it is net of total payouts received.

Of course, if there is a default subsequently, then GE would have to bear the loss themselves.

Overall, I think this move is a win-win for both GE and their GLC customers.

I am sure investors of Prudential’s Pru 3Plus and Yield 15/20 will be casting an anxious look at Prudential and see whether they will offer something similar.

Yesterday, MAS released their 99-page report on the selling of structured products by ten financial institutions.

It detailed the process by which each financial institution sold the products, a tabulation of the amount of compensation received by investors, as well as actions taken against the financial institutions.

Punishments include a ban of structured products selling for a period of 6 months to DBS Bank, ABN Amro, Maybank, DMG & Partners Securities and UOB Kay Hian; 1 year to CIMB-GK Securities, Kim Eng Securities, OCBC Securities and Phillip Securities; and 2 years to Hong Leong Finance.

This ban appears to be of limited significance as some of the financial institutions have already suspended their selling of structured products to retail investors anyway. Note this ban DOES NOT include the private banking units of DBS and ABN Amro Bank.

Among the compensation offered to investors, Hong Leong Finance gave the most. In fact, the amount of settlement that they offered exceeded the total of the 9 other financial institutions put together. Ironically, they were also the only financial institution that had the longest ban of 2 years imposed.

Reports can be downloaded below:

MAS Structured Products Investigation Report

Structured Products Compensation Table

MAS Acts Against 10 Financial Institutions (news report by Straits Times)

For those who are taking legal actions against the financial institutions, note the following paragraphs by MAS:

38) Although section 64 of the FAA provides that the failure of any FI to comply with the Guidelines issued under the FAA may be relied upon to establish liability against the FI in any criminal or civil proceedings, any such failure does not by itself render the FI liable for criminal sanctions or civil damages to an individual investor. Section 27 of the FAA also requires that, for an investor to make out a claim for damages where a recommendation was made without a reasonable basis, the investor must show reliance on the recommendation and that it is reasonable, having regard to the recommendation and all other relevant circumstances, for that investor to have purchased the Notes in reliance on the recommendation. Similarly, a claim in tort or contract for misrepresentation has to show reliance on the misrepresentations complained of. Whether an investor bringing an action against the FA can prove that there was such reliance, whether such reliance was reasonable, and to what extent, if any, the recommendation could be shown to have affected the investor’s actual decision to invest is a matter that would need to be established by each investor based on the specific facts and circumstances at the time of purchase. Establishing such a case in law would depend, among other things, on the oral and documentary evidence as to what transpired between the client and the representative of his FA and what documents the client signed as part of the transaction process.

39) All clients investing in the Notes were generally provided with, or asked to acknowledge receipt of or sign, documentation containing risk warnings and disclaimers in respect of the liability of a seller of the Notes.

42) The Distributors generally take the view that the documentation signed by clients mean they do not have any legal liability to the client and, accordingly, afford them a legal basis not to offer redress in many cases. The Distributors also take the view that they were not liable for statements of opinion expressed in good faith. Additionally, the Distributors highlighted their fiduciary obligations to shareholders and other stakeholders which as a matter of law they needed to take into account in making offers of settlement.