Minibond issue

I think this whole matter has got to today where it should be addressed. I am glad at least there is some looking into this matter by MAS by appointing that 3 independent members to form an investigating body. It is seriously a misrepresentation by all the PFCs, IFAs and FAs. How many of them truly know what they are selling? How many of them even know the difference between derivatives and fixed deposits and investments? I would never ever believe in investing in derivatives. I do not think this phrase is even right in the first place.

http://www.hsbc.com.sg/1/2/miscellaneous/minibond-notes-frequently-asked-questions

Just take a look at the most recent faq created by HSBC on queries for minibonds. I bet they faced so many questions that they got damn pissed answering them, that they structured it into faq. This is extracted from this link above.

How minibond works is that "swap counterparty Lehman Brothers Special Financing Inc entered into interest rate, currency and credit default swaps with Minibond Limited. Under the interest rate and currency leg of the swaps Minibond Limited would have agreed to pay to Lehman amounts received from the underlying securities acquired with the proceeds of the notes in return for payments from Lehman of amounts necessary to generate the returns on the notes. Under the credit default swap Minibond Limited would have provided Lehman Brothers Special Financing Inc with credit default protection in respect of the reference entities for the relevant notes. Lehman Brothers Holdings Inc guaranteed the obligations of the Lehman swap counterparty to Minibond Limited under the swap.

As market agent, Lehman Brothers International (Europe) was able to make a secondary market in the notes to allow investors to buy and sell the notes although they would not have been under any obligation to do this."

So this means Minibond Limited buys the CDOs, MBS from Lehman then subsequently pay Lehman the i/r that the CDOs, MBS pays Minibond. It is like some sort of "refinancing arrangement". The worst thing is that Minibond is the party providing credit default protection where they do not have the finances at all. Imagine a SPV being set up for holding off balance sheet debt, how much cash and BV would you put in a SPV like that knowing that it would collapse in any time soon?

Important facts
1. It is called minibond because the company is called minibond and not because it is a bond.
2. Minibond Limited is set up in Cayman islands with LIMITED LIABILITY (which means you will never be able to sue it from Singapore, you probably can only sue the party which sells you the minibonds)
3. the shares of Minibond is held under a trust (where shares/money goes in and out without anyone knowing)
4. Lehman is a swap guarantor, swap counterparty, arranger, market agent for minibond in name (but in actual fact, minibond is a special purpose vehicle set up by Lehman to hold off balance sheet securities and debt)
5. In the event of a default on i/r payments on the notes, HSBC will take action to sell the securities. (with no liquid market, not knowing where they can sell to)
6. the notes are not capital guaranteed at all and is extremely risky, probably more so than any investments which any investors can get their hands on.

These are just some of the most important facts which I have extracted and what have been related wrongly to the investors out there. The most important thing is capital guarantee. guaranteed by a company that is empty. Where is the rating agencies? A bonds? it is not even a bond. It seems like every 10 years we get such shit happening and wipe the hardworking people out and reward the assholes.