Martin Lee @ Sg
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Pinnacle Notes 9 and 10 Default

Morgan Stanley have officially announced today that a mandatory redemption event of Pinnacle Notes 9 and 10 has occured. Unfortunately, investors will be getting back nothing. 

Morgan Stanley have published a FAQ on this event that occured to series 9 and 10.

They have also uploaded information on all the different Pinnacle series at their website:

Morgan Stanley Pinnacle Notes Website

MAS has provided some advice to investors who would like to file a complaint:

MAS on Pinnacle Notes

If you are a Pinnacle Notes investor and would like to talk to the press (can be anonymous), please contact me with your contact details.

Click here to leave your comments.

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22 comments
sureesh says 9 years ago

Dear Worried
In the case of Pinnacle notes, the process is clear cut. In the event of a manditory redemption (which would likely happend) , you will get back only the redemption value as shown on morgan stanley ‘s website. For series 3 and 7, I believe it is only 0.1 percent which means for every $100 you put in, you will get back only 10cents. It is worse tha minibonds.

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lioninvestor says 9 years ago

A US law firm, Kirby McInerney, has spoken about possible legal action that can be taken in US Courts in connection with the Pinnacle Notes.

Investors will only need to pay Kirby McInerney if they are successful in their law suit and the fee will be based on a percentage of the money recovered from the financial institution that is being sued.

As I understand, the law suit is not against the distributor of the Pinnacle Notes so those who have already settled on a partial compensation with their distributor would still be able to join.

More information here:

http://www.martinlee.sg/pinnacle-notes-legal-action/

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Worried says 9 years ago

Can anyone advise on what is likely to happen to pinnacles notes now? I’m still holding on to pinnacle notes 3 and 7. Though I’m young and educated and didn’t ask the right questions, is there anything that I can do now to minimise my loss or do i just wait like a lamb that is going to be slaughtered?

Understand that quite a large proportion of the Lehman investers managed to receive some kind of compensation. Am still hopeful that it will not be zero… hard earned money saved over the years.

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Intheknow says 9 years ago

did they use the words principal PROTECTED or GUARANTEED?

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Eileen says 9 years ago

unhappy with bank resolution

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Eileen says 9 years ago

RM (HL finance) confirmed PN are very safe & 100% principle guarantee upon maturity, all you need is to keep till maturity. If redeem it early you will loss partial of principle.
The marketing brochures just give us the five familar blue chip campanies but hide away 100 over unfamilar USA, others campanies.
RM never disclose any 10 out of 100 over companies announce defaults, everythings will windup to zero.

Moreover, RM mark these notes are low risk like blue chip bonds which is untrue.

Isn’t RM are profession like doctors & lawers? Should Mas SUSPEND their qualifications. They are not salesman station at supermarkets promote “Yakult at $2.85” and they received commission from buyers whom buy the notes and must be truthful to their customers.What are RMs responsibility & ethics to their customers?
Normal cilivian, will not able understand financial terms(Code), medicial or laws even though we understand english or mandarain.

Been cheat because had too much faith & trust in Singapore banks.
What is preventive actions from MAS? Can MAS give a clear guidelines what financial products should grade as low risk, medium & high risk? All potential risk can’t hide aside or print as fine notes.

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Intheknow says 9 years ago

it all depends on the recovery rate and the proportion of the portfolio the security constituted.

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sureesh says 9 years ago

Yes, But I wonder if this would effect series 6, which I hold.
This product is so complicated that any time a credit event can happend. Anymore credit events and it might go bust too

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sad says 9 years ago

I read somewhere that for Aiful, its 75% on the dollar for the CDS swop.

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sureesh says 9 years ago

It was reported in the media that japanese lender Aiful had caused a credit event and Credit Default Swaps will be activated.

Aiful is one of the underlying assets in Series 6, I wonder if this would cause yet another credit event . Does anyone know

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sureesh says 10 years ago

It is confirmed that series 1 has now gone bust. I don’t see any MAS announcement on their website. The other series will also go bust soon if there are any more credit events. I thought the credit markets have stabilised.

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PAG says 10 years ago

The Pinnacle Action Group wishes to write to MAS to investigate into the Pinnacle product that was engineered by Morgan Stanley. The group has consolidated some findings in series 9 and 10 and has identified several questions and they wish to get the regulator (MAS) to investigate.

They need the support from noteholders of the Pinnacle Series 9 and 10 to sign electronically on a letter to be sent to MAS. They like to ask the noteholders to write to [email protected] with their name and email address.

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Kevin says 10 years ago

These two articles provide insight into the failure of Pinnacle CLN 9 & 10:
http://ftalphaville.ft.com/blog/2008/11/17/18324/from-pinnacle-to-nadir
http://josh.sg/2008/11/a_pig_in_a_poke.html

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Chan says 10 years ago

Hi Ed,

I totally agree with you on the correct questions to ask (it is not as thou we are in tt profession). My mom and i both thought tt this is a FD product as claimed by the RM which is well supported by the strong countries. I even remember the RM rebutted us saying even if the FI collapse this product also wouldn’t collapse and have you ever seen countries collapse?

In fact he simplified the whole product in less than 20mins that you will get back your prinicpal amt when it matures (isn’t it the same as a FD?) and just sit back and relax to collect the $2K interest amt every year. He did not go into details on what r the risks involved and what they r going to do with the money

This is my mum’s whole life savings, an uneducated woman who spends centuries saving up and in the end left with a few pcs of papers ~ the FI can’t just push all the responsibility away and say sorry we tried our best to help you fight already

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    Ed says 10 years ago

    Hi Chan,

    Think many of us victims are sold based on false information given by FA’s unethical & irresponsible sales tactics.

    The meeting at Speakers Corner is cancelled today, but I’m going to look at Tan Kin Liang’s website to learn more about his idea of class action.

    We must make more noise before the authority will take action to compensate us.

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Intheknow says 10 years ago

Hi Ed,

It’s not fair for you to say ‘cheating’ before you prove your case.

Everything is laid down clearly in the prospectus. The risks, how the structure works, and when you will lose your principal.

To answer your question directly, your money didn’t disappear into thin air. Your money was paid out to the ‘buyers’ of the CDO insurance. That’s how your coupon/interest payment is generated: from the sale of ‘insurance’ to the buyers of the insurance.

It’s just like NTUC income collects your insurance premium, if you fall sick, you make a claim. Now, the roles are reversed, you are selling the insurance, and someone has just made a claim against you.

It can be attributed to your fault of not asking the relevant questions if you are unsure.

Of course, if the Relationship Manager who sold you the product gave you false information that conflicts with the prospectus, then the bank is in the wrong. But if it’s due to you NOT asking questions, then it’s your fault.

Regards,
Intheknow

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    Ed says 10 years ago

    Hi Intheknow,

    Thanks for the explanation.

    Well, its not me buying the policy. Its my ~70 year-old mom. Anyway, even if it were me who was offered the product, I doubt I have the ability to ask the correct questions. Even my accountant brother-in-law said he coudn’t understand the last letter sent to us regarding the default of PN10. If the bank’s RM explains it the way you did, bet my mom would never take the risk. Fact is, the bank’s RM gave false information (e.g. worst case scenario is a 5% value loss – according to what my mom said she was told) as well as incorrect recommendation (e.g. the RM surveyed my mom’s to be an investor with the most conservative profile, yet recommended PN10 with the assurance its based solely on 6 strong companies like Singtel, SIA, Keppel etc. – and its stated on one of the letter for PN10). Am sure my mom asked the correct questions (like worst case scenario & its performance based on what), just that the RM, IMO, is cheating by not revealing the actual facts, plus recommending a high-risk product for a low-risk investor.

    My mom is a cautious person, who only wanted FD, yet was deceived by the RM touting with false information. Had my mom knew she will become an insurer for some complex toxic synthetic and unknown CDOs, she’d never be stupid enough to take up the offer. A product can have 145 strong underlying assets mixed with 5 destined-to-fail hopeless underlying assets easily – who dares to bet their life-savings on 150 total unknown factors?!

    These RMs are just too much. By trying to meet their sales target, they can cause others to lose their live-savings!

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      Intheknow says 10 years ago

      Hi Ed,

      Understood and I fully agree that there is mis-selling for your mum’s case if the facts are exactly what you laid out.

      Now the tough part is to prove that the RM did indeed say what he said. It’s going to be hard to prove a verbal comment versus the signed risk acceptance documents.

      As I mentioned in one of my posts about these sort of products, there was not enough highlighting about the risks of the underlying securities. Sure, the brochure highlighted the risk of the 6 reference entities like Singtel, SIA, etc… but it was not clearly highlighted (in my opinion) that the product will also lose money if the pool of underlying securities went kaput.

      Wish your mum all the best though!

      Cheers,
      Intheknow

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        Ed says 10 years ago

        True.

        With the only hard evidence being the RM ticked “conservative investor” while recommending risky PN10, its hard to prove otherwise regarding the intentional verbal misinformation.

        Well, let’s hope the FI’s image IS important to the public & that MAS can exert enough pressure for them to compensate all affected investors. Worse come to worst, we will join others in taking group legal action to see how far we can go. We’re not going down without a fight! Nobody is going to cheat us of $100K scot-free!

        It’ll be interesting what kinda of group legal action Mr. Tan Kin Lian can advise us come next Saturday’s gathering at Speakers’ Corner. I believe his motives are more altruistic than anything else. He gives us lost victims hope. Now, let’s hope the government follow suit.

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Ed says 10 years ago

The government better investigate where our invested $ has disappeared to!

It just can’t disappear into thin air!

Someone must be pocketing it & cheating us in the process!!

WHO???

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nhyone says 10 years ago

Small nitpick: the %age is wrong for Freddie Mac.

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VSL says 10 years ago

This is the carnage of the global financial crisis so far. Keep in mind that these companies are not exactly emerging small companies but rather blue chips.
These losses include:

• A I G -Then: $178.8 billion… Now: $5.46 billion. Down 96.95%
• Bank of America -Then: $236.5 billion… Now: $123.4 billion. Down: 47.82%
• Citigroup -Then: $236.7 billion… Now: $76.34 billion. Down 67.75%
• Merrill Lynch – Then: $63.9 billion… Now: $30.2 billion. Down 52.74%
• Fannie Mae – Then: $64.8 billion… Now: $0.45 billion. Down 99.3%
• Morgan Stanley – Then: $73.1 billion… Now: $41.1 billion. Down 43.78%
• Wachovia – Then: $98.3 billion… Now: $19.44 billion. Down 80.22%
• JP Morgan Chase – Then: $161 billion… Now: $130.2 billion. Down 19.13%
• Capital One Financial – Then: $29.9 billion… Now: $16.9 billion. Down 43.48%
• Washington Mutual – Then: $31.1 billion… Now: $3.64 billion. Down 88.3%
• Lehman Bros. – Then: $34.4 billion… Now: $0.80 billion. Down 97.6%
• Goldman Sachs – Then: 97.7 billion… Now: $40.6 billion. Down 58.7%
• Wells Fargo – Then: $124.1 billion… Now: $111.25 billion. Down 10.35%
• National City – Then: $16.4 billion… Now: $2.8 billion. Down 83%
• Fifth Third Bancorp – Then: $18.8 billion… Now: $7.9 billion. Down 57.6%
• American Express – Then: $74.8 billion… Now: $37.5 billion. Down 49.87%
• Freddie Mac – Then: $41.5 billion… Now: $0.16 billion. Down 58.7%
• Suntrust Banks – Then: $27 billion… Now: $16.07 billion. Down 58.7%
• BB&T – Then: $23.2 billion… Now: $18.4 billion. Down 20.69%
• Marshall & Ilsley – Then: $11.6 billion… Now: $4.48 billion. Down 61.3%
• Keycorp – Then: $13.2 billion… Now: $5.68 billion. Down 56.97%
• Legg Mason— Then: $11.4 billion…Now: $4.96 billion. Down 56.49%
• Comerica— Then: $8.3 billion…Now: $4.74 billion. Down 42.89%
• Countrywide Financial: Then: $11.1 billion…Now: $0.00 billion. Down 100%
• Bear Stearns— Then: $14.8 billion…Now: $ 0.00 billion. Down 100%

Together these 25 companies alone have lost investors a total of $992,690,000,000 over the last 12 months… or nearly 1 trillion dollars.

And they say USA is the Land of Opportunities.

VSL

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