Savings Scams & Portfolio Bombs: A Petition to the Independent Commission Against Corruption (ICAC)

Charge insurers, fund companies, and brokers with bribery. These crooks have used ILAS savings scams and portfolio bombs to swindle hundreds of thousands of investors out of their hard-earned savings. 

Sign the petition here!!!

Every time someone signs, an email will be automatically sent to the ICAC. Signers can choose to have their name displayed publicly, or they can keep it private. They can include their reason for signing the petition if they want. The petition will remain active until the ICAC acts.

Savings Scams

Countless hundreds of thousands of Hong Kong investors have been locked into unneeded, exploitative “savings plans” that never should have been sold to them. This has happened because insurers have been secretly paying brokers up to 25 years worth of commissions in advance for selling these awful products. The total upfront payment is often hundreds of times higher than the commissions paid by issuers of competing products. Insurers transfer the high costs of these obscene commissions to investors through obfuscatory fees and excessive lock-ins, whose massive damage is concealed by deceptive account statements. With no disclosure to investors, most of their first two years of savings aren’t really saved, but are instead pocketed by insurers.

Recently, a leader in the brokerage industry emphatically called for 25-year savings plans to be banned. He claimed the products provide no value to investors and only benefit insurers and brokers. He also said the products are so toxic they should have health warnings like cigarette packets which say “this product is not good for your financial well-being.”

Brokers, who are bound by a legal duty to act in their clients’ best interests, are obviously only selling these poisonous products because it allows them to line their own pockets at their clients’ expense—via the secret commissions paid by insurers.

Consequently, it is undeniably true that insurers and brokers have been engaging in corrupt transactions which are expressly prohibited by Section 9 of the Prevention of Bribery Ordinance. These crimes are punishable by up to 7 years imprisonment and a fine of up to $500,000 HKD. 

The signers of this petition are calling upon the ICAC to swiftly bring these scoundrels to justice. All savings plans with excessive lock-ins must be annulled, and wrongdoers must be forced to give victims their money back, plus interest.

For further reading about ILAS savings scams, see here:

ILAS Commissions Explained: A Look at How Insurers Bribe Advisers to Screw Their Clients and Why They Could and Should Be Prosecuted

The Most Evil Insurance Companies in Hong Kong

The SFC Must Draw a Line in the Sand on ILAS: Front-Loading Years of Commissions Is Unacceptable; Lock-In Periods and Exit Penalties Must Be Capped, Eventually Banned

Legal Armageddon On the Horizon: Two ILAS Policies That Could Decimate the Insurance Brokerage Industry

Industry Leader ‘Shouts From the Rooftops’: Ban 25-Year ILAS Savings Plans!!!

Portfolio Bombs

Shockingly, another class of ILAS products known as “portfolio bonds” can cause even more destruction than savings scams.

A loophole in securities regulations allows brokers to market unlicensed funds to expats by packaging them inside portfolio bonds. This loophole also allows brokers to “double dip” into their clients’ pockets by accepting a large commission from both insurers (who issue the portfolio bonds) and fund companies (who issue the unlicensed funds).

Some brokers abuse the loophole by primarily selling unlicensed funds which pay commissions that are multiple times higher than licensed funds. 

According to SCMP, the fund company LM Investment Management paid brokers 3 times the average commission rate for flogging its unlicensed Managed Performance Fund, which ultimately imploded and lost investors 95% of their money. Some of the victims were cold-called by brokers and told that the fund was low-risk, and they were advised to put their entire life savings in it. Once they did, their money vanished into thin air. This was just one of the latest in a series of more than 80 different unlicensed fund collapses occurring since the 2008 financial crises. 

Clearly, the greedy brokers who sold such funds had only one motive, and it wasn’t fiduciary. They were doing the bidding of shady fund companies, in exchange for indecently large commissions. Their corrupt behavior was in blatant violation of Section 9 of the Prevention of Bribery Ordinance.

The signers of this petition are calling upon the ICAC to bring offending fund companies and brokers to justice. They must be forced to give victims all of their money back, plus interest.

For further reading about portfolio bombs, see here:

Scope seen for tighter regulation of insurance-linked investments (SCMP – April 21, 2014)

Future of Portfolio Bonds Is Unclear (International Adviser – May 8, 2014)

LM Investor Victim Group Hits 500 (International Adviser – June 4, 2014)

DeVere ‘investigating options’ over Strategic Growth Fund (International Adviser – April 29, 2014)

CEO’s Stake Risked Conflict of Interest (SCMP – Oct. 23, 2013)