Tag Archives: PIBA

Professional Insurance Brokers Association

Competition Commission Should Break Up Insurance Industry Cartel

Dear Anna Wu, Chairperson of the Hong Kong Competition Commission:

Anna Wu - Competition Commission Chairperson

I would like to draw your attention to Section 3.2, Paragraph (a) of the Professional Insurance Brokers Associations’ February 2011 Position Paper on Insurance Brokerage Commission. In that paragraph, PIBA explains why it opposes telling clients the exact amount of fees they are being charged via kickbacks from insurers, in spite of the fact that failure to adequately disclose such kickbacks potentially violates the Prevention of Bribery Ordinance:

PIBA Opposes Disclosure of Exact Amount of Commission

Clearly, the insurance brokerage industry has been actively and openly engaged in “long-existing” anti-competitive business practices, the sole aim of which is to extract the maximum possible amount of commission from clients, without clients knowing any better. Bizarrely, the industry maintains that it is in the clients’ best interest not to know how badly they are being fleeced, as this would somehow “compromise the quality of services provided”. Yeah right.

Please recall that The First Conduct Rule of the Competition Ordinance “prohibits undertakings from making or giving effect to agreements or decisions or engaging in concerted practices that have as their object or effect the prevention, restriction or distortion of competition in Hong Kong.”

I request, on behalf of the millions of Hong Kong investors who have fallen victim to scam insurance products, please, break up the insurance industry cartel.


In case you do not know, the life insurance industry is a worldwide scam, but it is especially bad in Hong Kong. The Hong Kong industry literally earns about 99% of new revenue by ripping off investors.

Notice that I use the word “investor”, not “policyholder”. The truth is that the “life insurance” industry is actually in the business of selling exploitative investment products, not insurance. Ripoff investment products include whole life, ILAS, and endowment policies. The industry is able to fleece investors with impunity partly because it is allowed to “self-regulate”, rather than be regulated by an independent organization like SFC.

An essential feature of the industry’s ripoffs is that insurers pay massive undisclosed upfront commissions to the swindlers who sell their products. The victims who are conned into buying the ripoff products are led to believe that the products help them save money and even earn a profit. In reality, the victims are tricked into giving away most (if not all) of their savings for up to 2 or 3 years or more. The victims typically have no chance of breaking even financially unless they pay into the product for a decade or more (few victims do).

These products are financially toxic, and almost without exception, there is never a good reason for a Hong Kong investor to own one. Just about every other investment product is a better option.

Perhaps what is most disturbing of all is that naive young people who studied to be teachers and engineers often give up their career plans in order to enter the insurance industry, since ripping off investors (including friends and family) is a more lucrative profession.

If the Competition Commission cares anything about the health of Hong Kong society, please, bring an end to the “long-existing” anti-competitive business practices of the insurance industry. These practices are what sustain the industry’s various scams, which lead to a much bigger problem of social self-destruction.

No Hope for Fair Investigation after Investor Gets Scammed by Regulatory Chairman’s Company

Johnson Chow

Johnson Chow, Chairman of PIBA and CEO of Centaline

The Professional Insurance Brokers Association (PIBA) is a group of Hong Kong brokers who’ve been entrusted with the responsibility of “self-regulating” themselves since 1995. Johnson Chow (周忠信), the CEO of Centaline Financial Services, is the current chairman.

PIBA’s Code of Conduct requires members to act in the best interests of their clients. However, most PIBA members, including Centaline, blatantly disregard this regulation.

For years, these members have been flogging investment-linked assurance schemes (ILAS) embedded with indemnified commissions. These indemnity products have been outlawed in many developed countries and were recently banned in Hong Kong. One local expert describes the products as financially toxic, and another says they are scams.

Whenever a Hong Kong consumer has been scammed by a PIBA member, the consumer has no independent regulator to turn to. If he or she files a complaint, the complaint must go to PIBA. 


Since PIBA exists “to serve and to protect” the interests of its members, consumers have virtually no chance of their cases being handled in a fair, impartial, and just manner.

Scammers are always safe, while victims are always screwed.

The Story of a Centaline Victim

Yip is a young Hong Konger who works as an auditor at a bank. In early 2014, he was assigned a task that required him to do research on the regulation of ILAS.

As he was studying, he realized that he had been mis-sold an ILAS by a friend and former colleague, Melanie, who worked at Centaline Financial Services—Johnson Chow’s company.

Centaline Financial Services

Melanie had breached several industry regulations, including one that prohibited selling ILAS to investors who have no insurance needs.

By the time Yip figured out that he was screwed, he had already contributed $12,000 HKD per month for 12 months—$148,000 in total—to an ILAS with a 25 year payment term. If he stopped making payments, his policy would be automatically terminated and charged with an 86% exit penalty. He’d only get roughly $20,000 of his money back.

The remaining $128,000 would be pocketed by Melanie, Centaline, and the insurance company that designed the ILAS, Standard Life.

Yip later learned that Standard Life had paid his friend, Melanie, and her company, Centaline, a secret upfront indemnified commission of $165,600 for luring him into the policy.

Standard Life Logo

Due to its extraordinary size, Standard Life’s secret payment likely violated Hong Kong’s anti-bribery laws. An offense is punishable by up to 7 years imprisonment.

“I Don’t Sell, I Advise—Provide Valuable Advice La!”

In early 2013, shortly after Melanie had been hired by Centaline, she and Yip chatted about the nature of her new job. She said it involved giving people investment advice about “bonds, stocks, commodities, etc”. She did not mention insurance:

Screenshot 1 (redacted)

When Yip later playfully suggested that she was a salesperson, Melanie strongly denied it, insisting that she was an adviser:

Screenshot 4 (redacted)

In fact, Melanie was neither qualified nor licensed to give investment advice. She only held a license to sell insurance policies.

Nevertheless, from February to July of 2013, she sent Yip numerous WhatsApp messages offering advice on stocks, bonds, and mutual funds, trying to convince him that she was knowledgeable about investments and that he should become her client.

By pretending to work as an investment adviser, Melanie was likely committing an offense contrary to Section 114 of the Securities and Futures Ordinance. Yip has since filed a complaint with the SFC.

What Melanie really aimed to do, as opposed to giving “valuable” investment advice, was to earn a massive commission by selling Yip an ILAS policy.

Yip now says:

“Had I known that Melanie was not a SFC licensed advisor and that her advice to me was biased toward insurance products (since she could not sell any investment products)…I would not have purchased anything from her.”

A few weeks after the mis-sale, Melanie claimed in a Whatsapp conversation that she held an SFC license:

Screenshot 13 (redacted)

Melanie eventually obtained an SFC license, but SFC records show that she did not yet have one when the above conversation took place.

A $50 Million Dollar Plan

Melanie told Yip that her team of colleagues at Centaline had helped several clients “win” a lot of money, and she wanted to help him too, “as a friend”.

Yip finally agreed to meet her on 17 July 2013 at a restaurant to discuss her services. She brought a document labeled, “Financial Analysis”, which is shown below:

15 Percent Returns Over 25 Years (3)

Although she only had a few months of training as an insurance broker (and no SFC license), she was confident that she could help Yip pick investment funds that would earn an average of 15% annual returns—after deducting all fees—over the next 25 years. She predicted his savings would grow into nearly $50 million HK dollars.

Her rate of return assumptions were more than double the historical average. According to the research of Wharton Professor, Jeremy Siegel, stocks have averaged only 6.5% to 7% annual returns after inflation over the past 200 years. As a whole, actively managed funds, such as Melanie was promoting, necessarily underperform the stock market average, a phenomenon which is explained by Stanford Professor, William Sharpe, in his essay, “The Arithmetic of Active Management“.

When active funds are wrapped in an ILAS policy, the multiple layers of additional high fees put a further, very significant drag on returns.

Melanie’s promise of consistent far-above-average returns were therefore unrealistic and seriously inappropriate. She maybe did not realize this, since she was inexperienced, unqualified, and unlicensed to give investment advice.

A Plan to Extract Maximum Commission

Melanie’s “Financial Analysis” (shown above) projected exactly 25 years into the future. This was probably not a coincidence.

Most ILAS savings plans have a payment term ranging from 5 to 25 years. Although the same amount of work is required to sell policies with different payment terms, insurance companies secretly pay 500% more upfront commission to brokers when they convince victims to sign on for 25 years, as opposed to 5.

Insurance companies immediately recoup this commission by pocketing their victims’ first 18 months of savings (sometimes more).  Victims never know what hit them. Their policy’s account value shows that they are earning big profits, when in fact, all of their savings has disappeared. (More info HERE.)

The Broker’s Financial Needs

At their meeting, Melanie gave Yip a financial needs analysis (FNA) form.  In theory, this form is used to determine which, if any, financial products are “needed” by a client.  In practice, it is used to deceive clients into thinking they “need” whichever ripoff product the broker wants to sell. This is exactly how Melanie used it.

The questions in Section 1 were aimed at determining how much money Yip had, i.e., how much money Melanie and Centaline could get their hands on.

The final part of Section 1 was labeled “Recommendations and Reasons for Recommendations”. Melanie left this area blank:

FNA Section 1 (Recommendations and Reasons for Recommendations) - N.A.

She later filled it out sometime after Yip had signed all the forms. In the blank space, Melanie wrote: “Saving plan is recommended for wealth accumulation“. 

She could have added that it was a savings plan recommended for her wealth accumulation, not Yip’s.

FNA Section 1 (Recommendation and Reasons for Recommendations) - Filled Out

After Yip answered the questions in Section 1, Melanie immediately handed him Section 2, which was labeled, “Only Applicable to Investment-Linked Policy”.  She never explained why investing in funds through an insurance policy was preferable to the much cheaper and more flexible option of investing in ETFs or using a regular fund platform like Fundsupermart.

FNA Section 2 (Only Applicable to Investment-Linked Policy)

Section 2 contained a question which asked, “What is your target horizon for insurance policy / investment linked assurance scheme?”  It contained another question which asked, “For how long are you able to contribute to an insurance policy and/or investment plan?”  

For both questions, Melanie told Yip he should tick 20+ years so he could “get the maximum bonus”, meaning his account would be credited with extra “free” fund units.

What is your target horizon for investment-linked policy

For how long are you able to contribute to an investment plan

Melanie did not disclose that a 20+ year policy would earn her the maximum upfront commission. She also did not explain that the bonus was deceptive and imaginary, since the “free” fund units would be taken back by fees.

When Yip agreed to ticking 20+ years, he says he had no desire to be “locked up” in an ILAS for that period of time.  He thought he was just indicating that he planned to invest for 20 years or more, like anyone else his age.  Neither Melanie nor the FNA form had mentioned a 20+ year lock-in.  

The next part of the FNA was labeled “Risk Profile Questionnaire (RPQ)”.

Risk Profile Questionnaire (underlined)

The RPQ stated that no product should be recommended before the questionnaire was completed. However, an ILAS had already been recommended, as the entire form was labeled “for ILAS only”, which meant that the RPQ was inherently flawed and self-contradictory.

Additionally, the RPQ began with a loaded question, asking, “What are your purposes of buying insurance product?”  Yip had no intent at this point to buy an insurance product or any product, even though the form was telling him that he did.  He was under the impression that his financial needs were being analyzed.

Yip ticked that his “purposes of buying insurance product” were Savings and Investment. He did not tick any option, such as Life Protection, which would have justified his buying an insurance policy.

What are your purposes of buying insurnace product - Savings and Investment

Over the past several years, four different Hong Kong regulators—SFC, HKMA, HKFI, and OCI—have all issued circulars stating that ILAS policies are not suitable and should not be recommended to investors who have no insurance needs. Unless all of those regulators were mistaken, Melanie should not have recommended an ILAS to Yip.

The Harvest Wealth Investment Scam

Based on her “analysis” of Yip’s financial needs, Melanie concluded that he should purchase a 25-year Harvest Wealth Investment Plan.

Harvest Wealth Investmnet Plan Brochure Cover

For a “limited time only”, Standard Life was offering free fund units equivalent to 62.5% of all contributions paid during the first 18 months of the plan. These “free” units would make the account value show an instant 62.5% profit.

In the coming days, Melanie would pressure Yip to hurry before the offer expired:

Not much time left if you want to have the bonus (redacted)

She did not explain the fraudulent nature of the “bonus”, possibly because she did not understand it herself.

Cheaper than Buying Stocks!

Yip had some experience buying stocks and bonds, but he had never invested in mutual funds and had never heard of ILAS.

According to Melanie, ILAS was a “great bargain” because it allowed free switching of mutual funds. She told him that he would save money on transaction costs if he stopped buying stocks directly and instead bought stocks indirectly via mutual funds in an ILAS. 

She was wrong. Yip could not possibly save money by paying additional fees to her, Centaline, Standard Life, and various active fund managers—fund managers who incur their own stock trading fees which would then be passed on to Yip. 

Nevertheless, Melanie gave Yip a flawed and misleading fee comparison allegedly showing how he would save over 40% in fees if he switched funds every single day of the year:

Melanie's Fee Comparison (cropped)

She never explained why it made sense to actively trade fund managers when the fund managers were being well-paid to actively trade for him.

Nor did she mention that regular fund platforms allow free fund switching at a tiny fraction of the cost of ILAS. For example, Standard Life’s upfront fees were more than 600 times higher than iFAST Central’s.

My Client Earned 18% in One Month Investing in Super Safe Stuff!

Several days after Melanie recommended the ILAS, before Yip had made a decision about whether to follow her advice, she sent him a Whatsapp message boasting about having helped another client earn 18% in one month, “net of all charges”, investing in “super safe stuff”:

Whatsapp - 18 Percent Return in One Month

She showed him a snapshot of her client’s account statement to “prove” that she was telling the truth:

Whatsapp - 18 Percent Return Account Statement -Redacted - Highlighted

The account statement showed the returns of a few funds. One fund had gone up by 3%, another by 6%, and only one had gone up by 18%. It wasn’t clear whether it had gone up 18% in one month or in one year (probably the latter).

The fund that earned 18% was a biotechnology fund—far from “super safe”.

“All of Our Clients Earn Annual Fees Back in a Few Days!”

When Yip expressed concern about the ILAS policy’s high fees, Melanie sent him the following WhatsApp message:

All out clients earn annual fees back in a few days (redacted)

Yip’s first ILAS payment would be $12,000.  Melanie claimed that he would earn back the annual fees in just a few days. If that were true, he’d need to get a return of 1,380% just to recoup Centaline’s secret $165,600 commission.

Suggesting that anyone could earn so much money so quickly is utterly preposterous, so presumably Melanie did not mean that Yip could earn back Centaline’s commission in a few days. Instead, she probably meant that he could earn back the ILAS fees of over 6% per year. If so, then Yip would need to earn at least 2% per day in order to recoup 6% “in a few days”.

Melanie spoke as if this were guaranteed. If so, then “all of her clients” would be earning about 730% per year (2% per day x 365 days per year), which is also preposterous. Perhaps this is why Melanie encouraged Yip not to “focus on the fees”.

She told him to instead focus on “what really mattered”, i.e., her investment advice. She failed to mention that was not licensed to give investment advice.

“We Are Remunerated for Providing Long Term Advice”

The day after Melanie sent the above WhatsApp message, she sent Yip an email in which she elaborated even further on the fees that her company collected. She claimed:

“This is a long term relationship and our remuneration is structured that way to provide incentive too. Unlike insurance agents, we are not agents. We are consultants and are remunerated for providing long term advice. We have the incentive to provide good advice as we will receive a % of your account value. Rest assured that, it won’t deduct from your investment income. Standard Life shares their fee income with us. The only expense you need to pay for is the platform fee to Standard Life. NO advisory fee to us, NO fund fee to fund houses. Standard Life will share with us.”

The entire paragraph was loaded with lies, misrepresentations, and contradictions. Standard Life did not just share fees, it advanced the fees in a form akin to bribery. The remuneration structure was designed to incentive high pressure sales tactics, not a long-term relationship or good advice. Melanie and Centaline would keep Yip’s money whether or not they provided the 25 years of service they were secretly paid for in advance.

Melanie Quit Her Job Within Months of Pocketing 25 Years’ Worth of Fees

All of Melanie’s lies and unrealistic forecasts eventually had the desired effect on Yip. She convinced him to sign the paperwork for a 25-year ILAS.

Standard Life immediately paid her and her company a $165,600 commission. Standard Life would recoup this commission by deceptively pocketing Yip’s next 18 months of payments.

Although Melanie had been pre-paid for 25 years of work, she had no obligation to return the money if she did not finish the job. As long as Yip made payments for 18 months, she’d face no clawback. If she wanted to, she could take Yip’s money and run, which is exactly what she did.

She quit her job at Centaline less than a year after selling Yip a “long term relationship”.

Yip claims that the funds Melanie recommended dropped in value by about 15%, precisely the opposite of the 15% annual profits she had predicted.

“Too Stubborn to Get It”

In early 2014, after studying ILAS regulations for his banking job, Yip realized that he had been mis-sold. He immediately confronted Melanie:

You did not tell me it was insurance product (redacted)

Although Melanie claimed that she told Yip that ILAS was an insurance product, in her email correspondence, she exclusively referred to it as a “platform” for investing in funds.

Perhaps realizing that Yip’s allegations were true, she defended herself by saying that ILAS was an insurance product that “has no insurance protection”:

It is insurance but has no insurance protection (redacted)

After Yip pointed out that the regulations forbid her from selling ILAS to him, given that he had no insurance needs, Melanie claimed that, from her “professional perspective”, Yip did in fact have insurance needs, but he was “too stubborn to get it”, suggesting that it was ok for her to misrepresent the insurance element of the policy, since this was the most efficient way to convince Yip to buy what he allegedly “needed”:

Whatsapp - You Have Insurance Needs (redacted)

No Evidence of Mis-Selling Or Negligent Conduct

Over the next few months, Yip did a lot more research on ILAS and considered his options. By summer, he decided he had no choice but to stop contributions, file a complaint, and demand a refund. On 12 August, Yip met with representatives from Centaline to explain how he had been mis-sold and why he deserved a refund.

Three weeks later, Centaline sent him a short reply:

“After truly reviewed all the documents, considered all the information, and contacted with Ms. Melanie for her confessions, we concluded that there is no evidence showing that Ms. Melanie, our ex-Consultant had mis-selling practices or any negligent conduct. Ms. Melanie performed her duty in compliance with our internal policies and statutory requirement. If there is no additional information, no action will be taken for this issue.”

Yip was angry that Centaline, without explanation, had disregarded all the evidence he had provided. He demanded a better response.  After more phone calls and another meeting, Yip finally received a more detailed reply letter from Centaline’s compliance officer, Lomax Wong. 

Unfortunately, Lomax’s letter was deeply unsatisfactory. It contained multiple factual errors, misquoted the regulations, and continued to ignore some of Yip’s points.

The letter’s main takeaway was that Melanie’s conduct was irrelevant.  Even if some of the things she said were blatantly false, misleading, and unreasonable, Centaline would never give back his money. The company would forever point to the fact that Melanie conned him into signing a statement saying that he agreed that the ILAS was suitable for him. It did not matter that his belief was based on Melanie’s lies and misrepresentations.

Yip Contacts Johnson Chow

On 26 September, Yip sent the following email to Centaline’s CEO, Johnson Chow:


By way of introduction, I am a customer who purchased the ILAS policy from Centaline last year in July, in which I believe I was mis-sold by your Company. Accordingly, I reported my complaint to Lomax Wong in August 2014.

The reason why I am writing this email to you is because Lomax Wong has not been handling my complaint in a fair manner and he also appears to be not familiar with the regulation.

As you are the CEO of Centaline and also the Chairman of PIBA, I believe you would be very familiar with the regulation and would look at my case in an objective and fair manner, and therefore I would like to discuss my complaint with you directly to seek your views. Attached are my letter to Lomax Wong, and his reply letter to me.

Can you please suggest a time to meet and I can discuss with you my case directly



To Yip’s surprise, Chow agreed to a meeting on Oct. 6.  Lindell Lucy, author of this blog, was present at that meeting.

Johnson Chow: “Even if the sales process breached the regulation, so what? Maybe get penalized by PIBA? It’s ok.”

At the beginning of the meeting, before any discussion had taken place, Chow immediately told Yip that he would not refund his money.  He then refused to speak in English, apparently in an attempt to silence Lindell, who had been outspoken in a previous meeting with Lomax Wong.

The whole meeting with Chow lasted almost an hour, but Yip summarized it in five key points in a letter which he cc’d to the Office of the Insurance Commissioner a few weeks later:

Letter to Centaline (Oct 27, 2014) p1-2

“Garble Statements”

On 3 November, Lomax replied to Yip’s letter, stating:

“We do not agree with the points stated in your letters as we believe that they were all garble statements with incomplete information. We will not confirm the information stated in those letters.

Based on the information we have found, as well as the evidences after meetings with you, we believe that we had already done our best to solve your inquiries.”

Chow has welcomed Yip to file a complaint with PIBA if he is unsatisfied with Centaline’s decision.

Seeking a Viable Route to Justice

Yip does not believe that PIBA would fine Centaline, since PIBA is headed by Chow. Even if PIBA did fine Centaline, Chow has already stated that he does not care. He will just pay the fine and keep Yip’s money.

Consequently, Yip has had to explore other ways to pressure Centaline to give back his money.

Securities and Futures Commission (SFC)

Yip believes that Melanie and Centaline have broken some of the laws contained in the Securities and Futures Ordinance (SFO), not just in their dealings with him, but in their dealings with other clients as well.  Yip has written to the SFC, shared his information, and has asked for an investigation.  In one of his letters, he says:

“I understand that SFC does not have the legal power nor can SFC arbitrate a dispute between an investor and a third party. However, I do believe that SFC has the power as a regulator to influence the captioned entities to do the right thing for the public’s interest. In substance, the ridiculously high commissions earned by Centaline Financial Services Limited are the hard-earned saving of its customers, and it got its customers into purchasing ILAS by violating the SFO. I hope that SFC will utilize such power, shall SFC conclude that the captioned entities indeed violate the SFO, to remediate the damages that they had done to the public.”

Office of the Commissioner of Insurance (OCI)

Yip has also filed a complaint with OCI against Standard Life. Yip argues that Standard Life obtained his money by breaching the industry’s Code of Conduct.

In a letter to the Insurance Commissioner, Annie Choi, Yip has said:

“The HKFI Code of Conduct [Section 44 and 45] requires Standard Life to conduct its affairs “honestly and fairly and in a manner consistent with the public’s interests” and “should seek to promote and enhance (and should not damage) the insurance industry’s reputation and standing as a responsible service provider and good corporate citizen”…

In its letter [to me], Standard Life did not even attempt to explain why its product and remuneration structure were considered fair and consistent with my best interests. Obviously, the remuneration structure only served Standard Life’s and Centaline’s interest.

If all the regulators in HK agree that ILAS should be sold to someone who has insurance needs, I would expect that any ethical company that is fair and concerned about customers’ interests would accept a refund request from a mis-sold customer. Standard Life is absolutely not complying with HKFI’s Code of Conduct in this regard. I believe it is concerned about its own interest in retaining profit, rather than the public’s interest.”

Independent Insurance Authority (IIA)

When the IIA is established within the next few years, ILAS victims will be able to file complaints with it, rather than self-regulatory organizations like PIBA.

Officials from OCI have told Yip that the IIA will not investigate cases that PIBA has already closed. For this reason, Yip has instructed both OCI and SFC to not refer his case to PIBA. He wants to wait to send his complaint to IIA—even if that means waiting three years—so that Chow and PIBA do not get a chance to screw him.

The Media

So far, SFC and OCI have allowed Centaline and Standard Life to go unpunished for scamming Yip and thousands of other Hong Kongers.  Yip is justifiably outraged, and he is sharing his story with any news organization that is willing to listen. He hopes that media coverage will shame Centaline, Standard Life, and the regulators to do the right thing. Journalists who wish to speak with Yip may contact Lindell at lindelll@gmail.com.

Yip’s Documents

Below are copies of all Yip’s ILAS documents. Some of his personal information has been redacted.

Financial Needs Analysis (FNA)

Important Facts Statement (IFS) and Declarations

Harvest Wealth Investment Plan – Brochure

A pdf copy of the September 2012 version of the brochure can be downloaded by clicking HERE. This is the version that was given to Yip.

Melanie’s Explanation of ILAS, Centaline’s Services, and Related Fees

Melanie’s Email about Dollar Cost Averaging

Example Fund Switching Confirmation

Harvest Wealth Investment Plan – Application Form

Illustration Document

Email from Melanie Asking Him to Print and Sign the Illustration Document

Cooling Off Notice

Yip’s Letters

Below are copies of letters that Yip has sent and received from Centaline, Standard Life, SFC, HKFI, and OCI.

Early Emails with Centaline and Standard Life (Aug. 9 – Sept. 10, 2014)

Centaline to Yip (Sept. 2, 2014)

Centaline to Yip (Sept. 10, 2014)

Yip to Centaline (Sept. 15, 2014)

Centaline Compliance Officer, Lomax Wong to Yip (Sept. 24, 2014)

In Point 1 of his letter, Lomax misquoted HKFI regulations, leaving out the words, “as in (b) above”, perhaps in an attempt to conceal what he believed to be a blatant regulatory violation. Here is a screenshot of the regulations:

Yip to Centaline CEO, Johnson Chow (Sept. 26, 2014)

Yip to Centaline CEO, Johnson Chow (Oct. 7, 2014)

Yip to Centaline (Oct. 27, 2014)

Centaline to Yip (Nov. 3, 2014)

Yip to Centaline (Nov. 7, 2014)

Yip to Centaline (Nov. 11, 2014)

Yip to Centaline (Dec. 2, 2014)

Centaline to Yip (Dec. 5, 2014)

Yip to SFC (Dec. 15, 2014)


[This letter has been temporarily removed as of May 3, 2015.]


SFC to Yip (Dec. 24, 2015)

Yip to SFC (Dec. 31, 2014)

[This letter has been temporarily removed as of May 3, 2015.]


SFC to Yip (Jan. 23, 2015)

Yip to SFC (Jan. 30, 2015)


[This letter has been temporarily removed as of May 3, 2015.]


Correspondence with HKFI (Nov. 19 & Dec. 11, 2014)

Correspondence with HKFI (Feb. 6 & March 4, 2015)

Yip to Standard Life (Sept. 9, 2014)

Standard Life to Yip (Sept. 12, 2014)

Yip to Standard Life (Sept. 15, 2014)

Standard Life to Yip (Sept. 19, 2014)

Yip to Standard Life (Sept. 22, 2014)

Standard Life to Yip (Oct. 30, 2014)

Yip to OCI (Nov. 13, 2014)

OCI to Yip (Nov. 20, 2014)

Standard Life to Yip (Dec. 19, 2014)

Yip to OCI (Dec. 20, 2014)

Standard Life to Yip (Dec. 30, 2014)

OCI to Yip (Jan 2, 2015)

Yip to OCI (Jan 2, 2015)

OCI to Yip (Jan 9, 2015)

Yip to Standard Life (Jan 12, 2015)

OCI to Yip (Jan. 16, 2015)

Yip to Standard Life (Jan. 29th, 2015)

Standard Life to Yip (Jan 29, 2015)

Standard Life to Yip (Jan 30, 2015)

Standard Life to Yip (Feb. 6th, 2015)

Attachment 1 – HKFI Updated Requirements wef 1 Jul 2013

Attachment 2 – HKFI Updated Requirements wef 1 Jul 2013 – AppendixA

Attachment 5 – Pamphlet – Questions you need to ask before taking out an ILAS product

Attachment 6 – KFS

Standard Life maintains that Melanie’s ILAS recommendation to Yip was compliant with the HKFI regulations in effect at the time. Those regulations stated:

“If the [financial needs] analysis result indicates that the potential customer has investment needs and his/her personal and financial circumstances may be suitable for investing ILAS product(s), then insurance intermediary may propose the potential customer to consider suitable ILAS product(s).”

As early as 2009, various Hong Kong regulators have issued circulars stating that ILAS is not suitable for investors who have no insurance needs. Consequently, Standard Life’s argument that Melanie’s recommendation was suitable for Yip and thus complaint with HKFI regulations is not supported by the facts.

HKFI issued a circular in October 2013 and another in December 2014 which confirms that ILAS was not suitable for Yip.

Yip to Insurance Commissioner, Annie Choi (Feb. 9th, 2015)

OCI to Yip (Feb 23, 2015)

Yip to OCI (Feb 24, 2015)

Yip to OCI (Feb 27, 2015)

Yip to Standard Life (April 9, 2015)

Essential Info for ILAS Victims: How to File a Complaint

[NOTE: This is the first in a series of posts I’ll be publishing over the coming days. It deals with the logistics of filing a complaint. The next posts will explain in detail all the laws and regulations which the insurance industry has broken. That info can help you write your complaint. For convenience, I have added the information contained in this post to the Resources page of this website.]

Snow ball

Snowball effect: As complaints pile up, pressure grows for regulators and law enforcers to take action.

ILAS victims (including savings scam and portfolio bomb victims) should file a complaint with every regulator and law enforcer that is responsible or potentially responsible for handling any matter related to your case. This will increase the likelihood of recovering your money.

When you file a complaint with a self-regulatory organization (such as PIBA, CIB, or IARB), make sure you copy your complaint to the Office of the Commissioner of Insurance (OCI), which has a duty to monitor how these organizations handle your complaint. None of these self-regulatory organizations can be trusted, as the committee members are also the executives of companies which openly scam consumers and violate regulations. They protect their own interests, not the interests of the people they scammed.

Below, I have listed all the relevant regulators/law enforcers and their contact information, accompanied by notes which explain what the regulator/law enforcers do and other important facts.

For convenience, if you would like to send a complaint to some or all of the relevant regulators/law enforcers simultaneously, I have listed their email addresses here at the top, so that you can simply copy and paste:


At the bottom of this post, I have provided links to laws, lawsuits, regulations, and codes of conduct which will be of interest to people filing complaints.

Anyone who has questions or would like help filing a complaint can send me (Lindell Lucy) an email: lindelll@gmail.com

Filing a Complaint

Office of the Commissioner of Insurance (OCI)
Website: http://www.oci.gov.hk/about/index08.html
Email: iamail@oci.gov.hk
Phone: 2867 2565
Address: 21st Floor, Queensway Government Offices, 66 Queensway, Hong Kong.
Note: You can file a complaint against any insurance company, insurance agent, or insurance broker with OCI. Your complaint will be forwarded to the relevant self-regulatory organization (PIBA, CIB IARB). OCI will monitor their handling of your complaint. It would be foolish to file a complaint with a self-regulatory organization without notifying OCI, as your complaint may not be handled in a fair manner.

Securities and Futures Commission (SFC)
Website: http://www.sfc.hk/web/EN/lodge-a-complaint/
Email: complaint@sfc.hk
Phone: 2231 1222 (press 2 after selecting your preferred language)
Address: 35/F, Cheung Kong Center, 2 Queen’s Road Central, Hong Kong
Relevant Laws: Section 114 and Section 103 of the Securities and Futures Ordinance
Note: If your insurance broker has an SFC license and he/she has breached SFC regulations or the SFC Code of Conduct, you can file a complaint with the SFC. (You can do a search on the SFC’s website to see if your broker has an SFC license.) If your insurance broker/agent violated the Securities and Futures Ordinance, regardless of whether they hold an SFC license, you can file a complaint against them with the SFC. Self-regulated insurance brokers are terrified of SFC!!!

Hong Kong Monetary Authority (HKMA)
Website: http://www.hkma.gov.hk/eng/other-information/contact-us.shtml
Email: bankcomplaints@hkma.gov.hk
Phone: 2878 8196
Address: 55th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong
Note: If you were sold a ripoff insurance policy in a bank, then you file your complaint with HKMA, as it is the bank regulator. You can also send the complaint to OCI.

Independent Commission Against Corruption (ICAC)
Website: http://www.icac.org.hk/en/report_corruption/index.html
Email: general@icac.org.hk
Phone: 25 266 366
Address: G/F, 303 Java Road, North Point, Hong Kong
Hours: Open 24 Hours
Relevant Law: Section 9 of the Prevention of Bribery Ordinance
Note: If you were sold an insurance policy by a broker, then you may be able to complain with the ICAC. A broker is supposed to be your agent, not the agent of an insurance company or fund company. The broker must disclose any conflicts of interest, especially about commissions. If your broker did not get your permission to receive a commission (a kickback from the product issuer), and if he/she did not disclose material information about how much commission he/she received and when he/she received it, then he/she violated Section 9 of the Prevention of Bribery Ordinance, which is an offense punishable by $500,000 in fines and 7 years imprisonment.

Hong Kong Police
Website: http://www.police.gov.hk/ppp_en/02_er_room/
Email: crimeinformation@police.gov.hk (only accept attachments up to 10 MB)
Phone: 2860 5012 (Commercial Crime Hotline)
Address: Find your nearest police station.
Hours: Open 24 hours.
Relevant Laws: Section 16A of the Theft Ordinance and/or Section 36 of the Crimes Ordinance
Note: If you were sold a scam insurance policy (a fraud), or if your broker deceived you for financial gain (defrauded you), then file a fraud complaint against the insurance company who created the scam and the insurance agent or broker who sold it to you. Fraud is a serious offense punishable by up to 14 years imprisonment.

Consumer Council
Website: http://www.consumer.org.hk/website/ws_en/complaints_and_advices/how_to_complain/howtocomplain.html
Email: cc@consumer.org.hk
Phone: 2929 2222
Address: Find your nearest Consumer Advice Center.
Hours: Mon to Fri, 9:00 – 1:00, 2:00 – 6:00
Note: Any ripped off consumer can file a complaint with the Consumer Council. The Consumer Council will act as a mediator and a monitor, similar to OCI.

Mandatory Provident Fund Schemes Authority (MPFA)
Website: http://www.mpfa.org.hk/eng/supervision/mpf_intermediaries/complaints_against/index.jsp
Email: mpfa@mpfa.org.hk
Phone: 2918 0102
Address: Units 1501A and 1508, Level 15, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong.
Note: Many insurance agents and insurance brokers hold an MPFA license, and presumably, they should have to abide by MPFA’s Code of Conduct, which is more strict than the self-regulatory codes of conduct. File a complaint to MPFA if your agent/broker held an MPFA license and breached the MPFA code of conduct.

Hong Kong Federation of Insurers (HKFI)
WARNING: Self-Regulatory Organization / Has Conflicts of Interest
Website: http://www.hkfi.org.hk/#!/consumer-zone/avenue-for-complaints
Email: hkfi@hkfi.org.hk
Phone: 2520 2728
Address: 29/F Sunshine Plaza, 353 Lockhart Road, Wanchai, Hong Kong
Note: If you want to file a complaint about an insurance company (for creating a scam product and selling it to you), send the complaint to HKFI. Copy your complaint to OCI, so OCI can monitor the complaint. If you are complaining about a company’s agent, the complaint will go to the IARB.

Insurance Agents Registration Board (IARB)
WARNING: Self-Regulatory Organization / Has Conflicts of Interest
Website: Go to HKFI’s website.
Email: hkfi@hkfi.org.hk
Phone: 2520 1868
Address: 29th Floor, Sunshine Plaza, 353 Lockhart Road, Wanchai, Hong Kong
Note: The IARB was set up by HKFI. If you were sold a ripoff insurance policy by an insurance agent (not a broker), complain to IARB. Copy your complaint to OCI, so OCI can monitor the complaint. An insurance agent is the agent of a particular insurance company, whereas an insurance broker is your agent and is not tied to a particular insurance company.

Professional Insurance Brokers Association (PIBA)
WARNING: Self-Regulatory Organization / Has Conflicts of Interest
Website: http://www.piba.org.hk/index.php/en/about-piba/establishment-of-piba
Email: info@piba.org.hk
Phone: 2869 8515
Address: Room 2507-08, 25/F, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong
Office Hours: Mon to Fri, 9:00 – 12:30 / 1:30 – 6:00
Note: Insurance brokers are self-regulated by two different organizations, PIBA and CIB. If you were ripped off by an insurance broker, check to see whether your broker is licensed with PIBA or CIB. You can search the register of members on PIBA’s website to find out if the broker is licensed with PIBA. Note that there is a register for companies and a register for individuals. Complain to the organization with which your broker is licensed with. Copy your complaint to OCI, so OCI can monitor the complaint.

Confederation of Insurance Brokers (CIB)
WARNING: Self-Regulatory Organization / Has Conflicts of Interest
Website: http://www.hkcib.org/hkcib/en/about/ourMission.html
Email: info@hkcib.org
Phone: 2882 9943
Address: Room 3407, AIA Tower, 183 Electric Road, Fortress Hill, Hong Kong
Note: Insurance brokers are self-regulated by two different organizations, PIBA and CIB. If you were ripped off by an insurance broker, check to see whether your broker is licensed with PIBA or CIB. You can search the register of members on CIB’s website to find out if your broker is licensed with CIB. Complain to the organization with which your broker is licensed with. Copy your complaint to OCI, so OCI can monitor the complaint.

Office of the Ombudsman
Website: http://www.ombudsman.hk/en-us/how_to_lodge_a_complaint.html
Email: complaints@ombudsman.hk
Phone: 2629 0555
Address: 30/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong
Hours: Mon to Fri, 8:45 a.m. to 5:45 p.m
Note: If SFC, HKMA, or OCI is not handling/monitoring your complaint in a responsible manner, then file a complaint against them with the Office of the Ombudsman.

Legislative Council (LegCo)
Website: http://www.legco.gov.hk/general/english/members/yr12-16/biographies.htm
Email: Click HERE to download the emails of all LegCo members.
Phone: Click HERE to download the phone numbers of all LegCo members.
Note: You can try contacting one of the 70 members of the LegCo for help. LegCo members have power and influence. I suggest you avoid members of the LegCo who are not democratically elected, such as Chan Kin-por, who was elected by 52 insurance companies in 2008. Choose a member who was elected by a geographical constituency, NOT a functional constituency.

Bills Committee on Insurance Companies (Amendment) Bill 2014
Website: http://www.legco.gov.hk/yr13-14/english/bc/bc06/general/bc06.htm
Email: bc_06_13@legco.gov.hk
List of Members: http://www.legco.gov.hk/yr13-14/english/bc/bc06/general/bc06_mem.htm
Note: These members of the LegCo are responsible for overseeing the drafting of the bill which will set up a new insurance regulator (the Independent Insurance Authority). The bill will legally require insurance intermediaries to act in the best interests of clients. Contact these guys to pressure them to make sure that the bill is not corrupted by lobbyists from the insurance industry. Pressure them to amend the bill so that the new independent regulator will be able to take consumer complaints as soon as possible. It is outrageous that victims must file complaints with organizations that represent the very companies that committed the wrongdoings.

Financial Services and Treasury Bureau (FSTB)
Website: http://www.fstb.gov.hk/fsb/iia/eng/establishment/index.htm
Email: iia_consultation@fstb.gov.hk
Phone: 3655 5088
Address: Special Duties Division, 24/F, Central Government Offices, 2 Tim Mei Avenue, Tamar, Hong Kong
Note: Complain to the FSTB if you are unhappy with the way insurance is regulated in Hong Kong. They are responsible for setting up the new insurance regulator (the Independent Insurance Authority).

Financial Secretary
Website: http://www.fso.gov.hk/eng/role.htm
Email: fso@fso.gov.hk
Phone: Not Listed. Fax number is 2840 0569.
Address: 25/F, Central Government Offices, 2 Tim Mei Avenue, Tamar, Hong Kong
Note: If you’re unhappy about the way insurance is regulated in Hong Kong, complain to the Financial Secretary (John Tsang). “The Financial Secretary’s primary responsibility is to assist the Chief Executive in overseeing policy formulation and implementation in financial, monetary, economic, trade and employment matters.”


Section 9 of the Prevention of Bribery Ordinance (Corrupt transactions with agents)
Maximum punishment for offense is 7 years imprisonment and a fine of $500,000 HKD

Section 16A of the Theft Ordinance (Fraud)
Maximum punishment for offense is 14 years imprisonment

Section 114 of the Securities and Futures Ordinance (Restriction on Conducting Business in Regulated Activities without an Appropriate SFC License)
Maximum punishment for offense is $5 million HKD and 7 years imprisonment

Section 103 of the Securities and Futures Ordinance (Offence to issue advertisements, invitations or documents relating to investments in certain cases)
Maximum punishment for offense is $500,000 HKD and 3 years imprisonment
[NOTE: When insurance brokers distribute unauthorized funds to retail investors indirectly via portfolio bonds (the fund is technically bought by the insurance company, not the investor), it is an offense to give investors a copy of the fund’s information / marketing documents, as these documents have not been authorized by the SFC.)]

Section 36 of the Crimes Ordinance (False statutory declarations and other false statements without oath)
Maximum punishment for offense is a fine and 2 years imprisonment

Section 25 of the Organized and Serious Crimes Ordinance (Dealing with property known or believed to represent proceeds of indictable offence)
Maximum punishment for offense is a fine of $5 million HKD and 14 years imprisonment
[Note: This law is related to money laundering, which is the act of making “dirty” money (illegally gotten) appear as if it were legitimately gotten.]

Section 25A of the Organized and Serious Crimes Ordinance (Disclosure of knowledge or suspicion that property represents proceeds, etc. of indictable offence)
Maximum punishment for offense is a fine of $50,000 and 3 months imprisonment.
[Note: This law is related to money laundering. If someone (such as a bond provider) is aware of another person (such as an insurance broker) obtaining money illegally, but does not report this information to authorities, the person has committed an offense.]

Section 82 of the Inland Revenue Ordinance (Tax Evasion / Tax Fraud)
Maximum punishment for offense is $50,000 HKD fine + triple the amount evaded + 3 years imprisonment
[Note: Sources say that some insurance brokers hide fund commissions offshore to evade corporate taxes and to avoid violating Section 114 of the Securities and Futures Ordinance.] 

Hong Kong Competition Ordinance (Anti-Trust Laws)


Judgement – Jeremy Hobbins vs. Skandia and Clearwater (Famous lawsuit in which undisclosed ILAS commissions were argued to be a form of bribery)

Article about the Hobbins lawsuit in the South China Morning Post: Cost in the Mists of Time

A Lawsuit in Singapore which was Settled out of Court — I visited Singapore last summer and obtained a digital copy of the court documents before this case was settled. It involved an American family who sued their financial adviser for mis-selling them an ILAS product, which caused them hundreds of thousands of US dollars of tax penalties, accounting bills, and legal bills. ILAS is a disaster for Americans. See this blog post: “American ILAS Victims Could Face Criminal Prosecution after FATCA“. Anyone interested in learning more about this lawsuit may contact me for more information (lindelll@gmail.com).

Regulations, Circulars, Codes of Conduct

SFC – 31 Oct 1996 – Introduction of ILAS Illustration Document (In Response to Complaints)

Consumer Council – 15 January 2004  – Warning for Consumers to Avoid ILAS

SFC – 23 February 2005 – Report on Selling Practices of Licensed Investment Advisers

SFC – 13 August 2009 – Clarification of ILAS Licensing Requirements

HKFI – 1 February 2010 – Code of Practice for Life Insurance Replacement

HKMA – 14 March 2011 – Enhanced ILAS Regulations

CIB – 22 July 2011 – Regulations for Brokers Selling ILAS

CIB – Code of Conduct for Insurance Brokers

MPFA – September 2012 – Code of Conduct for Registered Intermediaries

HKMA – 22 April 2013 – More Enhanced ILAS Regulations

HKFI – 22 April 2013 – Updated ILAS Regulations

SFC – 3 May 2013 – Enhance Disclosure Requirements for ILAS

Consumer Council – 16 September 2013 – Warning to Consumers about High ILAS Fees

SFC – October 2013 – Code of Conduct

HKFI – 22 October 2013 – FAQ on Updated ILAS Regulations

PIBA – 1 March 2014 – Updated Code of Conduct

OCI – 30 July 2014 – Ban on Indemnity Commissions and Unfair Charges (GN 15)

HKFI – 8 December 2014 – Updated ILAS Regulations

HKMA – 8 December 2014 – Mystery Shopping Programme Findings

HKMA – 8 December 2014 – Enhance Regulation of Non-ILAS Insurance Products

OCI – 10 December 2014 – GN 15 (Second Edition) – Ban on Indemnity and Unfair Charges

HKMA – 17 December 2014 – Update on ILAS Commission Disclosure Requirements

SFC – 22 December 2014 – Mystery Shopping Programme Findings

Conflicts of Interest Compromise PIBA’s Ability to Handle Consumer Complaints with Impartiality

Letter to PIBA

Leung Chung Yan and DeAnn Tsang filed complaints against Convoy Financial Services Limited well over a year ago.

On September 26th (one month ago), PIBA promised to wrap up the ladies’ cases within two weeks. Two weeks passed, and no conclusion was reached. PIBA claimed that it needed more time, as it was awaiting supplemental information from Convoy.

Four weeks have now passed, and a conclusion has still not been reached. Hopefully this process won’t drag on for an additional year.

However long PIBA takes to wrap up these cases, we hope that PIBA will not ignore the fundamental issues which have been raised by the lady’s complaints. Some of the issues concern not just Convoy’s behavior, but the behavior of the entire insurance brokerage industry. Thus, if Convoy is guilty of misconduct, it logically follows that most other brokerages are also guilty.

Because PIBA is stacked with representatives from the industry, we are deeply concerned that PIBA’s investigation and judgement will be biased in such a way as to protect the interests of the industry, rather than the interests of Ms. Leung, Ms. Tsang, and consumers at large.

If PIBA issues a judgement which is irrational or which completely ignores certain aspects of the ladies’ complaints, we will immediately file a complaint against PIBA with the Insurance Authority. Hopefully PIBA won’t force us to do this.

To be clear, any judgement which PIBA issues will be considered unsatisfactory unless the points below are directly addressed. Each point explains how Convoy has breached a different section of PIBA’s Code of Conduct and Membership Regulations. None of these points are unique to the cases of Ms. Leung or Ms. Tsang. All points refer to practices which are widespread throughout the entire industry.

Convoy Places Its Own Interests Above Its Clients’ Interests

Advice Must Be in Clients' Best Interests

Excerpted from PIBA’s Code of Conduct for brokers conducting ILAS business.

ILAS products are never in the best interests of clients. The fees are so obscenely high that they cause investors to lose about half their retirement funds if the products are held for more than a couple of decades. If the products are only held for a short period of time, then exit penalties will destroy as much as 100% of investors’ contributions. Investors are always better off purchasing mutual funds directly, rather than through an ILAS policy. 

Insurance brokers should be well-aware of the toxicity of ILAS products, since it is their job to know such things. To be compliant with PIBA’s code of conduct, brokers should always advise clients to steer clear of ILAS products. If brokers want to help clients buy funds, then they should obtain an SFC license (if they don’t already have one), so that they can sell funds directly (not through ILAS).

It is blindingly obvious that the only reason Convoy or any other broker sells ILAS is to benefit themselves at the expense of clients. No other investment product pays a higher commission.

Convoy Accepts Payments Which Are Unfair, Unreasonable, and Disproportionate to the [Dis]Service Rendered to Clients

Fees and Remuneration Must Be Fair and Reasonable and Charachterized by Good Faith

Excerpted from PIBA’s Code of Conduct for brokers conducting ILAS business.

Ms. Leung and Ms. Tsang were sold 25-year ILAS policies. The commission which Convoy accepted was roughly equal to 1260% of the ladies’ first investment. To put it another way, Convoy was paid for 25 years of service before that service was provided. Convoy did not inform Ms. Leung or Ms. Tsang about the massive secret commission, nor did Convoy explain how the commission was financed—by defrauding them out of their first years of savings.

If Convoy had sold funds to these ladies directly, Convoy’s commission would have been at most 5% of the first investment. Convoy would not have been paid for any service in advance. Convoy would have continued to receive commissions only if Ms. Leung and Ms. Tsang were satisfied with Convoy’s service.

Secretly charging 25 years of fees before providing 25 years of service is neither fair nor reasonable. It is extremely disproportionate to the (dis)service being rendered, since 25-year ILAS policies are toxic, fraudulent, high-cost, and financially destructive.

Convoy Does Not Disclose Material Facts Regarding the ILAS Products It Sells

Broker Must Know the Product and Disclose All Material Facts

Excerpted from PIBA’s Code of Conduct for brokers conducting ILAS business.

Convoy did not disclose all material facts regarding the 25-year ILAS policies it sold to Ms. Leung and Ms. Tsang.

  1. Convoy did not disclose that the ladies’ first years of savings were not saved, but were instead swallowed by a “smoke and mirrors” fee structure.
  2. Convoy did not disclose that most of the units in their initial account, including bonus units, would be eaten by fees.
  3. Convoy did not disclose that their account value grossly misrepresented their return on investment and concealed the fact that they suffered a near 100% loss during the initial period.
  4. Convoy did not disclose that, historically, 25-year ILAS policies have been surrendered at horrendously high rights, resulting in massive exit penalties.
  5. Convoy did not disclose that ILAS is the worst possible way to invest in mutual funds, since every other option is astronomically cheaper and less risky.
  6. Convoy did not disclose that it would receive 25 years of indemnifed commissions.

Convoy Does Not Disclose Conflicts of Interest

Conflicts of Interest Must Be Avoided or Disclosed

Excerpted from PIBA’s Code of Conduct for brokers conducting ILAS business.

  1. Convoy did not disclose that it would receive indemnified commissions for selling ILAS. Indemnified commissions create a conflict of interest by which the adviser has an incentive to recommend policies with longer lock-in periods, which are far more dangerous for clients. (A 25-year policy pays a commission which is five times larger than a commission for selling a 5-year policy. However, the 25-year policy is far more likely to be surrendered, and the penalties are far worse. It is lucrative for the adviser but catastrophic for the client.)
  2. Convoy did not disclose that selling funds through ILAS paid much higher commissions than selling funds directly. Larger ILAS commissions create a conflict of interest by which Convoy has a financial incentive to promote the worst option for the client.
  3. Convoy did not disclose to Ms. Leung that her adviser, Ms. Lau, was not licensed to advise on or sell mutual funds directly, thus severely limiting the types of recommendations she could provide, and biasing her advice towards ILAS (the worst option).

Convoy Provides Its Services in a Dishonest and Unforthright Manner

Honesty and Fairness

Excerpted from PIBA’s Code of Conduct for brokers conducting ILAS business.

If Convoy conducted its ILAS business in an honest and forthright manner, then Convoy would exit the ILAS business. ILAS products are toxic for consumers. The only reason Convoy is able to sell ILAS is because Convoy misrepresents the “benefits” of owning ILAS and hides information about commissions, the impact of charges, and alternative investment options.

Convoy’s Name Is Deceptive

Name of Company Must Not Deceive

Section 2, Paragraph (d) of PIBA’s Membership Regulations.

Convoy Financial Services Limited is an insurance brokerage, yet its name suggests that it offers a broader scope of services, advice, and products than it actually does. In order to be compliant with PIBA’s Membership Regulations, Convoy would need to revise its name to something that is not deceptive, such as Convoy Insurance Services Limited.

We hope that PIBA will enforce its regulations and require Convoy to change its name.

Shocking ILAS Statistics (#6): PIBA Imposed Zero Disciplinary Actions In the First Half of 2014


To Serve & To Protect Crooks

PIBA is one of the two self-regulatory bodies for insurance brokers. During the first half of 2014, PIBA punished zero brokers for misconduct. If an outsider had no other information, he might be tempted to believe that this is an industry of angels.

He would be mistaken. Most brokers are swindlers (or else extremely ignorant, inexperienced, and naive). The ILAS products they sell are so horrific that no informed, rational human being would ever consider buying them.

The least bad ILAS products are exploitative (due to unjustifiably high fees), and the worst ILAS products are criminal (due to fraudulent design).

Every sale necessarily requires multiple violations of PIBA’s own Code of Conduct, which states that brokers should offer objective advice and act in the best interests of clients.

This Code is obviously unenforced and totally meaningless. It’s primary purpose is to deceive the public into believing that the industry is being regulated according to high principles, when in fact, the industry is largely an unregulated pack of thieves.

PIBA - Zero Disciplinary Actions Imposed

A screenshot from PIBA’s website showing that zero disciplinary actions were imposed in the first half of 2014. Data is not published for previous years.

History of the ILAS Ripoff

Several decades ago, ILAS was invented in the UK as a clever way to exploit a feature of the UK tax code. By packaging funds within an insurance policy, it resulted in a 15% tax break which was not available when investing in funds directly. Due to this favorable tax treatment, ILAS products were attractive, despite their extortionate hidden charges.

In March 1984, the UK government changed the tax rules for insurance, and the huge tax benefits of ILAS ceased to exist. These products should have disappeared. However, because the products paid such obscenely high commissions, they had become extremely popular with brokers. Since the majority of brokers were unscrupulous and greedy, they did not stop selling the products, even though the products were no longer good for consumers.

ILAS products eventually spread across the globe, becoming especially concentrated in places that were both wealthy and poorly regulated, i.e., Asia and the Middle East.

In Hong Kong, ILAS products were originally sold mainly to expats by expat brokers, but it eventually morphed into a giant scam with locals ripping off locals (and foreign insurers reaping most of the rewards).

ILAS never offered tax benefits to Hong Kongers, so it never should have been sold to them. The unscrupulous/ignorant people who now sell it claim that the outrageous fees are justified because the products offer so-called “free” fund-switching.

This is nonsense. Non-insurance fund platforms, such as Fundsupermart and iFAST Central, offer free switching, access to more funds, better due diligence of funds, and fees which are only a small fraction of ILAS fees.

iFAST offers a better service at a much lower cost, not because it has superior technology, but because it charges a fairer price.

Insurance companies are able to grossly overcharge only because they deceive consumers, buy off the brokers, and (non)regulate themselves.

PIBA’s Unenforced Code of Conduct

Excerpts of PIBA’s Code of Conduct have been copied below. Each excerpt is followed by a brief explanation of how brokers have trashed that section of the Code.

Treat Your Client Fairly

Brokers are supposed to “protect the interests of clients”, yet recommending ILAS products, especially contractual savings plans, is never in the interests of clients.

Brokers are also supposed to “uphold the integrity fostered by PIBA”, but since PIBA fosters zero integrity, there’s no integrity for brokers to uphold.

Honesty and Fairness

Because of extortionate fees, ILAS products are always unfair to consumers. If brokers told the truth to clients, then clients would not buy the products. This means every broker who sells ILAS is being dishonest.

Broker Must Know the Product and Disclose All Material Facts

If some brokers are not dishonest, then, at the very least, they are negligent. PIBA’s code of conduct requires brokers to “know the product” and to “disclose all material facts”.

If brokers did their research, they’d know that most ILAS savings plans are scams, and the rest are just plain awful. Brokers have no justification for recommending ILAS when better and much cheaper investment options are available.

Advice Must Be Appropriate and in Clients' Best Interests

ILAS is not appropriate for Hong Kongers and definitely not in their best interests. Brokers are clearly giving bad, self-serving advice.

Information Provided to Client Should Be Accurate and Non-Misleading

ILAS products are ripoffs, so no broker can sell them without being inaccurate and misleading.

Recommendation Should Be Appropriate and Client Must Understand Nature of Product and Recommendations

ILAS is never appropriate for Hong Kongers. Obviously, brokers are not ensuring that clients understand the products. If clients understood, they wouldn’t buy them.

Fees and Remuneration Must Be Fair and Reasonable and Charachterized by Good Faith

ILAS products pay significantly higher commissions than every other investment product on the market, yet the people who sell this toxic waste are generally the least qualified people in the financial industry. This crazy remuneration system is neither fair nor reasonable.

25-year ILAS savings scams pay upfront commissions which are literally hundreds of times higher than other savings plans. This is not just insane; it is criminal.

If a broker accepts 25 years of commissions upfront, it is extremely “disproportionate to the service rendered to the client”. Brokers rarely provide more than a few years of service, and the service is always poor, evidenced by the fact that ILAS shouldn’t have been recommended in the first place.

Conflicts of Interest Must Be Avoided or Disclosed

If conflicts of interest should be avoided, then brokers should not accept commissions from insurance companies. Brokers should instead charge clients a fee for service.

Commissions are a huge conflict of interest (a type of legalized bribery), and this must be disclosed if it can’t be avoided. Presumably, most brokers have been disclosing that they receive a commission for selling ILAS products (usually in very fine print buried in pages of legalese that few people have time to read).

However, brokers have not been disclosing ALL of the conflicts of interest, such as the fact they they receive MULTIPLE TIMES MORE UPFRONT COMMISSION when they recommend highly toxic 25-year savings scams, as opposed to 5-year savings plans or non-contractual savings plans.

This lack of disclosure not only breaches PIBA’s Code of Conduct, but it also clearly violates Section 9 of the Prevention of Bribery Ordinance. According to paragraph (5), commissions are regarded as a criminal offense unless clients give brokers permission to receive commissions, and “before giving such permission, have regard to the circumstances in which it is sought.”

No clients would give a broker permission to accept 25 years worth of commissions upfront if they knew that other plans paid much less (or even nothing) in advance. They especially wouldn’t grant permission if they knew that the commissions were financed by defrauding them out of their first years of savings.

Brokers will be lucky if the ICAC doesn’t eventually fine them and throw them in prison.

PIBA’s Conduct Is Inexcusable: A Complaint to OCI, the HK Police, and the HK Legislature

PIBA Logo 

“To Serve & To Protect”

PIBA’s motto is a joke. This organization has served and protected nothing but the interests of its members. It has sanctioned wholesale consumer fraud for decades.

25-year contractual savings scams should not and should have never existed. The executives who are responsible for creating, selling, and authorizing the sale of these products deserve to go to prison.

Two of my friends were scammed by these products via Convoy Financial Services. My friends filed complaints with PIBA more than one year ago. (See here and here.) One case was a top story in the South China Morning Post. 

Six months ago, we asked PIBA for an update. A staff member told us that PIBA was “still investigating”. We asked when this so-called investigation would be finished. She told us that one of the cases would be finished in less than one month

It is now six months later, and we are still waiting for an answer.

This is inexcusable.

I called PIBA a few days ago and asked for an explanation. A staff member told me again that PIBA was “still investigating”.

I asked, “What is the average investigation time for a complaint? Do you think more than one year is reasonable?” He did not give me an answer.

Personally, I think there is not a genuine investigation. PIBA has too many conflicts of interest, since several of its members are guilty of flogging 25-year savings scams. For PIBA to conclude that Convoy is a rogue organization is to conclude that many other PIBA members are equally bad. But for PIBA to deny this obvious truth is also incredibly damning. It is thus in PIBA’s interest to never reach a conclusion, to pretend to investigate for as long as possible, while its members continue ripping off thousands of unsuspecting consumers in the meantime.

I am hereby requesting that OCI, the police, or the legislature please intervene in this matter. 

Almost Half a Year and Still Waiting for an Apology

To Convoy and PIBA:

It has been nearly half a year since Leung Chung Yan first asked for her money back. Why has it taken so long to get an apology and a refund? What does this say about Convoy’s quality of service? Its moral standards? What does it say about the seriousness of PIBA’s self-regulatory mission? These are rhetorical questions, the answers of which are obvious.

I would appreciate an update about the current state of PIBA’s investigation of Convoy. I am also still waiting for Convoy to offer an admission of mis-selling, an apology, and a refund for Ms. Leung.

I hope Convoy and PIBA will please respond sometime before 2014, but preferably before Friday.

Still waiting,

Lindell Lucy

PIBA Refuses to Handle ILAS Complaint without Confidentiality Agreement while also Distorting the Nature of the Complaint

To the Office of the Commissioner of Insurance:

You earlier notified me that PIBA should be handling Ms Leung’s case (copied below). I am writing to notify you that PIBA cannot handle her case. I presume this means that only OCI can now do it. The reason PIBA can’t handle it is because one of their preconditions is that we stop talking to the media. We cannot agree to this because more than a decade of history has proven that ILAS regulators will do nothing to resolve our main complaint without external pressure, and we believe our only hope of seeing justice is if the media is involved. If the regulators aren’t in the public spotlight, there is little chance that all guilty parties will be held accountable for their wrongdoings.

I am also writing to complain about what seems like an attempt by PIBA to distort the nature of Ms Leung’s complaint. They sent a letter to my P.O. Box with the following subject heading: Re: Complaint against Technical Representative of Convoy Financial Services Ltd (“Convoy”) (Membership No.: M0066).

It should be clear to anyone who has read my emails that Ms Leung and I have not been focusing our complaint solely against the Technical Representative, Cat Lau. Actually, we think she holds little responsibility. We are far more angry at Convoy’s executives for training and incentivizing their employees to sell a rotten investment product for the purpose of profiting at the expense of their clients’ best interests. Convoy’s executives are the architects of this corrupt business model and should ultimately hold the bulk of the responsibility.

Further, none of my emails ever had a subject title saying “Complaint against Technical Representative of Convoy”. They all said “Complaint Against Convoy” or “Complaint Against Standard Life”. So why does it seem that PIBA is trying to frame our complaint as if Cat Lau is the only one who did anything wrong? It makes me wonder whether PIBA is trying to use Cat Lau as a scapegoat in order to protect the executives at Convoy. Since it is a self-regulatory body, I presume PIBA is being funded by Convoy and other broker members, and I also presume that executives at PIBA work for the same companies that they’re supposed to be regulating (perhaps including Convoy). It is unreasonable to expect that PIBA will be able to handle our case in an objective manner. I hope OCI, with the media holding a spotlight on it, can do a better job.

I only check my post office box once every week or two. A couple of days ago I checked it and found a letter from PIBA that was postmarked Tuesday of last week (June 11). I suspect PIBA sent this letter after they received knowledge that the South China Morning Post was going to publish a story on Chung Yan’s case the following Monday (June 17). In the letter, they asked Chung Yan to sign a Confidentiality Agreement form which was attached to the letter. In effect, they were asking her to stop talking to SCMP. I am attaching copies of that letter to this email.

This evening, I visited PIBA to confirm whether PIBA would handle Chung Yan’s case without her signing the confidentiality agreement. The man I talked to, who was a high-level executive, said PIBA would not take the case if she didn’t sign. I told him there was no point to sign it because all of the information was already public, since it had been the headline of the Business Section of the South China Morning Post website for 4 straight days. Unprompted, he began to tell me that the SCMP story was one-sided and unfair, which supported my suspicions that PIBA itself was not objective or fair.

I went on to ask him why PIBA reframed our complaint to single out Cat Lau when we were clearly complaining about Convoy as a whole, and its executives in particular. He beat around the bush until he threw me a sarcastic rhetorical question: “So there was no problem with her sales?” At this point I lost my temper and started shouting and cursing, saying something to the effect that ILAS was an f-ing piece of sh** that rips off everyone who buys it, that Convoy has no excuse for training employees to sell it, and that Convoy is a corporate criminal. He seemed to me to be defending Convoy, so I demanded an answer: Who do you work for? Who are you trying to protect? The guilty brokers or the innocent public? The criminals or the victims? By this point he threatened to call the cops, and I think he actually called security inside the building. I don’t blame him for doing it because I was furious and probably disturbing other people, but I won’t apologize for my opinion or my anger. It’s hard to keep calm when trying to reason with a so-called regulator who seems to be defending an entire corrupt industry guilty of fleecing thousands and thousands of people. He told me: “I can’t talk to you. Your manner is too bad. I’m sorry.” I said, “You shouldn’t be sorry to me. You should be sorry to the people of Hong Kong.”

I have an audio recording of this event if there is ever a dispute over what happened. And PIBA can rest assured that I will never set foot in their office again because there is nothing they can help me with and nothing I want them to help me with.

I am cc-ing this message to regulators and the media.

Lindell Lucy


On Tue, Jun 4, 2013 at 4:58 PM, <iamail@oci.gov.hk> wrote:

Dear Mr. Lucy,

We refer to your emails of 28 May and 3 June 2013 addressed to our office, the Hong Kong Federation of Insurers, the Securities and Futures Commission and Convoy Financial Services Ltd. (“Convoy”) regarding the complaint from Ms. Leung Chung Yan (“Ms. Leung”) against Standard Life (Asia) Limited (“Standard Life”) and Convoy. 
The contents of your emails have been duly noted.  Under the self-regulatory system for insurance brokers, Ms. Leung’s complaint against Convoy should be handled by the Professional Insurance Brokers Association (“PIBA”), an approved body of insurance brokers with which Convoy is registered as a broker member.

We have contacted PIBA and are given to understand that they have already received the same complaint from you.  PIBA would be looking into the matter and taking follow-up actions as appropriate.  We would follow up with PIBA in this respect.

As Standard Life is the insurer which issued the policy concerned in this complaint, we have also contacted Standard Life and requested it to investigate the complaint with a view to responding to you on the issues raised therein.

Our office will continue to follow up your case.  If you have any doubt about the above or any queries regarding the case, please feel free to contact our staff.

Yours sincerely,

(Edmund Chow)
for Commissioner of Insurance
(Insurance Authority)

PIBA Letter 1 (Redacted and Resized)

PIBA Letter 2 (Redacted and Resized)

PIBA Letter 3 [Resized]

PIBA Letter 4 (Confidentiality Agreement) [Resized]

PIBA Letter 5 (Consent Agreement) [Resized]

SCMP Business Section