Direct Investments Multi-Asset Solution Series 1

As a matter of interest, who are this crowd Direct Investments ??
 
mercman said:
As a matter of interest, who are this crowd Direct Investments ?? It's a brave person who would invest money with a new outfit operating in this country ??
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Managing Director is Vincent Digby. You can read about his previous career [broken link removed].

The money is placed on deposit with KBC Bank.
 
Folks

Please stay on topic as this is a long anc complicated thread. I have deleted the off topic responses.

Mercman asked a question. Liam answered.

If you want to make theoretical points, start a new thread.
 
Guys,

Most of this stuff has gone straight over my head, but great analysis all the same and nice to see Duke making a complaint to the CB on the back of it. Whilst many posters (including myself) seem to reside in the lighter parts of this site, it brings us back to the essence of this site.

Well done,

Firefly.
 
This is the response from the CBI.
Response from CBI said:
Dear Mr. xxxxxxxx (my x's)

Thank you for your email of 27 May.

Please note that the Central Bank of Ireland does not investigate individual consumer complaints. In circumstances where an issue that is considered to be of systemic importance is brought to our attention, the details are passed to the relevant supervisory area of the Central Bank for their information. I have forwarded a copy of your correspondence to the relevant department. However in accordance with Section 33AK of the Central Bank Act 1942 (as amended) we cannot disclose the details of any action that we might take on foot of the information provided.

if are unhappy with the service you have received from a firm which is regulated by the Central Bank, you are entitled to make a complaint by writing directly to the firm concerned.

If you are not happy with the response you receive you are entitled to escalate your complaint to the Financial Services Ombudsman (FSO), who has the statutory powers to investigate complaints against financial services providers. Please be aware that the FSO will only consider a case once the internal complaints procedure within the firm concerned has been followed. I enclose an information brochure from the FSO which you may find helpful.

I hope this information is of assistance to you.
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I find this very unsatisfactory. The CBI clearly do not have the staff to properly enforce the CPC. I would have thought that they would welcome input from practitioners such as myself. Maybe something will come of the referral to the "relevant department" - I will never know.
 
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Duke of Marmalade said:
This is the response from the CBI.
I find this very unsatisfactory. The CBI clearly do not have the staff to properly enforce the CPC. I would have thought that they would welcome input from practitioners such as myself. Maybe something will come of the referral to the "relevant department" - I will never know.
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Duke, as far as I know this issue came up last year when the Financial Regulator examined Tracker Bonds and their documentation. They found that some firms weren't able to provide the information in the format that you gave because of the Interest Rate Swap component. As someone said earlier, that format is fine when a zero coupn bond is purchased but not always in this case. Last I heard, the Central Bank were in discussions with providers to find a solution but I don't think they ever found them to be in breach on the Consumer Code. Will try and find a link for you.
 
Sunny that sounds very plausible and this thing is starting to smell, big time. The earlier version of the CPC asked for the "open market value" of the deposit and the "open market value" of the bonus to be disclosed. These are reasonably observable values and should have nothing to do with what way the provider hedges its liability or even if it hedges it at all.

The latest version of CPC 2012 has subtly changed to asking providers to state what they did with the money rather than asking for an open market value breakdown. This of course very conveniently allows providers to arrange the underlying engineering so as to duck the intended disclosure.

The CBI aren't up to it. They have been hoodwinked. Next stop a personal finance journo.:mad:
 
I have been studying this more carefully. CPC 2012 has not changed from CPC 2006 in this regard. The key section is as follows:
CPC on Tracker Bond Disclosure said:
WHERE DOES MY INVESTMENT GO?
[FONT=Calibri,Calibri][FONT=Calibri,Calibri]This section must show clearly the split of the investment amount (or a typical investment amount for this type of product if the disclosure is being made on a provisional or generic basis) into three components: [/FONT]
[FONT=Calibri,Calibri]1 the open market value, at the date of investment, of the payment promised to the [/FONT][/FONT][FONT=Calibri,Calibri][FONT=Calibri,Calibri]consumer[/FONT][/FONT][FONT=Calibri,Calibri][FONT=Calibri,Calibri]; [/FONT]
[FONT=Calibri,Calibri]2 the open market value, at the date of investment, of the cash bonus promised to the [/FONT][/FONT][FONT=Calibri,Calibri][FONT=Calibri,Calibri]consumer[/FONT][/FONT][FONT=Calibri,Calibri][FONT=Calibri,Calibri]; and [/FONT]
[FONT=Calibri,Calibri]3 [/FONT][/FONT][FONT=Calibri,Calibri][FONT=Calibri,Calibri]charges [/FONT][/FONT][FONT=Calibri,Calibri][FONT=Calibri,Calibri]representing the balance. [/FONT][/FONT]

[FONT=Calibri,Calibri][FONT=Calibri,Calibri]The open market value referred to above is the open market cost of the benefit promised to the [FONT=Calibri,Calibri][FONT=Calibri,Calibri]consumer [/FONT][/FONT]at the date of investment, net of the value of any commission or other reward or benefit payable to the [FONT=Calibri,Calibri][FONT=Calibri,Calibri]credit institution [/FONT][/FONT]or [FONT=Calibri,Calibri][FONT=Calibri,Calibri]insurance [/FONT][/FONT][FONT=Calibri,Calibri]
[/FONT][/FONT][/FONT]
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This is really quite straightforward and has nothing to do with how or indeed whether the provider has hedged the promised return. KBC are perfectly capable of complying with the above requirements but seem to have hoodwinked the CBI into believing that because they use swaps it is impossible to comply. I think Ulster Bank have similarly bamboozled the poor souls in charge of our consumer protection regulations. The domestic institutions, AIB, BoI and Irish Life have no difficulty in complying with the code and I am sure they are just as capable of using swaps as the foreign competitors and most likely do so.
 
Hi Duke, in my opion the swaps the swaps have nothing to do with this issue. As I mentioned in an earlier post it is the choice of zero coupon bond or 100% deposit structure which causes this particular issue. In fairness to KBC in all my dealings with them, in my opinion they have been absolute sticklers to the letter of the law re CPC. They have always used a 100% deposits structure rather than zero coupon bonds so this is not in my opinion, a ploy to avoid disclosure obligations rather an unintended consequence of the CPC 2012 wording. I do understand your preference for visibility on each of the components as per the zero coupon bond structures and I fully accept those points. However I believe that KBC is both fully compliant with CPC and that theirs is a strict interpretation of CPC that is driven by the compliance function and as such is not a commercial agenda where the intention might possibly be construed to avoid disclosure requirements. I believe that there have been substantial discussion with CBI on this point. Please see [broken link removed] the letter Sunny refers to, it would appear that CBI was aware of this issue pre CPC 2012 introduction. I am not of aware of any discussions post this letter though they may well have taken place. So in summary I understand your sentiments but my interpretation is that KBC are in full compliance, they have not changed their approach to take advantage of CBI or anyone else and CBI is fully aware of the matter. Please allow me to investigate if there is some form of supplemental disclosure that I can provide regarding our product which will assuage your concerns.

Kind regards Vincent
 
This one has fascinated me for a while - I never understood the idea of a 100% deposit structure......how is the swap funded if not by taking some of the invested capital? I suppose the alternative is to use some or all of the interest on the money but it is more than a touch of smoke & mirrors.

KBC are pretty ethical operators and I would be very surprised if not compliant with the letter of the CPC : however if they are compliant I suggest the CPC needs to be redrawn.
 
Vincent,

That letter reveals it all now. The CBI have been seriously hoodwinked, not too strong a word.

What obviously happened is that the themed inspection in 2010 caught KBC and at least one other foreign bank with its pants down. KBC spun a ridiculous yarn about swaps and the CBI fell for it hook, line and sinker. They promised to address the matter in the upcoming review. CPC 2012 is totally unchanged in this space - that matter was not addressed and KBC continue to be non compliant - shame:mad:.

At least we have one thing cleared up - they are non compliant - the letter states that they are unable to meet the requirements. They are not outside the law as they have persuaded the CBI to give them a derogation.

Let us be absolutely clear about this. ALL Tracker Bonds are 100% Deposit structures, even life assurance based ones state that 100% of your money (ex levy of course) are placed on deposit. There are no consumers who have zero coupon bonds and options. The legal form is not the issue.

KBC are asked to state clearly the open market value of the capital protection. This is not rocket science. Take their 5 year funding rate and calculate the NPV. I'll have a stab. Let's say their funding rate is 6% p.a. then the OMV of the capital protection is 75%.

They are asked to state clearly the OMV of the bonus. If they supply me with the swap terms I will calculate it for them. Absent this info I can estimate the OMV of the bonus using the Black Scholes formula and say 15% volatility of the basket. I get an OMV of about 15%.

That leaves a balance in charges of 10%.

In the absence of compliant disclosure I had to make these estimates. If KBC supply me with the actual funding rate and the swap terms I will gladly redo my calculations.
 
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