• All blog entries
    • Calculators
    • Case studies
    • Cost of living
    • CPF Are You Ready?
    • CPF Matters
    • Credit Management
    • e-Learning
    • Estate Planning
    • Events
    • Financial advisers
    • High Networth
    • Insurance
    • Investments
    • Letters to the Press
    • Magazines
    • Others
    • Retirement Planning
    • Scams
    • Surveys
    • Tragic Stories
    • Unethical sales process
    • Videos
  • Legal
  • Testimonies
    • Individual testimonies
    • Gallery
  • My Account
Hi, looking for a fee-based financial planner in Singapore? Read this article now!
  • Home
  • About
    • About Wilfred Ling
    • Wilfred Ling from Client to Adviser
    • Why do you run your own professional financial planning practice?
  • FAQs
    • FAQs on Wilfred Ling’s Financial Services
    • FAQs on Financial Planning
    • FAQs on Investments
    • FAQs on Insurance
    • FAQs on Estate Planning
  • Services
    • Overview
    • Retirement Planning
    • Investment Portfolio Management
    • Insurance Planning
  • Fees
  • Cool Tools
  • Contact
  • Subscribe
You are here: Home / CPF Are You Ready? / Land International (Far East) land banking fiasco. No legal recourse here?

Land International (Far East) land banking fiasco. No legal recourse here?

13, May 2010 by Wilfred Ling Leave a Comment

Today’s Straits Times report entitled “200 lose $6m in British land deals” which apparently these individuals in Singapore were sold plots of land zoned as “greenbelt” – which means no development is allowed.

When MAS was asked about the fiasco, this was what the spokeperson said:

“Land-banking investments involve investors acquiring direct interests in real estate rather than in securities related to real estate and, as such, fall outside the scope of the SFA and FAA.” – Spokesman for Monetary Authority of Singapore referring to Securities & Futures Act (SFA) and Financial Advisers Act (FAA).

Because MAS only regulates products defined as “securities” under legislation, anything that are not “securities” are unregulated. I have pointed out this loophole countless times in my blog like a tape recorder that this is a major loophole. For instance, what is the difference in buying 100 bottles of wine compared with buying a collective investment scheme unit trust that buys a portfolio consisting of a diversified range of wines? The difference is that the latter has to be regulated by MAS while the former is unregulated. Many companies have taken advantage of this loophole by ensuring that they do not give an impression that the investments are securitized.

For real estate like raw land, how will it become a security? From what I see, the only way which a real estate can become a security defined under the SFA is that it becomes a collective investment scheme (CIS). A CIS or a unit trust is a fund which allows investors to pool their monies together. The unit trust would than buys the raw land. Individual investors will have no claim on specific plot of land as their claim is based on the number of units issued to them from the fund manager. The fund manager will be able to buy and sell the underlying raw land without seeking permission from individual unit trust holders. Unit trusts holder minimum investment amount will also be reduced significantly. However, the catch is that since this is a CIS it will be regulated by MAS.

Since raw land can potentially requires large capital and leverage is generally not available (unlike commercial properties), some innovative scheme has to be developed to reduce the capital size required and at the same time allowing the land banking company to make investment decision for all investors. I have seen how one land banking gets around this but I am not referring to Land International Far East. One of my client bought raw land in United States via the Singapore office. I have seen the documents. What the land banking company did was to specifically spell out the exact location of the land and the physical dimension of the land. The specified plot of land is placed into a trust. In the trust deed, it appoints the client (settlor) to be the Trustee. The primary beneficiary of the trust is the settlor himself. However, the Trustee would give the reserve power of investment (the power of attorney) to the land banking company so that the company can continue to make investment decisions. Also to avoid complication, the Trust Deed permits secondary beneficiaries in case the primary beneficiary (the client) dies. In this way, it avoids probate and those messing things which can cause problems. If it sounds expensive to you, no it isn’t very expensive as the plot of land only cost US$20,000 inclusive of the trust. But since the Trustee is the client himself, there is no need to engage any third party professional trustee to manage the trust. Therefore, there is no trustee setup fee or annual fee (or perhaps it was already embedded into the cost of the land?) Actually there is nothing to manage since the power of attorney is given to the land banking company. By doing this it achieve the two objectives: (1) The land banking company is able to make investment decisions for all investors since all investors give the power of attorney to the company and (2) lower minimum investment sum that can be achieved by issuing small plots of land. These are also the two advantages of a CIS. As it can be seen, that this totally avoids giving the impression that the land is a “security” and thus remains unregulated by MAS.

As more and more innovative alternative investments emerges and if the definition of “securities” are not updated, there will be more and more investment products in Singapore that will not be regulated.

But before anyone thinks that regulated products are safe, I am sorry to say that this is not so. For example, advise on futures contracts and leverage foreign exchange trading is a regulated activity under the Financial Advisers Act. Yet, you can see seminars and personal coaching conducted by companies and individuals on FX and CFDs who do not hold the necessary financial advisory license. Why? Go figure.

So, what is the lesson here? Do your own diligent. If you do not know how to do your own research, you can always engage someone who can. Although I refuse to recommend unregulated products, the fact of life is everyone is always getting prospected all the time by other salespersons. Hence, they still need someone with an independent opinion on whether the investment is worth the risk.

Like this article? Subscribe to my newsletter below for more.

Get regular Tips on Financial Planning. Free subscription for 3 years. Covers all aspect of financial planning such as 'How much salary you should have?', 'How to avoid insurance that is not suitable?", 'What are the retirement planning methods?", etc

Share this:

  • Tweet
  • Print

Related

Filed Under: CPF Are You Ready?, Scams

What do you think? Leave a comment. Cancel reply


WILFRED LING, CFA

WANT TO GET REGULAR TIPS ON FINANCIAL PLANNING?

JOIN with thousands of other subscribers in getting tips on all aspect of financial planning such as "What is the minimum salary required?", "How avoid insurance that is not suitable", etc.


WILFRED LING IN THE NEWS

Click HERE to find out more.


THE KIND OF CLIENTS I AM LOOKING FOR

NEW TO US?

Learn how you can fully benefit from this massive website: HERE

For Registered Users Only (free)

  • iFAST Monthly Investment Update -July 2020 7/7/2020
  • Navigator Newsletter_June 2020 (36 pages) 19/6/2020
  • iFAST Monthly Investment Update -June 2020 (21 pages) 9/6/2020
  • Fortitude Budget – Save, create jobs and be post-pandemic ready 28/5/2020
  • Navigator Newsletter May 2020 (44 pages) 22/5/2020

View All

For Clients Only

  • JPMorgan Guide to Market Q2 2020 15/4/2020
  • JPMorgan Perspective Q2 2020 15/4/2020
  • JPMorgan Guide to Market Q1 2020 5/2/2020
  • JPMorgan Perspective Q1 2020 5/2/2020
  • PPAM Quarterly Market Outlook 1Q2020 (17 pages) 1/2/2020

View All

Top Posts

  • Vanguard funds in Singapore at just US$ 20,000! Vanguard is the world’s most famous index fund provider...
  • Strange way of how CPF Interest is calculated & retirement planning CPF has a rather strange way of calculating interest. I...
  • Access Information & Sign Up Page
  • CPF: How to Accumulate $1m in your CPF by 57? I read from the CPF’s AREYOUREADY facebook about a man...
  • How financial advisers are paid? This article is inspired by this article YOUR PRACTICE-...

Recent comments

  • LittleTiger on Nomination in insurance policies
  • Josephine Pek on Nomination in insurance policies
  • chonghoong lim on Strange way of how CPF Interest is calculated & retirement planning
  • Jeremy Tan on Strange way of how CPF Interest is calculated & retirement planning
  • Janice on CPF Retirement Sum Scheme
  • Duskerdawn on Strange way of how CPF Interest is calculated & retirement planning

To be notified of new blog post, like this facebook page

To be notified of new blog post, like this facebook page

Read articles based on different categories

Investment Login

iFAST Central: Login

iFAST Prestige: Login

Navigator: Login

Chartered Financial Analyst

CFA
5 years milestone in Continuing Education

Chartered Financial Consultant

ChFC

Featured Blogger

IM$avvy
© Copyright 2006-2021 Wilfred Ling. All Rights Reserved hollow-nasty
hollow-nasty
hollow-nasty
hollow-nasty