The Monetary Authority of Singapore (Mas) has confirmed that 700 investors have lost up to S$26m in two tranches of structured notes from Morgan Stanley, whose underlying securities have suffered from credit events.
Although no credit events have affected the headline reference entities for Pinnacle Series 9 and 10 credit-linked notes (Australia, Hong Kong, Singapore Telecommunications and Temasek), the loss derives from the underlying collateral for the products, which was placed in synthetic CDOs (with minimum AA ratings) that were themselves linked to a portfolio of credit including US mortgage companies, Fannie Mae and Freddie Mac, and banks such as Kaupthing, Lehman Brothers and Landsbanki.
The regulator has advised investors to pursue any mis-selling complaints with the distributors, which include UOB Kay Hian, Kim Eng Securities, DMG & Partners Securities, OCBC Securities and Hong Leong Finance.
Morgan Stanley said in a note on Friday that it expects to be in a position to redeem the notes within approximately four to six weeks. Investors are likely to lose all of their original principal investment.
It added that it can give no assurance about the future of other series of Pinnacle Notes (16 tranches have been launched), for which no mandatory redemption event has yet occurred.
These products appear on the Singapore database.