Minibond holders voice ire

Updated: 2008-09-23 07:27

By Kwong Man-ki(HK Edition)

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 Minibond holders voice ire

A man shows an investment contract for a Lehman minibond product, with a leaflet claiming up to 6 percent annual return, in front of the Hong Kong Monetary Authority yesterday. China Daily

A week after the collapse of Lehman Brothers, distraught investors in Hong Kong yesterday met the officials from the Hong Kong Monetary Authority, Securities and Futures Commission (SFC) and banks and expressed their discontent over how they were misled by the banks to buy Lehman's structured products such as minibonds.

The regulator has received as many as 54 written complaints and promised to look into investors' grievances.

An investor said in an Internet forum: "The content of the leaflets by the banks has been simplified, and (the banks) played down a very complicated and high-risk product into a very safe and principal protected product."

Raymond Li, executive director of the HKMA, said the authority would handle and follow cases of improper sales by individuals or institutions. The authority will reprimand, impose fines or revoke their licenses, but will not help in claiming compensation, he added.

The authority has provided a hotline for lodging complaints from today. Investors can call 8100 2314 for complaints and inquiries. The complaint form is also available on HKMA's website.

Lehman minibond investors protested on Sunday, urging the authorities to review the regulations on structured products sales.

Hong Kong Baptist University Finance Professor Billy Mak said the regulators, investors, intermediary (banks or brokerages) and Lehman - all parties are responsible for the problems.

He said that conceptually bonds mean low-risk and stable return products in Hong Kong. However, in the US minibonds mean structured products including credit-linked investment such as collateralized debt obligations (CDOs) or other derivatives.

Mak noted that if the investors were misled by the intermediaries when buying the products, they may claim compensation.

"For example, if they tell investors that minibond is kind of low-risk bond, it's misleading," he added, "but of course investors are also responsible as they should understand what they are buying."

Mak said it is appropriate that minibonds holders reported the cases to the regulators. "But they should know that it may take quite a long time even if they can have some of their money back." How long does it take will depend on the liquidating process.

HSBC, the trustee of the structured products, said in a statement yesterday that the bank is liaising with the issuers and other Lehman Brothers entities. The bank said it would take appropriate courses of action in case there is an event of default or any early redemption. A hotline has been set up for investors and the number is 2748 3345.

(HK Edition 09/23/2008 page2)