HONG KONG: The Securities and Futures Commission (SFC) told lawmakers Friday that the deal between the authorities and the retail banks remains the best approach to resolving the yearlong Lehman Brothers minibonds saga.

In a hearing at the Legislative Council, Martin Wheatley, Chief Executive Officer of SFC, said that the deal will maximize the benefits for the victims.

"Those investors who did not accept the offer are not guaranteed compensation through other means," said Wheatley.

Legislator James To said the SFC could have pushed for bigger refunds had it named banks found to have breached securities regulations.

Compared to a full repayment made by Sun Hung Kai Financial to other investors earlier, the SFC and the Hong Kong Monetary Authority (HKMA) struck a deal with 16 retail banks to repay investors 60 to 70 percent of their investment.

The retail banks sealed a HK$6.3 billion agreement with the SFC and HKMA to pay back about 25,000 investors. Figures showed that 99 percent of the investors replied to their banks and accepted the buyback offer before the 60-day response deadline expired last October.

About 200 investors, however, rejected the offer. Some of them considered seeking a judicial review of a buyback agreement struck between regulators and banks as the offer came to expire.

"The SFC took what we thought was the best and most appropriate approach under the circumstances in reaching the settlement," said Wheatley.

Wheatley also rebuffed lawmakers' requests to identify banks embroiled in the investigation. He said the investigation reports were kept confidential since it was only preliminary rather than conclusive. There has, as yet, been no independent report regarding each retail bank involved in the mis-selling of notes. The SFC would also not disclose the remaining 372 copies of investigation records and dialogue with high ranks from the banks.

Unlike corporate bonds, minibonds are credit-linked derivatives that are high-risk. Over 40,000 Hong Kong investors lost billions of dollars on Lehman-backed financial products in 2008 when the US investment bank went bankrupt.

The HKMA announced Friday that there were 12,922 complaint cases concerning the investment products that have been resolved. On the other hand, 417 complaint cases, including minibonds cases, are still under disciplinary consideration after detailed investigation.

(HK Edition 01/09/2010 page2)