South China Morning Post (Hong Kong) - October 10, 2008
Author: Joyce Man and Peter So
The Hong Kong Monetary Authority is considering a ban on banks selling complex investment products such as minibonds. It is one of the possible measures to be taken to protect small investors from financial turmoil.
The authority may also raise the minimum investment in such products to a level that would deter unsophisticated investors.
The possible steps were revealed yesterday by its deputy chief executive, Choi Yiu-kwan, amid continuing calls for relief for small investors facing heavy losses on minibonds and other complex derivatives issued or guaranteed by bankrupt US bank Lehman Brothers.
Meanwhile DBS Bank (Hong Kong) became the first local bank to say it would consider full compensation for losses on one such investment product - but only if its investigations showed buyers had been misled by the bank's sales staff.
At the same time, banking sources said banks were inclined to accept a government proposal that they buy back such products at current market value but that some questions still needed answering, including whether a buy-back would be legal.
The Monetary Authority will submit recommendations for changes in policies covering the sale of complex investment products to Financial Secretary John Tsang Tsun-wah within three months.
"Whether banks should be an investment adviser on such products could be one of the issues," Mr Choi said. The authority could also consider raising the minimum investment in them to US$1 million, so that they were out of the reach of small investors who could not handle the risk.
Banks have been selling minibonds in lots of as little as HK$100,000.
The authority has received 7,730 complaints of mis-selling of minibonds and other products issued or guaranteed by Lehman Brothers.
It has opened investigations into 41 cases and is seeking more information before deciding whether to investigate a further 189. The cases under investigation involve nine banks.
Investors complain they were misled into believing the minibonds - sold as proxy investments in well-known companies - were low-risk and unaware of the Lehman Brothers link. In fact they are high-risk, credit-linked derivatives.
Mr Choi said the authority had contracted 45 people to join more than 70 full-time staff already working on the complaints.
He noted that the authority had told banks in 2006 that they must take special care when dealing with vulnerable customers such as the elderly, illiterate or visually impaired and assess their tolerance of risk.
More than 70 worried purchasers of one such complex investment - called structured notes - met DBS Bank executives yesterday to seek a full refund for their losses.
The notes, issued by Constellation Structured Retail Notes, included some linked to Lehman Brothers. The bank will appoint an independent accounting firm to assess the products' remaining value, allowing customers to redeem them early.
"If we find any case of misleading sales, we will not rule out repaying the client's full investment," Linda Wong, regional head of consumer banking, said. Each case would be considered separately. The bank said it would not buy back structured notes unconditionally.
Billy Mak Sui-choi, associate professor in the department of finance and decision science at Hong Kong Baptist University, said structured products were securities linked to a broad class of financial instruments and their value could move with changes in interest rates and the prices of stocks and other assets.
Lawmakers who accompanied the DBS customers to yesterday's meeting questioned the independence and transparency of its in-house investigation of sales tactics.
Audrey Eu Yuet-mee, leader of the Civic Party, said the investigation should be conducted by a third party.
- ► 2020 (660)
- ► 2019 (1839)
- ► 2018 (1406)
- ► 2017 (1258)
- ► 2016 (828)
- ► 2015 (691)
- ► 2014 (144)
- ► 2013 (501)
- ► 2012 (1269)
- ► 2011 (1873)
- ► 2010 (2369)
- ► 2009 (1654)
10/05 - 10/12
- Distributor: UOB Kay Hian
- Social responsibility to Singaporeans
- Speaker's Corner - 11 Oct 2008
- File an affidavit to support your claim
- Rebuilding the Global Financial System
- High cost of life insurance at older ages
- Class action against Lehman Brothers in USA
- Is MAS at fault?
- Unhappy with bank's complaint handling process (3)...
- Hong Kong - selling of structured products
- MAS publishes timeline for Minibond resolution pro...
- Climate of fear and intimidation
- Risky to trade on leverage
- Feedback on complaint handling process
- Difficulty with travel insurance claim
- Lehman Bond Probe Widens
- ST Index approaching 1900
- Petition has been lodged
- How the market really works
- Hong kong: Curb on banks' investment sales aired
- Complaint to MAS against a financial institition
- SCMP - DBS offers full compensationto mini-bond ho...
- Fiduciary duty
- HKMA vs MAS
- Global Financial Crisis - subprime loans
- Get information from my blog
- Book on financial planning
- Unhappy with bank's complaint handling process (2)...
- Bank agree to buy back risky investments
- No personal investment in credit linked securities...
- Media interviews on Petition
- Call for investors to take the next step
- Unhappy with bank's complaint handling process
- Financial institution fined for mis-selling
- Oversight of the complaint handling process
- Misleading advertisements
- Hong Kong: Minibond investors demand full refund
- Restrict the issue of credit cards
- Petition to Singapore Government - 983 signatures
- HKMA investigates complaints of alleged mis-sellin...
- South China Morning Post: 2003 case sets precedent...
- New type of foreign talent
- Poor payout on Anticipated Endowment policy
- Is bond fund risky?
- Legal fees - action against distributor
- Credit default swaps - who benefits?
- Coordinated interest rate cuts
- Reduced bonus under Income policies
- Dividend under STI ETF
- Credit default swap
- Full particulars of investors of credit linked sec...
- Hong kong - minibond buyback proposal
- File a police report
- Securities Investors Association of Singapore (SIA...
- Consumer Association
- Collective Action against specific distributors
- Unable to give individual advice or attend to indi...
- Monetary Authority of Singapore - Consumer Complai...
- ST Index is still falling
- Lodge your complaint with the Distributor
- Write to Monetary Authority of Singapore
- Meet the Member of Parliament
- My blog passes 500,000 visitors on 6 Oct 2008
- Petition to Singapore Government - Credit Linked S...
- Expensive to battle in court
- Consumer banking sells the structured products
- Loss of retirement savings
- Speaker's Corner, Saturday 11 October, 5 - 7 pm
- Section 199 of the Securities and Futures Act
- Section 27 of the Financial Advisers Act
- Request for help from Relationship Managers
- Petition on Credit Linked Securities, Singapore
- Capital protected product
- Service to the people
- CNBC short video on Minibond
- Is it wise to cash out on the structured product n...
- A highly risky structured product
- Selling of life insurance through multi-level
- Engaging a lawyer
- Elderly get hit the most!
- ▼ 10/05 - 10/12 (80)
- ► 2007 (1803)
- ► 2006 (696)
- ► 2005 (159)