7 Jan 2009
HONG KONG: Hong Kong's securities regulator on Wednesday insisted the city's monitoring system had stood up to the financial crisis, despite criticism complex products were wrongly sold to vulnerable investors.
"Hong Kong's system has broadly worked well," said Martin Wheatley, chief executive officer of the Securities and Futures Commission (SFC). "We have not had a systemic failure."
Wheatley said the fact that Hong Kong had so far avoided the collapse of any major financial institutions or a huge fraud on the scale of disgraced US financier Bernard Madoff showed its regulatory regime had worked well.
Madoff was arrested on December 11 after allegedly admitting he had run a multi-billion dollar pyramid fraud in which individual investors, banks, charities and universities lost vast sums of money.
Wheatley conceded the city had suffered from a "mis-selling issue" over the sale of so-called minibonds backed by failed US bank Lehman Brothers.
However, he said it was too early to say if the banks who sold the products or the regulators were to blame.
Critics have accused the city's regulatory bodies of failing to protect investors from the derivative-backed products.
"We have got a problem with retail selling, we need to put that right," he said at Hong Kong's Foreign Correspondents' Club.
More than 40,000 Hong Kong investors – including many retirees – had put a total of 15.7 billion Hong Kong dollars ($2.0 billion US dollars) of their savings into minibonds and other complex products backed by Lehmans.
The collapse of the Wall Street giant in September meant the value of their investments dropped dramatically, which has sparked protests across the city from investors who said they were mis-sold the products.
The SFC and the city's de factor central bank, the Hong Kong Monetary Authority, are investigating hundreds of cases related to the sale of the bonds.