China Daily:Investors continue minibond fight

24 July 2009

HONG KONG: A complaint arising from the sale of Lehman Brothers minibonds is headed for the courts. At the same time the Consumer Council will continue assisting those hit hard when the minibonds and other dicey financial instruments became worthless.

The watchdog has received about 12,000 related complaints since the US investment bank collapsed last September causing astronomical losses to investors.

Apart from the one case that has been set for litigation, about 50 other cases are under review for possible legal action.

Investors burnt in the minibonds collapse have accused local banks of malpractice and deception in their efforts to sell the complex investment tools. Many of those who were hurt are elderly. Many don't have education sufficient to provide them a clear grasp on what happened to their money.

Speaking at a Consumer Council seminar yesterday, Secretary for Financial Services and the Treasury Chan Ka-keung urged sellers and financial consultants to expound fully the risk of investment products to investors and to assess actual needs in order to protect the consumers' rights.

They should not "hard sell" products, Chan said.

Meanwhile, Consumer Council chairman Anthony Cheung reminded consumers that it is they who must decide whether to accept the buy-back scheme.

Regulators and 16 banks set up the compensation package which was announced on Wednesday. Investors could receive between 60 and 70 percent of the principal they invested. But "experienced" and "professional" investors will not be eligible.

"The package is proposed by the Securities and Futures Commission (SFC), the Hong Kong Monetary Authority and banks. It is up to consumers to make final judgment. Everyone is under different circumstances," he said at a seminar yesterday.

Lawmaker Kam Nai-wai who has helped to champion the cause of investors pressed for the 16 banks to disclose the valuation of minibond collateral for investors in order to help the investors to consider whether they should accept the buy-back package.

Some minibond holders staged a sit-in at the headquarters of the SFC yesterday expressing their dissatisfaction with the compensation package. The protestors demanded full restitution, not partial.

Some said they had no alternative but to accept the offer. They need money to live. Some were confused, saying they had no idea whether they are entitled to compensation.

Local actress Meg Lam Kin-ming invested about HK$10 million in the minibonds and other investment tools. She may not be able to get back the principal, as a "professional investor" is one with over HK$8 million investment portfolio.

"What is the judgment of an investor as 'professional'? Does it mean buying lots of investment products before? I have no idea at all," said Lam.