Tan Kin Lian's Blog: Hong Kong tightens sale of deriviaties

Saturday, November 07, 2009

Hong Kong tightens sale of deriviaties

2 Nov 2009

HONG KONG - HONG Kong officials said on Monday they have tightened regulation of complicated investment products after thousands of local retail investors were burned by Lehman Brothers-backed derivatives last year.

But lawmakers said the new measures fall short, and urged the government to prosecute banks that misled investors and to ban some risky products outright.

Under the new regulations, banks must issue risk warnings for complex products and record conversations between their sales staff and clients to prevent deception, K.C. Chan, Secretary for Financial Services and the Treasury, said at a legislative hearing on Monday. The government was also considering setting up an investor education body and a financial services ombudsman, he said.

The measures come after 30,000 Hong Kong small investors who bought US$1.8 billion (S$2.5 billion) in Lehman-linked derivatives were left in limbo after the US investment bank collapsed September last year. Upset they weren't fully aware of the risk their investments carried - many of the complex derivatives were innocuously labeled 'mini-bonds' - investors took to the streets.

Hong Kong regulators announced a settlement with 16 local banks in July that returned up to 70 per cent of principal to the buyers, or up to HK$6.3 billion.

Opposition lawmaker Ronny Tong criticised the government for not focusing on legal action. 'I think it's strange that there is not a single case of prosecution after investigating for more than a year,' he said.

5 comments:

Anonymous said...: It may not be so relevant here, but...
They say China is a poor -, third world country, but the Beijing residents get to have free H1N1 jabs. In Spore, it is so expensive, only the rich can afford (you think the poor hv so much spare cash for such unessential things?).
But when the poor contacted the "flu", others will be affected also.

HK people get across the board compensation, yet here many "poor victims" still get nothing, or hv confirmed hetting nothing.

Yet they say HK is under china's rule, which is a 3rd world country.
What a world of difference.; November 07, 2009 9:24 AM
Anonymous said...: ""But lawmakers said the new measures fall short, and urged the government to prosecute banks that misled investors and to ban some risky products outright.""

They have said what many wanted to say, but dare not say.........; November 07, 2009 10:55 AM
Anonymous said...: ""Under the new regulations, banks must issue risk warnings for complex products and record conversations between their sales staff and clients to prevent deception. The government was also considering setting up an investor education body and a financial services ombudsman.""

See what people are doing, and what we are doing. Is that enough?
Decide for yourself.

The worse is no compensation (or extremely poor compensation).; November 08, 2009 8:47 AM
Anonymous said...: I don’t understand why some people (including some of our leaders) think that investments (such as Minibond) with annual return of 5% are considered high return and hence high risk.

If what they think is correct, then Temasek holdings annual return of 16% (320% of 5%) must be considered VERY HIGH RETURN investments and hence VERY HIGH RISK.

But should Temasek holdings be allowed to involve in VERY HIGH RISK investments?; November 08, 2009 10:56 AM
Anonymous said...: """TH annual return of 16% (320% of 5%) must be considered VERY HIGH RETURN investments and hence VERY HIGH RISK. But should VERY HIGH RISK investments be allowed?""

We want safe investment. We do not want risky investment. We cannot afford to loss.; November 08, 2009 1:45 PM