21 Nov 2009
A former employee of DBS Bank (Hong Kong) has been suspended from providing securities-related services for three months by the Monetary Authority after being found to have failed to disclose to a client the risk involved when selling a Lehman Brothers-related financial product.
It was the first disciplinary action taken by the authority since it received complaints about problematic sale practices of products linked to the bankrupt US investment bank.
The authority said yesterday that an investigation had found that Leung Wai-yu, who was registered with the authority to run securities-related businesses, had "failed to diligently disclose and explain to the client the product's risk".
She had also "failed to complete the risk-disclosure statement for the client in accordance with the bank's internal control procedures" when she was selling a client Lehman Brothers constellation notes, a derivative similar to minibonds also issued by Lehman, in March 2006, a spokesman said. He said the authority had suspended Leung's details from its register for three months from November 20 to February 19, during which time she could not take part in dealing in or advising on securities.
"This is the first time the HKMA has taken disciplinary action against a relevant individual in connection with a Lehman Brothers-related investment product," the authority's executive director responsible for securities enforcement, Raymond Li Ling-cheung, said. "There are other disciplinary cases which have reached an advanced stage and they will be announced in due course."
Leung left DBS in 2006 and works for the Bank of Communications. The authority said it had taken into account all the circumstances of the case, including the extent of the client's losses and the fact that Leung had no disciplinary history.
The action followed Leung's withdrawal of an appeal with the Securities and Futures Appeals Tribunal seeking to review the authority's decision. As of yesterday, the authority had begun disciplinary consideration of 765 Lehman Brothers-related investments other than minibonds. It is investigating 3,097 cases of Lehman Brothers-related non-minibond complaints and seeking further information on 1,292 cases. A DBS spokesman said it had reviewed every complaint by investors in the derivatives and had compensated those in which the sale might have been inappropriate.
Hong Kong investors lost billions of dollars on minibonds guaranteed by Lehman Brothers when the US investment bank went bankrupt in September last year. Minibonds are not corporate bonds, but consist of high-risk, credit-linked derivatives, marketed as a proxy investment in well-known companies.
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