Monday, October 06, 2008

Expensive to battle in court

Banks should settle with Lehman minibond investors instead of battling it out in court, analysts say.

"Lawsuits are not the way to go to solve the Lehman Brothers minibonds dilemma, as they are lengthy in process and might not benefit the investor in the end," Ho Lok-sang, professor of economics and director of the Centre for Public Policy Studies at Lingnan University, said yesterday.

A member of the audience at RTHK's City Forum in Victoria Park agreed, saying: "Even if the lawsuits were won, the compensation given might not be enough to cover the lawyers' fees."

Ho added: "Of course, the banks should just settle with the affected investors if possible."

The professor said it was important to study the fine print in promotional material, claiming it could hint at certain levels of deception.

Legislative Council member Chim Pui-chung defended bank staff caught up in the fury.

He said they were merely acting on the orders of the banks who sold the products, and were told not to ask questions when they had doubts.

He added that some staff had fallen victim themselves, having invested in the structured products and recommending them to close friends and family.

But this was not the first time retail investors have been hard hit by structured products. Lawmaker- designate Ip Wai-ming said warrants and accumulators could also be problematic products that involved more leverage than many investors realized.

In a survey by the Democratic Party, 67.6 percent of 552 people polled did not understand the nature of Lehman Brothers' minibonds.

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