Lehman Bond Probe Widens

Wall Street Journal
Friday October 10, 2008

Lehman Bond Probe Widens

By JACKIE CHEUNG

HONG KONG -- The Hong Kong Monetary Authority said Thursday it is investigating nine banks over sales of Lehman Brothers Holdings Inc. "minibonds" that sparked protests from investors who said they were duped into thinking their money was safe.

The HKMA has received 7,730 complaints about the minibond sales and has opened 41 investigations, HKMA Deputy Chief Executive Y.K. Choi told a news conference.

Mr. Choi said the regulator supports a proposal for banks to buy back the products at market value, which would be less than what they were sold for, and he said some banks have backed that idea as well.

Mr. Choi didn't identify the banks being investigated or provide figures for money lost by investors who invested in the structured products known as minibonds, which allegedly were marketed as secure bonds.

Mr. Choi said the HKMA might consider whether to stop retail banks from selling structured products like the Lehman minibonds and leave such dealings to professional investment consultants.

Investors have staged protests, with some complaining they lost millions of Hong Kong dollars in the minibonds tied to Lehman Brothers, the former Wall Street powerhouse that filed for bankruptcy protection last month.

One protest was held Wednesday outside the headquarters building of Bank of China Ltd.'s Hong Kong unit, BOC Hong Kong (Holdings) Ltd., with a group of investors going inside at one point to meet with bank officials.

A BOC Hong Kong spokeswoman, Carol Tam, said Thursday the bank had sold Lehman Brothers structured products. Ms. Tam said she wasn't aware of the bank being investigated but that it would cooperate with authorities if asked.

Mr. Choi said if irregularities are uncovered by the investigations , the HKMA will refer the matter to the Securities and Futures Commission.

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