Saturday, March 05, 2011

Lehman Brothers Equity-linked Notes

The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) announced today that an agreement has been reached with Standard Chartered Bank (Hong Kong) Limited (Standard Chartered) in relation to the bank’s distribution of equity linked structured notes issued and guaranteed by Lehman Brothers (LB ELNs) (Notes 1&2).

Without admitting liability, Standard Chartered has agreed to make a repurchase offer to eligible customers (Note 3) holding an outstanding LB ELN distributed by Standard Chartered. The total value of the repurchase offer is estimated to be approximately HK$1.48 billion and will cover over 95% of the outstanding transactions in LB ELNs by Standard Chartered customers.


My comments
I hope that the regulators in Singapore will follow the example of Hong Kong and take similar action against banks that distribute products that are unsuitable for consumers.


Unknown said...

Mr. Tan, having gone through the saga in the past, I doubt that they would act now when they did not in the past. My advice is that for investors, it is better to invest via hong Kong as the regulatory framework provide a better protection.

Lye Khuen Way said...

There is hope. Why ? GE round the corner. Nonetheless, the level of apathy is incredible.

Spur said...

HK authorities definitely do their jobs much better than Singapore, and the senior HK civil servants/ministers are only paid 25% to 33% of Singapore versions.

However, make no mistake that such "buybacks" is made out of remorse or guilt or altruistic reasons. When banks or insurers or any other FIs offer to buyback, they already know that they are able to unwind the securities at a price that is able to cover their costs or even make some profits.

This was the case with the buyback / compensation offer for Lehman credit-linked notes e.g. Minibonds, and also with a big local insurer offering to buyback their structured funds at par value less the interests already paid out. These FIs will only do so when the underlying markets linked to the securities have already recovered substantially, or even exceeded the pre-Lehman collapse. The FIs have already done their sums to break even or make profits. If just break even or make a small loss, the FIs just treat it as a marketing and publicity and goodwill cost.

Singapore's 5 Minute Investment Diary said...

Every time I see phrases like;

a) "the government should do this"
b) "our regulators should do that"
c) "our banks should be more ..."

I am reminded of the old Aerosmith song called "Dream On".

I can almost see/hear Steven Tyler (now an American Idol judge) screaming the signature words from the chorus "Dream On! Dream On! Dream On! .... "

Maybe the financial institutions should play this song while putting their customers on "Hold" in their customer service help line.

Tan Kin Lian said...

Dear Soodo
I want to be positive. No point being cynical and negative, even though we have been disappointed so far.

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