I wish to give an update to the notebolders (i.e. the investors of the credit linked notes).
1. About 200 notebolders have appointed a specific lawyer to act in the class action. I am meeting this lawyer to discuss his approach and the possibility of involving an experienced senior lawyer to fight the case in the high court.
2. A separate group of noteholders have approached several lawyers. They advised that a "test case" be used to take a case in high court. This group is likely to recommend a lawyer and to present the proposal to the noteholders in January 2009.
3. I have approached two senior lawyers to study the possible defects in the prospectus and pricing statement and to obtain an opinion from a Queens Counsel from the UK. A recommendation is likely to be made in January.
http://tankinlian.blogspot.com/2008/12/legal-action-against-issuers-and.html
I hope that the investors will wait until February to decide on the strategy for the class action. It may be possible for two or three class actions to be pursued separately for the differtent types of notes.
Wednesday, December 3, 2008
SCMP:Illiterate minibond investor files writ
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=GBJR3WVK97T5&linkid=c62f11e3-4682-4992-b33c-9bc37feea64e&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
4 Dec 2008
Yvonne Tsui, Eva Wu and Dennis Eng
A fisherman is suing the Bank of China for the return of HK$800,000 he invested with Lehman Brothers, alleging he was deceived because he is illiterate.
Lai Kam-fook, who filed a writ in the District Court on Tuesday, is taking legal action after he was told in September that his money was affected by the collapse of the American bank.
The writ alleges he and his wife were advised by a staff member at the bank’s Aberdeen branch in August 2004 to make a risk-free, five-year deposit with a higher interest rate. It says he had deposited HK$800,000.
It alleges Mr Lai had never received or read any documentation from the bank.
“Because the staff member, surnamed Leung, told me it was a fiveyear deposit, I believed her. I did not read anything. It is useless to have read anything because I am illiterate anyway,” Mr Lai stated in the writ.
“To conclude, the total sum I had invested is HK$800,000. My allegation is: the bank cheated me because I am illiterate.”
However, HSBC Hong Kong received a cease-and-desist order last week from Weil, Gotshal & Manges, Lehman’s bankruptcy counsel. This notice means the minibonds cannot be liquidated, which would be necessary to go ahead with a buy-back. Democrat Kam Nai-wai, however, said the best option remained the banks buying back the bonds.
As an alternative, six lawmakers suggested that a redemption fund of HK$20 billion, including HK$10 billion from the government, be established.
However, the Secretary for Financial Services and the Treasury, Chan Ka-keung, said public funds should not be used to compensate investors’ losses.
Minibonds are not corporate bonds, but consist of high-risk, credit-linked derivatives that were marketed as proxy investments in well-known companies.
4 Dec 2008
Yvonne Tsui, Eva Wu and Dennis Eng
A fisherman is suing the Bank of China for the return of HK$800,000 he invested with Lehman Brothers, alleging he was deceived because he is illiterate.
Lai Kam-fook, who filed a writ in the District Court on Tuesday, is taking legal action after he was told in September that his money was affected by the collapse of the American bank.
The writ alleges he and his wife were advised by a staff member at the bank’s Aberdeen branch in August 2004 to make a risk-free, five-year deposit with a higher interest rate. It says he had deposited HK$800,000.
It alleges Mr Lai had never received or read any documentation from the bank.
“Because the staff member, surnamed Leung, told me it was a fiveyear deposit, I believed her. I did not read anything. It is useless to have read anything because I am illiterate anyway,” Mr Lai stated in the writ.
“To conclude, the total sum I had invested is HK$800,000. My allegation is: the bank cheated me because I am illiterate.”
However, HSBC Hong Kong received a cease-and-desist order last week from Weil, Gotshal & Manges, Lehman’s bankruptcy counsel. This notice means the minibonds cannot be liquidated, which would be necessary to go ahead with a buy-back. Democrat Kam Nai-wai, however, said the best option remained the banks buying back the bonds.
As an alternative, six lawmakers suggested that a redemption fund of HK$20 billion, including HK$10 billion from the government, be established.
However, the Secretary for Financial Services and the Treasury, Chan Ka-keung, said public funds should not be used to compensate investors’ losses.
Minibonds are not corporate bonds, but consist of high-risk, credit-linked derivatives that were marketed as proxy investments in well-known companies.
Persist in our efforts
The officials in MAS spent the past month to find a new swap counterparty to replace Lehman Brothers. They are not able to find a new arrangement, in spite of the highly qualified, well paid people and regulatory power available in their hands.
I work with a handful of volunteers to help the noteholders (i.e. the "investors" who bought the credit linked notes) to get a fair compensation. These volunteers have to work on their full time job, and find some free time to devote to this task. Our request for information and meetings from the financial insitutions and with the regulator are usually ignored.
In spite of the great obstacles, we will persist in our fight for justice and fairness. I hope that, one day, our efforts will be rewarded.
http://forums.delphiforums.com/n/mb/message.asp?webtag=3in1kopitiam&msg=2907.1
I work with a handful of volunteers to help the noteholders (i.e. the "investors" who bought the credit linked notes) to get a fair compensation. These volunteers have to work on their full time job, and find some free time to devote to this task. Our request for information and meetings from the financial insitutions and with the regulator are usually ignored.
In spite of the great obstacles, we will persist in our fight for justice and fairness. I hope that, one day, our efforts will be rewarded.
http://forums.delphiforums.com/n/mb/message.asp?webtag=3in1kopitiam&msg=2907.1
Hong Kong: Can the SFC avoid a knee-jerk response?
http://www.asianinvestor.net/article.aspx?CIaNID=90380
By Jame DiBiasio 4 December 2008
CEO Martin Wheatley explains the Hong Kong securities regulator’s strategy for dealing with the Lehman Minibond fallout.
Martin Wheatley, CEO of the Hong Kong Securities and Futures Commission, says the SFC and other securities regulators around the world are trying to understand how so many retail investors became exposed to complex financial products, to the extent that blow-ups of Icelandic banks could cause serious losses to moms and pops in Hong Kong.
He spoke yesterday at a conference organised by AsianInvestor on the future of fund management, on a panel session regarding regulation that also included a fund management regulatory lobbyist and a tax specialist. James Walker, a partner at Clifford Chance, moderated the discussion.
Wheatley says investors around the world have lost money on complex structured products backed by Lehman Brothers (of which the Minibonds are a branded product line) or through other credit-derivative exposures. Since the investment bank went under in September, the entire spectrum of financial products has been tarnished.
This has led the SFC to realise the extent to which investors have been sold such complex instruments; and the extent to which selling agents didn’t understand the risks in these products. Things like counterparty and credit risks must be explained, he concludes.
Right now the SFC is investigating the process that has taken the industry to this point, to understand whether issuers and distributors are guilty of mis-selling, and whether they are competent at understanding and explaining the risks of such products.
Second, the SFC is trying to determine what the financial-products regime must look like. This includes macro structural issues, such as which government agencies are responsible for approving and overseeing such products or sales; as well as micro ideas such as a cooling-off period for prospective buyers, or the process used by sales channels to appraise product suitability.
The SFC is consulting with other securities regulators to develop a response to issues such as short selling, regulating credit-default swaps and oversight of unregulated entities. But market players recognise the difficulty in getting a standard response.
Catherine Simmons, vice-president for regulatory and government relations at State Street Bank and Trust, says local political agendas will shape each market’s response.
Asian governments lack a centralised policy coordination platform, let alone a single monetary policy structure, unlike Europe. Its financial systems vary. So while they all face the issue of fallout from investor exposure to complex credit products, their responses are not uniform.
For example, many regional governments have guaranteed bank deposits, but these measures vary by time horizon, and what assets are covered – those of foreign depositors or just locals; individuals or corporations; local currency or foreign exchange; and whether such protection incurs a fee.
“Businesses must continue to monitor regulatory change – and to engage with regulators,” Simmons says.
Accounting issues are also in flux, particularly as more investors and fund managers question the wisdom of marking assets to market. But Florence Yip, partner for tax services at PricewaterhouseCooper, says the Lehman bankruptcy will accelerate global moves to accept International Financial Reporting Standards. This will impact tax laws, which in turn will affect revenues on investments and fund products.
“Fund management companies need to understand the impact of uncertainty in tax rules on their businesses,” she says.
The SFC will submit its ideas to the Hong Kong government by the end of the year, and the financial secretary’s office is expected to recommend specific actions by mid-2009. “I hope by that time the finance industry has returned to something close to normal,” Wheatley says.
Wheatley’s overriding philosophy is to avoid knee-jerk reactions, mainly by focusing on the necessary information to be disclosed to investors, rather than micromanaging questions of product suitability. “Markets hate sudden change,” he says, citing moves by other governments to ban short selling. “We’ve tried to stay on an even keel.”
He says the focus of the SFC’s investigation will be on disclosure of structured products, particularly when they offer capital protection. Product structure determines under which regulator it is manufactured and sold, and the SFC is aware of the problems of this uneven playing field. It is also aware that current standards of disclosure have created documentation so dense that clients don’t bother to read it, and are overly reliant on tips from distributors.
By Jame DiBiasio 4 December 2008
CEO Martin Wheatley explains the Hong Kong securities regulator’s strategy for dealing with the Lehman Minibond fallout.
Martin Wheatley, CEO of the Hong Kong Securities and Futures Commission, says the SFC and other securities regulators around the world are trying to understand how so many retail investors became exposed to complex financial products, to the extent that blow-ups of Icelandic banks could cause serious losses to moms and pops in Hong Kong.
He spoke yesterday at a conference organised by AsianInvestor on the future of fund management, on a panel session regarding regulation that also included a fund management regulatory lobbyist and a tax specialist. James Walker, a partner at Clifford Chance, moderated the discussion.
Wheatley says investors around the world have lost money on complex structured products backed by Lehman Brothers (of which the Minibonds are a branded product line) or through other credit-derivative exposures. Since the investment bank went under in September, the entire spectrum of financial products has been tarnished.
This has led the SFC to realise the extent to which investors have been sold such complex instruments; and the extent to which selling agents didn’t understand the risks in these products. Things like counterparty and credit risks must be explained, he concludes.
Right now the SFC is investigating the process that has taken the industry to this point, to understand whether issuers and distributors are guilty of mis-selling, and whether they are competent at understanding and explaining the risks of such products.
Second, the SFC is trying to determine what the financial-products regime must look like. This includes macro structural issues, such as which government agencies are responsible for approving and overseeing such products or sales; as well as micro ideas such as a cooling-off period for prospective buyers, or the process used by sales channels to appraise product suitability.
The SFC is consulting with other securities regulators to develop a response to issues such as short selling, regulating credit-default swaps and oversight of unregulated entities. But market players recognise the difficulty in getting a standard response.
Catherine Simmons, vice-president for regulatory and government relations at State Street Bank and Trust, says local political agendas will shape each market’s response.
Asian governments lack a centralised policy coordination platform, let alone a single monetary policy structure, unlike Europe. Its financial systems vary. So while they all face the issue of fallout from investor exposure to complex credit products, their responses are not uniform.
For example, many regional governments have guaranteed bank deposits, but these measures vary by time horizon, and what assets are covered – those of foreign depositors or just locals; individuals or corporations; local currency or foreign exchange; and whether such protection incurs a fee.
“Businesses must continue to monitor regulatory change – and to engage with regulators,” Simmons says.
Accounting issues are also in flux, particularly as more investors and fund managers question the wisdom of marking assets to market. But Florence Yip, partner for tax services at PricewaterhouseCooper, says the Lehman bankruptcy will accelerate global moves to accept International Financial Reporting Standards. This will impact tax laws, which in turn will affect revenues on investments and fund products.
“Fund management companies need to understand the impact of uncertainty in tax rules on their businesses,” she says.
The SFC will submit its ideas to the Hong Kong government by the end of the year, and the financial secretary’s office is expected to recommend specific actions by mid-2009. “I hope by that time the finance industry has returned to something close to normal,” Wheatley says.
Wheatley’s overriding philosophy is to avoid knee-jerk reactions, mainly by focusing on the necessary information to be disclosed to investors, rather than micromanaging questions of product suitability. “Markets hate sudden change,” he says, citing moves by other governments to ban short selling. “We’ve tried to stay on an even keel.”
He says the focus of the SFC’s investigation will be on disclosure of structured products, particularly when they offer capital protection. Product structure determines under which regulator it is manufactured and sold, and the SFC is aware of the problems of this uneven playing field. It is also aware that current standards of disclosure have created documentation so dense that clients don’t bother to read it, and are overly reliant on tips from distributors.
SCMP:Lehman investors turn to US government
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=Q4YPBJJ055D7&linkid=dedc89da-260c-411d-85be-9ca8bc4b31e3&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
3 December 2008
Paggie Leung
About 50 investors who bought Lehman Brothers-related products through Citibank marched to the American consulate yesterday to request an investigation into alleged mis-selling by the American bank.
The investors, who lost money after Lehman collapsed, petitioned the consulate, asking the American government to investigate Citibank's sales procedures.
"The US government recently injected so much money into Citi and has become the bank's key shareholder. Therefore, it should look into the matter," said Hui Shun-ngai, a representative of the group. The American government last week guaranteed US$306 billion of Citigroup's troubled assets and extended it US$20 billion in cash.
"The US government must also inquire into Citibank's authorised representatives responsible for the incident, including the tolerance of Citibank's mis-selling practices and lack of governance resulting in financial losses to Citibank's victims," the petition said.
Mr Hui said each protester had bought at least HK$500,000 in Lehman Brothers credit-linked derivatives from Citibank and they had not been informed of the high risk.
Meanwhile, 10 more investors filed lawsuits with the Small Claims Tribunal against six banks yesterday: Bank of China, Bank of Communications, Bank of East Asia, DBS, Wing Hang and Nanyang Commercial Bank. Their cases will be heard on January 29.
3 December 2008
Paggie Leung
About 50 investors who bought Lehman Brothers-related products through Citibank marched to the American consulate yesterday to request an investigation into alleged mis-selling by the American bank.
The investors, who lost money after Lehman collapsed, petitioned the consulate, asking the American government to investigate Citibank's sales procedures.
"The US government recently injected so much money into Citi and has become the bank's key shareholder. Therefore, it should look into the matter," said Hui Shun-ngai, a representative of the group. The American government last week guaranteed US$306 billion of Citigroup's troubled assets and extended it US$20 billion in cash.
"The US government must also inquire into Citibank's authorised representatives responsible for the incident, including the tolerance of Citibank's mis-selling practices and lack of governance resulting in financial losses to Citibank's victims," the petition said.
Mr Hui said each protester had bought at least HK$500,000 in Lehman Brothers credit-linked derivatives from Citibank and they had not been informed of the high risk.
Meanwhile, 10 more investors filed lawsuits with the Small Claims Tribunal against six banks yesterday: Bank of China, Bank of Communications, Bank of East Asia, DBS, Wing Hang and Nanyang Commercial Bank. Their cases will be heard on January 29.
Financial Advice for a Fee
The following financial adviser firm is willing to give advice for a fee, based on an hourly rate of $100 or $150 per hour. They will also give an estimate in advance for a particular type of advice.
An outline of their approach is stated here:
http://www.tankinlian.com/forms/providend.pdf
I have listed Providend as they agreed to offer their service at a modest rate, and also to provide an estimate in advance. I do not have any financial interest in Providend.
There are a few financial advisory firms willing to offer their service for a fee, but their charges are rather high. If they are willing to operate on my preferred fee structure, I shall list them as well.
Read this:
http://tankinlian.blogspot.com/2008/11/end-of-free-financial-advice.html
An outline of their approach is stated here:
http://www.tankinlian.com/forms/providend.pdf
I have listed Providend as they agreed to offer their service at a modest rate, and also to provide an estimate in advance. I do not have any financial interest in Providend.
There are a few financial advisory firms willing to offer their service for a fee, but their charges are rather high. If they are willing to operate on my preferred fee structure, I shall list them as well.
Read this:
http://tankinlian.blogspot.com/2008/11/end-of-free-financial-advice.html
Minibond investor keen to take class action
Dear Mr. Tan,
Our hopes are dashed by the most recent announcement on the minibond issue. I guess most of the investors are devastated now.
Unfortunately, there is no way out now except for the class action. I believe that is the most effective and most direct way in approaching this issue. We consumers need to know the truth, whatever the outcome is. Please lead us into this!
RZ
REPLY
Please read my blog about the progress of the class action. It will take some time to get organised. I expect to give a recommendation towards end January on the course of action to take.
http://tankinlian.blogspot.com/2008/12/legal-action-against-issuers-and.html
Our hopes are dashed by the most recent announcement on the minibond issue. I guess most of the investors are devastated now.
Unfortunately, there is no way out now except for the class action. I believe that is the most effective and most direct way in approaching this issue. We consumers need to know the truth, whatever the outcome is. Please lead us into this!
RZ
REPLY
Please read my blog about the progress of the class action. It will take some time to get organised. I expect to give a recommendation towards end January on the course of action to take.
http://tankinlian.blogspot.com/2008/12/legal-action-against-issuers-and.html
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