http://www.thestandard.com.hk/breaking_news_detail.asp?id=10620
Lehman Brothers minibond investors plan to sue the minibond trustee, US-incorporated HSBC (0005), after Hong Kong banks postponed buying back the structured products.
Peter Chan Kwong-yue, chairman of investors action group Allied Victims of Lehman Products, said the action group has been approached by US legal firm offering to represent minibond investors in Hong Kong filing the lawsuit.
Meanwhile, the Hong Kong Monetary Authority has received 19,196 complaints concerning minibonds as at Thurday. HKMA today referred 21 complaints of alleged misconduct tied to Lehman Brothers financial products to the Securities and Futures Commission for possible action.
Friday, December 5, 2008
SCMP:Class- action lawsuit over minibonds to start soon
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=TPKF3AERZ3I8&linkid=0b57f4e1-cc3d-4a34-9d09-8612bf7d989c&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
6 Dec 2008
Dennis Eng and Albert Wong
A US class-action lawsuit by local investors in soured minibonds is expected to start by the end of next month, paving the way for a protracted legal battle that could drag on for two years, a spokesman for the investors said.
“We really don’t want to do this but we have no other option. We’re not going to give up,” Peter Chan Kwong-yue, chairman of investor action group Alliance of Lehman Brothers Victims, said. Investors bought minibonds, issued or guaranteed by Lehman Brothers, from one or more of 16 local banks.
The move is seen as a last-ditch effort by angry investors to recover almost HK$13 billion from the bankrupt Wall Street giant after a proposed buy-back of the minibonds suffered a setback. Secretary for Financial
Services and the Treasury Chan Ka-keung said a legal challenge by lawyers representing Lehman’s liquidators would inevitably delay the buy-back timetable.
Details of the buy-back were supposed to be announced last week. “I think what the liquidators were doing was to ask the trustee to stop any actions regarding the collaterals,” he said, referring to the minibonds’ underlying assets.
Minibonds consist of high-risk, credit-linked derivatives that are marketed as a proxy investment in well-known companies.
“This, of course, will throw some challenges into the process of the buy-back, and the banks have to address these before they can proceed.”
Hong Kong Association of Banks chairman He Guangbei said the priority now was to try to clarify the legality of the buy-back and resolve the legal challenge. The buy-back was conceived under British law but the trustee, HSBC Bank USA, was incorporated under United States law, complicating the matter.
“There is a conflict in legal opinion from the US and UK,” Mr He said. “ According to UK law, there’s certainly a priority in terms of payments but there is this challenge from the US bankruptcy law. Which one is going to stand is very hard to say.”
The government said it had considered the legal risks when it proposed the buy-back to banks in October. It said the taskforce formed by the banks on the issue had clearly stated it was seeking legal advice and “we hope [it] will continue to follow up with the trustees of the Lehman minibonds in taking necessary actions to get back the market value of the minibonds”.
The class-action lawsuit will automatically cover the roughly 33,000 Lehman minibond investors in Hong Kong although they can opt out. US lawyers contacted Peter Chan as well as the Democratic Party about the possibility of a US class-action lawsuit. An agreement is still pending.
Peter Chan declined to identify the US lawyers but said they were involved in helping investors affected by the collapse of energy trader Enron in late 2001. Law firm Coughlin Stoia Geller Rudman & Robbins helped Enron investors settle for US$ 7.2 billion and negotiated a record US$688 million in fees.
The prospect of a drawn-out lawsuit is increasingly likely after banking sector legislator David Li Kwokpo, the chairman of Bank of East Asia, said lawyers advised against the buyback.
But Democratic Party legislator James To Kun-sun said he hoped the government would not give up on the buy-back proposal.
Since October 17, the Hong Kong Monetary Authority has referred 207 Lehman-related cases to the Securities and Futures Commission.
6 Dec 2008
Dennis Eng and Albert Wong
A US class-action lawsuit by local investors in soured minibonds is expected to start by the end of next month, paving the way for a protracted legal battle that could drag on for two years, a spokesman for the investors said.
“We really don’t want to do this but we have no other option. We’re not going to give up,” Peter Chan Kwong-yue, chairman of investor action group Alliance of Lehman Brothers Victims, said. Investors bought minibonds, issued or guaranteed by Lehman Brothers, from one or more of 16 local banks.
The move is seen as a last-ditch effort by angry investors to recover almost HK$13 billion from the bankrupt Wall Street giant after a proposed buy-back of the minibonds suffered a setback. Secretary for Financial
Services and the Treasury Chan Ka-keung said a legal challenge by lawyers representing Lehman’s liquidators would inevitably delay the buy-back timetable.
Details of the buy-back were supposed to be announced last week. “I think what the liquidators were doing was to ask the trustee to stop any actions regarding the collaterals,” he said, referring to the minibonds’ underlying assets.
Minibonds consist of high-risk, credit-linked derivatives that are marketed as a proxy investment in well-known companies.
“This, of course, will throw some challenges into the process of the buy-back, and the banks have to address these before they can proceed.”
Hong Kong Association of Banks chairman He Guangbei said the priority now was to try to clarify the legality of the buy-back and resolve the legal challenge. The buy-back was conceived under British law but the trustee, HSBC Bank USA, was incorporated under United States law, complicating the matter.
“There is a conflict in legal opinion from the US and UK,” Mr He said. “ According to UK law, there’s certainly a priority in terms of payments but there is this challenge from the US bankruptcy law. Which one is going to stand is very hard to say.”
The government said it had considered the legal risks when it proposed the buy-back to banks in October. It said the taskforce formed by the banks on the issue had clearly stated it was seeking legal advice and “we hope [it] will continue to follow up with the trustees of the Lehman minibonds in taking necessary actions to get back the market value of the minibonds”.
The class-action lawsuit will automatically cover the roughly 33,000 Lehman minibond investors in Hong Kong although they can opt out. US lawyers contacted Peter Chan as well as the Democratic Party about the possibility of a US class-action lawsuit. An agreement is still pending.
Peter Chan declined to identify the US lawyers but said they were involved in helping investors affected by the collapse of energy trader Enron in late 2001. Law firm Coughlin Stoia Geller Rudman & Robbins helped Enron investors settle for US$ 7.2 billion and negotiated a record US$688 million in fees.
The prospect of a drawn-out lawsuit is increasingly likely after banking sector legislator David Li Kwokpo, the chairman of Bank of East Asia, said lawyers advised against the buyback.
But Democratic Party legislator James To Kun-sun said he hoped the government would not give up on the buy-back proposal.
Since October 17, the Hong Kong Monetary Authority has referred 207 Lehman-related cases to the Securities and Futures Commission.
MAS seeks advice from senior counsel
By: FRANCIS CHAN, Straits Times
THE Monetary Authority of Singapore (MAS) has enlisted senior counsel Davinder Singh to advise it on the latest legal issues faced by the ill-fated Minibonds structured notes.
The central bank said last night that it had called on Mr Singh, the chief executive of Drew & Napier, "to advise MAS on the implications of the legal issues raised by the lawyers acting in the Chapter 11 proceedings for Lehman Brothers".
This follows Tuesday's warning by the Minibonds trustee – HSBC Institutional Trust Services Singapore – that the unwinding of the notes may be challenged by lawyers involved in bankruptcy proceedings over Lehman in the United States.
Minibonds series 1 and 5 to 10 of the notes have defaulted and will be unwound by three appointed receivers of the defaulted notes from PricewaterhouseCoopers (PwC) Singapore.
On Tuesday, the receivers said investors might have to wait at least two years or more for any resolution, given the legal complexities introduced by the notice from Lehman's lawyers.
MAS last month also called on Deloitte & Touche Corporate Finance to advise the central bank on the
Minibonds fiasco. Deloitte & Touche's services have also now been extended.
While the MAS has Mr Singh and the resources of Deloitte & Touche, the receivers from PwC are separately being advised by their own legal counsel.
Last night, the MAS also reiterated the trustee and receivers' warning that it may not be possible for any resolution to be reached within a short span of time.
"Nevertheless, MAS expects the trustee and receivers to pursue all appropriate avenues to protect noteholders' interests," it added.
About 8,000 retail investors sank $375 million in Minibonds – only to see Lehman collapse on Sept 15.
Three other independent parties have been roped in by the MAS to ensure that the plight of these investors is not ignored amid potential cross-border legal battles.
On Oct 2, Mr Gerard Ee, Mr Hwang Soo Jin and Mr Law Song Keng were appointed by distributors of structured products such as Minibonds, Merrill Lynch Jubilee Series 3LinkEarner Notes and DBS High Notes 5 to oversee their complaints handling processes.
All three said they were working closely with the financial institutions to ensure fair and prompt resolution of complaints by investors.
REPLY
I hope that MAS will also ask Mr. Davinder Singh to see if there were any wrong doing committed by Lehman Brothers in the creation of these products. Did they breach the requirements of the Securities & Futures Act to provide relevant information on the product for the investors to make a proper assessment, or were any material information omitted?
THE Monetary Authority of Singapore (MAS) has enlisted senior counsel Davinder Singh to advise it on the latest legal issues faced by the ill-fated Minibonds structured notes.
The central bank said last night that it had called on Mr Singh, the chief executive of Drew & Napier, "to advise MAS on the implications of the legal issues raised by the lawyers acting in the Chapter 11 proceedings for Lehman Brothers".
This follows Tuesday's warning by the Minibonds trustee – HSBC Institutional Trust Services Singapore – that the unwinding of the notes may be challenged by lawyers involved in bankruptcy proceedings over Lehman in the United States.
Minibonds series 1 and 5 to 10 of the notes have defaulted and will be unwound by three appointed receivers of the defaulted notes from PricewaterhouseCoopers (PwC) Singapore.
On Tuesday, the receivers said investors might have to wait at least two years or more for any resolution, given the legal complexities introduced by the notice from Lehman's lawyers.
MAS last month also called on Deloitte & Touche Corporate Finance to advise the central bank on the
Minibonds fiasco. Deloitte & Touche's services have also now been extended.
While the MAS has Mr Singh and the resources of Deloitte & Touche, the receivers from PwC are separately being advised by their own legal counsel.
Last night, the MAS also reiterated the trustee and receivers' warning that it may not be possible for any resolution to be reached within a short span of time.
"Nevertheless, MAS expects the trustee and receivers to pursue all appropriate avenues to protect noteholders' interests," it added.
About 8,000 retail investors sank $375 million in Minibonds – only to see Lehman collapse on Sept 15.
Three other independent parties have been roped in by the MAS to ensure that the plight of these investors is not ignored amid potential cross-border legal battles.
On Oct 2, Mr Gerard Ee, Mr Hwang Soo Jin and Mr Law Song Keng were appointed by distributors of structured products such as Minibonds, Merrill Lynch Jubilee Series 3LinkEarner Notes and DBS High Notes 5 to oversee their complaints handling processes.
All three said they were working closely with the financial institutions to ensure fair and prompt resolution of complaints by investors.
REPLY
I hope that MAS will also ask Mr. Davinder Singh to see if there were any wrong doing committed by Lehman Brothers in the creation of these products. Did they breach the requirements of the Securities & Futures Act to provide relevant information on the product for the investors to make a proper assessment, or were any material information omitted?
Auction Rate Securities
Extract from New York Times:
http://www.nytimes.com/2008/11/30/business/30gret.html?_r=1&pagewanted=print
Auction-rate securities are preferred shares or debt instruments with rates that reset regularly, usually every week, in auctions overseen by the brokerage firms that originally sold them. They have long-term maturities or, in the case of the preferred shares, no maturity dates at all. The securities are issued by municipalities, student-loan companies, closed-end funds and tax-exempt institutions like hospitals and museums.
Brokers that peddled these securities told buyers that they were cash equivalents, easy to get out of and relatively safe. But the promises of liquidity turned false last February when buyers for the securities disappeared and the auctions began failing. The $300 billion market for auction-rates ground to a halt, entrapping thousands of investors both large and small, sophisticated and novice.
Officials in Massachusetts, New York and other states came to the rescue earlier this year, striking settlements with some of the bigger brokerage firms in the arena.
But while some of the larger firms agreed to redeem the securities, not everyone is covered by those agreements. A group of people, size unknown, has fallen through the cracks in the settlements, and for several quirky reasons. They remain frozen in the securities and understandably upset.
http://www.nytimes.com/2008/11/30/business/30gret.html?_r=1&pagewanted=print
Auction-rate securities are preferred shares or debt instruments with rates that reset regularly, usually every week, in auctions overseen by the brokerage firms that originally sold them. They have long-term maturities or, in the case of the preferred shares, no maturity dates at all. The securities are issued by municipalities, student-loan companies, closed-end funds and tax-exempt institutions like hospitals and museums.
Brokers that peddled these securities told buyers that they were cash equivalents, easy to get out of and relatively safe. But the promises of liquidity turned false last February when buyers for the securities disappeared and the auctions began failing. The $300 billion market for auction-rates ground to a halt, entrapping thousands of investors both large and small, sophisticated and novice.
Officials in Massachusetts, New York and other states came to the rescue earlier this year, striking settlements with some of the bigger brokerage firms in the arena.
But while some of the larger firms agreed to redeem the securities, not everyone is covered by those agreements. A group of people, size unknown, has fallen through the cracks in the settlements, and for several quirky reasons. They remain frozen in the securities and understandably upset.
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