SCMP:Investors set for legal fight over lost millions

30 July 2009

The legal sector is bracing for a flood of litigation as a growing number of investors take their bankers to court in efforts to recover huge losses resulting from high-risk financial products.

On Tuesday, 77-year-old Chan Wai-yee filed a writ and statement of claim against Swiss-based investment bank UBS for allegedly advising her to buy an equity accumulator package which resulted in her losing HK$260 million.

Solicitor Bonita Chan Bow-ye of Hastings & Co, the law firm which represents the elderly Chan, said yesterday the company is also handling several other similar cases, and that it was likely more investors will follow suit.

``After seeing some investors taking their cases to court, others who are in a similar situation may consider doing the same, so it's very likely we will see more lawsuits concerning these high- risk financial products,'' Bonita Chan said.

A senior partner of ONC Lawyers, Ludwig Ng Siu-wing, told The Standard he is now handling several cases involving mainland investors who claim they had been advised by their Hong Kong bankers to buy equity accumulators months before last year's market crunch, resulting in losses totaling tens of millions of dollars.

However, Ng said not many law firms were willing to handle such cases, as they not only involved the novelty of financial products but also the potential conflict of interest between the banks and the law firms.

``Equity accumulators have become common only in the past few years, and the subject is still quite new to some lawyers,'' Ng said. ``In addition, several major law firms have close business ties with the banks, such as preparing legal documents for mortgages, and such firms may be reluctant to take up such cases.''

Ng said minibond investors were a different matter.

``Equity accumulators are for experienced investors, and where the transaction is through private bankers who normally serve only the very rich. It also means their investments in the accumulator would be huge, running into tens of millions of dollars. So those investors are a completely different group from those who subscribed to minibonds,'' Ng explained.

Last week, the Securities and Futures Commission announced a settlement with 16 banks for them to buy back all outstanding Lehman Brothers minibonds at 60 to 70 percent of their original value. The deal reached put an end to a 10-month saga.

Solicitor Henry Chiu Tuen-ting of Henry Chiu & Partners said the key element in such disputes would be whether the banks clearly explained and honestly disclosed the possible upside and downside of the stock market.