Hong Kong investor gets help from the Consumer Council

This investor sues Citibank with help from the Legal Action Fund of the Consumer Council of Hong Kong. I hope that Singapore can offer the same service to our people.

25 Sep 2009

Citibank has become the first financial institution to be taken to court by the Consumer Council over the Lehman minibonds saga.

And the case of nurse Chan Mei-ying may open the way for an avalanche: the council is readying more than 100 other cases with potential for court action.

Chan, backed by the watchdog's legal action fund, is suing Citibank on the grounds it misrepresented the nature and risk of a financial product. She claims to have lost HK$500,000 on her investment.

In the writ filed with the District Court, Chan claims bank staff told her the product was "very similar to a fixed deposit," with a yearly interest of about 4 percent. She says she was also told any potential loss would be less than HK$100,000 even if the stock market fell by half.

A Citibank manager filled out a risk profile in 2008 on her behalf. She was classified as an "active and experienced investor" with "aggressive" investment objectives and risk tolerance.

A spokesman for the Consumer Council said it is processing 120 other cases involving Lehman products that may end up in court.

Investors in 20 cases have decided not to pursue litigation.

According to the writ issued to the Citibank Taikoo Place branch, Chan became a customer in 1998, and about a year later a Virginia Yee Chung-nga became her relationship manager. Chan became a CitiGold client in 2004, and two or three years later an Elina Lau became her CitiGold relationship manager. Chan claimed she considered Yee and Lau as her investment advisers, and both recommended investments from time to time.

In 2007, Chan said, Lau described her as a "low" to "moderate" investor in a risk assessment. But Chan claimed she was not given a copy of the document. In January last year, Lau told Chan that the term on her fixed deposit of HK$400,000 had expired and invited her to discuss her investment plan.

Chan said she met Lau the same afternoon and was persuaded to subscribe to a Lehman equity-linked note. Chan invested HK$500,000 in the paper.

Chan claimed she was not told of a high risk or the potential interest rate of the product, which could be as much as 31 percent. But she was told she would have "lost a good opportunity" if she did not subscribe before the deadline. On September 15 last year, Chan said she was shocked to discover the huge loss when Lau called to say the note was negative in value owing to the collapse of Lehman Brothers.

Chan accuses the bank of a breach of duty and is claiming damages, interest and costs.