I will be speaking at Speaker's Corner on Saturday 15 November at 5 p.m. I will give an update about the three petitions that have been lodged with the Monetary Authority of Singapore and also give a response to the remark by a Government leader that the investors went in with their "eyes open". Mr. Goh Meng Seng will translate my speech into Chinese.
I like to ask the investors to bring your family and friends to attend this meeting, so that we can have a larger crowd than before.
Tuesday, November 11, 2008
Sunday Times article on Petitions
Tan Dawn Wei of the Sunday Times asked the following questions about the use of petitions in Singapore. My reply to the journalist is set out below. She only used some replies that are more suitable for her purpose.
1. Why did you choose to use petitions to call for action?
Reply: I used the online petition as a convenient way to gather the signatures of the people who are affected by the credit linked notes to ask the Government to take the appropriate actions. I hope that a large number of signatures will make a difference in getting the Government to be aware about the strong support for the proposed actions. This is in contrast to writing a letter to be newspaper, as the letter reflects the view of one person, and is likely to be ignored. The letter may not be printed by the newspaper due to lack of space.
Another way to express the strong views is to organise a protest rally or demonstration. However, it is illegal in Singapore to organise such an activity without a police permit. It takes a lot of trouble to get a police permit and the applicaiton is likely to be rejected. It take a lot of effort to organise a rally anyway.
2. Did you think it would be the most effective method to push for action and that the authorities would take heed, given petitions have not typically figured in the Government's decision-making process?
Reply: It is disappointing that the Government ignore petitions that have been signed by a large number of people. I think that it is not proper for the recipient of a petition to behave in this manner, as this reflects arrogance. At the very least, the recipient should meet with the represenatives of the signatories to have a dialogue and discussion.
I am not deterred by the negative response. I will continue to gather signatures for future petitions to ask the Government to do "the right thing". The Government should realise that people in Singapore are generally afraid to sign a petition as they do not wish to be seen to be disagreeing with the Government on its decision. For the signatories to muster the courage to sign the petition and provide their name and other particulars (such as NRIC, address or contact number), it must reflect a strong grievance that should be addressed.
3. Do you think the petitions you initiated had any bearing on the decisions made by MAS?
Reply: I have not received any communication from the MAS on the three petitions that have been lodged with them. They also do not wish to meet with me to discuss the petitions or to seek clarification. I suspect that these petitions have also been ignored.
4. What do you think the seemingly increasing number of petitions (eg. Serangoon Gardens, repeal 377A) we're seeing says about the Singapore psyche?
Reply: It reflects that people feel strongly on several issues and the existing channels to express these views are not effective. The internet allows them to communicate and reach out to other people who feel strongly about these issues, so that they can get together to express their collective views. It reflects the power of the internet as a new medium for the affected people to come together to express their grievances and to seek solutions.
1. Why did you choose to use petitions to call for action?
Reply: I used the online petition as a convenient way to gather the signatures of the people who are affected by the credit linked notes to ask the Government to take the appropriate actions. I hope that a large number of signatures will make a difference in getting the Government to be aware about the strong support for the proposed actions. This is in contrast to writing a letter to be newspaper, as the letter reflects the view of one person, and is likely to be ignored. The letter may not be printed by the newspaper due to lack of space.
Another way to express the strong views is to organise a protest rally or demonstration. However, it is illegal in Singapore to organise such an activity without a police permit. It takes a lot of trouble to get a police permit and the applicaiton is likely to be rejected. It take a lot of effort to organise a rally anyway.
2. Did you think it would be the most effective method to push for action and that the authorities would take heed, given petitions have not typically figured in the Government's decision-making process?
Reply: It is disappointing that the Government ignore petitions that have been signed by a large number of people. I think that it is not proper for the recipient of a petition to behave in this manner, as this reflects arrogance. At the very least, the recipient should meet with the represenatives of the signatories to have a dialogue and discussion.
I am not deterred by the negative response. I will continue to gather signatures for future petitions to ask the Government to do "the right thing". The Government should realise that people in Singapore are generally afraid to sign a petition as they do not wish to be seen to be disagreeing with the Government on its decision. For the signatories to muster the courage to sign the petition and provide their name and other particulars (such as NRIC, address or contact number), it must reflect a strong grievance that should be addressed.
3. Do you think the petitions you initiated had any bearing on the decisions made by MAS?
Reply: I have not received any communication from the MAS on the three petitions that have been lodged with them. They also do not wish to meet with me to discuss the petitions or to seek clarification. I suspect that these petitions have also been ignored.
4. What do you think the seemingly increasing number of petitions (eg. Serangoon Gardens, repeal 377A) we're seeing says about the Singapore psyche?
Reply: It reflects that people feel strongly on several issues and the existing channels to express these views are not effective. The internet allows them to communicate and reach out to other people who feel strongly about these issues, so that they can get together to express their collective views. It reflects the power of the internet as a new medium for the affected people to come together to express their grievances and to seek solutions.
Call to the Government to be fair to the affected persons
Dear Mr. Tan,
I am writing to commend you, as many before me had, for the care and bravery you have displayed in giving a much-needed helping hand and direction to thousands of aggrieved investors. I personally have not invested in these investments but unfortunately my homemaker wife have in the above said notes. To be honest, we cannot be said to be in the vulnerable category as defined by the FIs. But neither are we high risk investors, never going beyond stocks, shares and properties.
We take responsibilty for a lapse of care and caution in not fully realising the extent of the risks and toxidity of these notes, partly because the returns do not commensurate these. We also were lulled into comfort of its officialdom and apparent similarity in process to the equity market by the fact that CDP is the official custodian for these notes.
We regretted for not receiving or asking for a risk review by the distributors or a copy of the Prospectus before we signed up for the purchase. For sure the implication of the most damaging and hitherto unfamiliar term of "first-to-default" credit event, in the nature of a total loss on the weakest link, was lost in us and had this been emphasised to us, I am quite certain that the risk-return will not be accepatble to me.
Under this situation, I had not lodged a complaint to the the FI or signed any petition, as I could not with clear conscience alleged no-responsibilty on my part. But I have been following closely what's going on through your website in particular.
I believe there are many aggrieved investors in a similar position as mine. Having absorbed all the comments and opinions by investors, MAS and the senior-level ministers (including the damning comments by MM), the first strong impression is that our authorities is taking us to task on the grounds that we signed the sales documents on our own will and "caveat emptor" applies. Case closed as far as our ministers are concerned.
By doing this, MAS and the authorities are without solid evidence taking sides, in the favour of the FIs. This is unaccepatble coming from a supposedly popularly-elected govt who should a fiduciary responsibilty for the care of its people.
In fact this riles me and spurs me now not to want to call it quits. Why? I don't expect the government to provide financial subsidy for our losses nor to take the sides with the investors just because they are citizens. If we have made a wrong and bad investment decision, we take what comes with it. But it doesn't absolve the FIs from any wrongs they might have committed. Then the most decent thing we should expect from our govt is to embark on an independent investigation to verify if there have been any wrongdoings by the FIs.
We the investors are not in the position in technical and financial capability and authority to conduct this on our own if we deal with the FIs on case by csae basis.
In this respect, an investigation should be addressed at the least the following:
1) design, structure, pricing and comission /fee income of these products,
2) the ill intent and motive of the originators in introducing these products, especially whether there is ill or even fraudulent intent in scheming to lay off to the unknowing public risks embedded in substantially subprime exposures which could be anticipated by the originators to deteriorate in credit quality in short time after the sales
3) the callousness and carelessness of the distributors in the marketing and selling of such complex and risky products to retail investors, and the use of unqualified and poorly trained sales staff to engage in mass selling on a brochure-based mode. A test is whether if the sales staff were in fact well equipped to counsel intending investors adequately on the complexities and high risk nature of the products.
4) whether the marketing brochure was designed with an intent to mislead the investing public on a "No Ask No Tell" approach and focuses on better returns and the strong rating of the reference companies while downplaying on the real toxidities.
Now if an investigation indeed reveals negative revelations against these FIs, then they ought to be taken to task, fined and penalised to compensate investors, as had happened in othe jurisdictions. As you had said before, sharing (rather than taking full) responsibilty and pain with the investors will be satisfying to most investors.
I wonder if you think you will re-focus or redirect the petitioning along this line and if so whether you will talk about it at this Saturday's session at the Speakers Corner.
If you wish to develop this approach further and want me to contact you, please let me know by return email.
SB
REPLY
The first Petition sent in early October asked the Government to carry out an independent investigation into the possible wrong doings by the financial institutions that created or marketed these credit linked securities, and to take the appropriate action against these financial institutions, including seeking fair compensation for the losses suffered by the affected persons.
I have been disappointed by the lack of information from the Government on this matter, although they appear to be taking some action on behalf of the "vulnerable" investors. The other investors are left to fend on their own to face the financial institutions who are now emboldened by the remarks by our Government leaders.
I am writing to commend you, as many before me had, for the care and bravery you have displayed in giving a much-needed helping hand and direction to thousands of aggrieved investors. I personally have not invested in these investments but unfortunately my homemaker wife have in the above said notes. To be honest, we cannot be said to be in the vulnerable category as defined by the FIs. But neither are we high risk investors, never going beyond stocks, shares and properties.
We take responsibilty for a lapse of care and caution in not fully realising the extent of the risks and toxidity of these notes, partly because the returns do not commensurate these. We also were lulled into comfort of its officialdom and apparent similarity in process to the equity market by the fact that CDP is the official custodian for these notes.
We regretted for not receiving or asking for a risk review by the distributors or a copy of the Prospectus before we signed up for the purchase. For sure the implication of the most damaging and hitherto unfamiliar term of "first-to-default" credit event, in the nature of a total loss on the weakest link, was lost in us and had this been emphasised to us, I am quite certain that the risk-return will not be accepatble to me.
Under this situation, I had not lodged a complaint to the the FI or signed any petition, as I could not with clear conscience alleged no-responsibilty on my part. But I have been following closely what's going on through your website in particular.
I believe there are many aggrieved investors in a similar position as mine. Having absorbed all the comments and opinions by investors, MAS and the senior-level ministers (including the damning comments by MM), the first strong impression is that our authorities is taking us to task on the grounds that we signed the sales documents on our own will and "caveat emptor" applies. Case closed as far as our ministers are concerned.
By doing this, MAS and the authorities are without solid evidence taking sides, in the favour of the FIs. This is unaccepatble coming from a supposedly popularly-elected govt who should a fiduciary responsibilty for the care of its people.
In fact this riles me and spurs me now not to want to call it quits. Why? I don't expect the government to provide financial subsidy for our losses nor to take the sides with the investors just because they are citizens. If we have made a wrong and bad investment decision, we take what comes with it. But it doesn't absolve the FIs from any wrongs they might have committed. Then the most decent thing we should expect from our govt is to embark on an independent investigation to verify if there have been any wrongdoings by the FIs.
We the investors are not in the position in technical and financial capability and authority to conduct this on our own if we deal with the FIs on case by csae basis.
In this respect, an investigation should be addressed at the least the following:
1) design, structure, pricing and comission /fee income of these products,
2) the ill intent and motive of the originators in introducing these products, especially whether there is ill or even fraudulent intent in scheming to lay off to the unknowing public risks embedded in substantially subprime exposures which could be anticipated by the originators to deteriorate in credit quality in short time after the sales
3) the callousness and carelessness of the distributors in the marketing and selling of such complex and risky products to retail investors, and the use of unqualified and poorly trained sales staff to engage in mass selling on a brochure-based mode. A test is whether if the sales staff were in fact well equipped to counsel intending investors adequately on the complexities and high risk nature of the products.
4) whether the marketing brochure was designed with an intent to mislead the investing public on a "No Ask No Tell" approach and focuses on better returns and the strong rating of the reference companies while downplaying on the real toxidities.
Now if an investigation indeed reveals negative revelations against these FIs, then they ought to be taken to task, fined and penalised to compensate investors, as had happened in othe jurisdictions. As you had said before, sharing (rather than taking full) responsibilty and pain with the investors will be satisfying to most investors.
I wonder if you think you will re-focus or redirect the petitioning along this line and if so whether you will talk about it at this Saturday's session at the Speakers Corner.
If you wish to develop this approach further and want me to contact you, please let me know by return email.
SB
REPLY
The first Petition sent in early October asked the Government to carry out an independent investigation into the possible wrong doings by the financial institutions that created or marketed these credit linked securities, and to take the appropriate action against these financial institutions, including seeking fair compensation for the losses suffered by the affected persons.
I have been disappointed by the lack of information from the Government on this matter, although they appear to be taking some action on behalf of the "vulnerable" investors. The other investors are left to fend on their own to face the financial institutions who are now emboldened by the remarks by our Government leaders.
Business Times: Look at pricing structure, risk disclosure too
11 Nov 2008
By OH BOON PING
LAST month, DBS Bank agreed to return up to $80 million to investors who were mis-sold the DBS High Notes 5 series - a welcome move by many. But as the saga continues, public attention should be paid not just to the way products were mis-sold, but also the pricing structure and risk disclosures involved.
To recap, the note is a 5.5 year credit-linked series that pays 5 per cent annual premium on the Singdollar tranche with an underlying 'default' basket of eight securities including the now collapsed Lehman Brothers. If either of the reference entities undergoes a credit event - such as bankruptcy, this means that investors who bought the notes will receive only the net market value of only the underlying securities tied to the defaulting entity.
In a sense, they have become insurers against the total credit risks of the underlying basket in exchange for 5 per cent premium each year on the Singdollar tranche.
And this raises the question: is the interest payment fair given the types of risks involved? Indeed, if we assume that the chances of entities hitting a 'credit' event are mutually independent and equal, this means that investors are paid 5 per cent annually to insure against a total credit risk that is eight times that of one reference entity - scant compensation by any measure.
Yes, all the entities had strong ratings of between BBB+ and AA- when the notes were structured, and the issuer can point to those ratings as evidence that a low interest payout is fair.
Identical insurance
However, it is conceivable that the long counterparty may have to cough out a lot more in premiums if he had bought an identical insurance from general insurance firms with diversified portfolios of insurance assets.
A second issue concerns the level of professionalism among the relationship managers. Not only was product structure not properly explained to some investors, but the investments were sometimes sold to clients who did not have the risk appetite for them.
This is clear from the several cases of mis-selling, where High Notes 5 were sold to 'low-risk tolerance' investors who should not have bought the product in the first place.
In some cases, even the relationship managers did not understand the products but continued to market them to clients, according to some reports.
This is a serious breach of professional conduct since industry best practices dictate that those providing client advisory services have a duty of ensuring that only suitable investment products are recommended to clients, and related information should be transmitted accurately.
What the episode illustrates is that financial advisory standards still leave much to be desired among some local banks and brokers.
A third issue relates to the disclosure of market information on those structured products. Unlike stocks, structured products are not openly traded in a liquid secondary market and investors have no means of getting the latest market data or information except by calling their relationship managers.
The result? Investors have no means of making timely investment decisions, and this may hurt them in volatile market conditions like now.
For example, a check on the Bloomberg showed that spreads on Lehman's five-year senior credit default swap in US dollars had risen rapidly to a few hundred basis points in recent months, while credit spreads widened steadily over the same horizon.
Amending the rules
However, as most investors did not have access to such information, they may end up holding on to a depreciating asset instead of cutting losses.
Therefore, financial regulators may wish to consider amending the rules to require issuers to release such vital market information.
Already, the push for more disclosure in gaining momentum elsewhere, like when the Depository Trust & Clearing Corp said it will now release weekly credit-default-swap data, and similar moves should also be made in Singapore.
Institutional issuers have a duty of ensuring greater transparency, as individual investors deserve no less.
By OH BOON PING
LAST month, DBS Bank agreed to return up to $80 million to investors who were mis-sold the DBS High Notes 5 series - a welcome move by many. But as the saga continues, public attention should be paid not just to the way products were mis-sold, but also the pricing structure and risk disclosures involved.
To recap, the note is a 5.5 year credit-linked series that pays 5 per cent annual premium on the Singdollar tranche with an underlying 'default' basket of eight securities including the now collapsed Lehman Brothers. If either of the reference entities undergoes a credit event - such as bankruptcy, this means that investors who bought the notes will receive only the net market value of only the underlying securities tied to the defaulting entity.
In a sense, they have become insurers against the total credit risks of the underlying basket in exchange for 5 per cent premium each year on the Singdollar tranche.
And this raises the question: is the interest payment fair given the types of risks involved? Indeed, if we assume that the chances of entities hitting a 'credit' event are mutually independent and equal, this means that investors are paid 5 per cent annually to insure against a total credit risk that is eight times that of one reference entity - scant compensation by any measure.
Yes, all the entities had strong ratings of between BBB+ and AA- when the notes were structured, and the issuer can point to those ratings as evidence that a low interest payout is fair.
Identical insurance
However, it is conceivable that the long counterparty may have to cough out a lot more in premiums if he had bought an identical insurance from general insurance firms with diversified portfolios of insurance assets.
A second issue concerns the level of professionalism among the relationship managers. Not only was product structure not properly explained to some investors, but the investments were sometimes sold to clients who did not have the risk appetite for them.
This is clear from the several cases of mis-selling, where High Notes 5 were sold to 'low-risk tolerance' investors who should not have bought the product in the first place.
In some cases, even the relationship managers did not understand the products but continued to market them to clients, according to some reports.
This is a serious breach of professional conduct since industry best practices dictate that those providing client advisory services have a duty of ensuring that only suitable investment products are recommended to clients, and related information should be transmitted accurately.
What the episode illustrates is that financial advisory standards still leave much to be desired among some local banks and brokers.
A third issue relates to the disclosure of market information on those structured products. Unlike stocks, structured products are not openly traded in a liquid secondary market and investors have no means of getting the latest market data or information except by calling their relationship managers.
The result? Investors have no means of making timely investment decisions, and this may hurt them in volatile market conditions like now.
For example, a check on the Bloomberg showed that spreads on Lehman's five-year senior credit default swap in US dollars had risen rapidly to a few hundred basis points in recent months, while credit spreads widened steadily over the same horizon.
Amending the rules
However, as most investors did not have access to such information, they may end up holding on to a depreciating asset instead of cutting losses.
Therefore, financial regulators may wish to consider amending the rules to require issuers to release such vital market information.
Already, the push for more disclosure in gaining momentum elsewhere, like when the Depository Trust & Clearing Corp said it will now release weekly credit-default-swap data, and similar moves should also be made in Singapore.
Institutional issuers have a duty of ensuring greater transparency, as individual investors deserve no less.
Monday, November 10, 2008
SCMP:Time to reconsider class action lawsuits
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=B9JBGSP78WP8&linkid=3e7f0a20-5c7e-451d-aff0-65d68033f226&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
11 Nov 2008
Frank Ching is a Hong Kong-based writer and commentator. frank.ching@scmp.com
Hong Kong lacks a legal tool that is available to people in the US and Australia, as well as certain European jurisdictions – that of the class action lawsuit. A class action lawsuit is one where a large number of people collectively bring a claim to court. One advantage is that a single class action lawsuit aggregates a large number of individual claims into one representational lawsuit. It can save time and money.
The situation stemming from the bankruptcy of Lehman Brothers is a case in point. Some 43,000 local people have invested in Lehman products, mostly minibonds. The court system cannot possibly handle thousands, or even hundreds, of cases.
There are also many small investors who cannot afford to go to court, or the size of their investments simply does not justify the legal expenses involved in a court case.
Being able to take a class action lawsuit makes a huge difference. It enables individuals, who only stand to recover a small amount, to act together and assert their legal rights. Often, an individual cannot take legal action because the costs would be greater than the amount he or she could recover.
Hong Kong has never allowed class action lawsuits, primarily because it is almost always done on a contingency fee basis. That is to say, lawyers do not get paid if they lose and get a percentage if they win.
In principle, there is nothing wrong with this system. The fact that lawyers do not get paid if they lose means that even individuals without deep pockets can afford to be part of a class action lawsuit, because there is no outlay of money involved. If they lose the case, they haven’t lost any additional funds and, if they win, it is a windfall that they could not have expected otherwise.
Another criticism sometimes made is that class actions combined with conditional fees result in greater litigiousness. But this may simply reflect the fact that more people have access to legal justice as a result of this avenue being opened.
The fact that lawyers aren’t paid if they lose means that they are much more likely to pick only cases that they believe have merit. It should not result in many frivolous cases, because the lawyers themselves would stand to lose.
Critics also point to the fact that, in US style class action lawsuits, huge amounts of money is sometimes awarded by judges to the plaintiffs.
But this, like the contingency fee system, is something that can be governed by legislation. Surely, legal minds in Hong Kong’s Department of Justice, the Financial Services Bureau and the legislature are capable of devising legislation that will enable Hong Kong to benefit from class action lawsuits and, at the same time, minimise what are considered to be the unsatisfactory features of such actions.
While class action lawsuits have not been widely adopted in Europe, it is interesting to note that certain countries have found this a useful tool in the area of consumer protection. In Austria, for example, consumer organisations have in recent years brought claims on behalf of hundreds or even thousands of people, resulting in a significant reduction in overall costs.
In France, the law allows an association to represent the collective interests of consumers. But, in a lawsuit, each claimant must be individually named, which is not the case with class action cases in the US.
The bankruptcy of Lehman Brothers has already resulted in class action lawsuits in America, one by investors who purchased Lehman Preferred Series “J” stock shares and one by former employees who claim that – contrary to the law – they had not received payment for 60 days.
In Hong Kong, a class action lawsuit would most likely be against one of the banks that distributed Lehman products. There have been so many claims of “misselling” that thousands might benefit – if only such lawsuits were allowed here.
11 Nov 2008
Frank Ching is a Hong Kong-based writer and commentator. frank.ching@scmp.com
Hong Kong lacks a legal tool that is available to people in the US and Australia, as well as certain European jurisdictions – that of the class action lawsuit. A class action lawsuit is one where a large number of people collectively bring a claim to court. One advantage is that a single class action lawsuit aggregates a large number of individual claims into one representational lawsuit. It can save time and money.
The situation stemming from the bankruptcy of Lehman Brothers is a case in point. Some 43,000 local people have invested in Lehman products, mostly minibonds. The court system cannot possibly handle thousands, or even hundreds, of cases.
There are also many small investors who cannot afford to go to court, or the size of their investments simply does not justify the legal expenses involved in a court case.
Being able to take a class action lawsuit makes a huge difference. It enables individuals, who only stand to recover a small amount, to act together and assert their legal rights. Often, an individual cannot take legal action because the costs would be greater than the amount he or she could recover.
Hong Kong has never allowed class action lawsuits, primarily because it is almost always done on a contingency fee basis. That is to say, lawyers do not get paid if they lose and get a percentage if they win.
In principle, there is nothing wrong with this system. The fact that lawyers do not get paid if they lose means that even individuals without deep pockets can afford to be part of a class action lawsuit, because there is no outlay of money involved. If they lose the case, they haven’t lost any additional funds and, if they win, it is a windfall that they could not have expected otherwise.
Another criticism sometimes made is that class actions combined with conditional fees result in greater litigiousness. But this may simply reflect the fact that more people have access to legal justice as a result of this avenue being opened.
The fact that lawyers aren’t paid if they lose means that they are much more likely to pick only cases that they believe have merit. It should not result in many frivolous cases, because the lawyers themselves would stand to lose.
Critics also point to the fact that, in US style class action lawsuits, huge amounts of money is sometimes awarded by judges to the plaintiffs.
But this, like the contingency fee system, is something that can be governed by legislation. Surely, legal minds in Hong Kong’s Department of Justice, the Financial Services Bureau and the legislature are capable of devising legislation that will enable Hong Kong to benefit from class action lawsuits and, at the same time, minimise what are considered to be the unsatisfactory features of such actions.
While class action lawsuits have not been widely adopted in Europe, it is interesting to note that certain countries have found this a useful tool in the area of consumer protection. In Austria, for example, consumer organisations have in recent years brought claims on behalf of hundreds or even thousands of people, resulting in a significant reduction in overall costs.
In France, the law allows an association to represent the collective interests of consumers. But, in a lawsuit, each claimant must be individually named, which is not the case with class action cases in the US.
The bankruptcy of Lehman Brothers has already resulted in class action lawsuits in America, one by investors who purchased Lehman Preferred Series “J” stock shares and one by former employees who claim that – contrary to the law – they had not received payment for 60 days.
In Hong Kong, a class action lawsuit would most likely be against one of the banks that distributed Lehman products. There have been so many claims of “misselling” that thousands might benefit – if only such lawsuits were allowed here.
SCMP:Two investors reach settlement with bank before court case
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=S33X9O24V0U1&linkid=7aac9ac7-b998-4329-ab61-9627f56aa246&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
11 Nov 2008
Amy Nip
Two investors in Lehman Brothers derivatives who filed a case seeking refunds reached settlements with Wing Lung Bank yesterday, saying they will dismiss their suit after they receive compensation.
They were among the five investors who filed lawsuits on Thursday with the Small Claims Tribunal against Wing Lung Bank, Citic Ka Wah Bank and Mevas Bank. The cases are to be heard on December 29.
One of the investors, a 71-year-old surnamed Ting, said he was satisfied with the settlement, but refused to reveal details. He said his confidence in banks had been restored and that he would continue to use Wing Lung Bank’s services.
In 2004, Mr Ting invested HK$ 40,000 in Lehman Brotherslinked minibonds. He said the bank’s staff had misled him into thinking minibonds were like fixed deposits, and were backed by “sound and famous companies in the world”.
Meanwhile, other investors reached settlements with the Bank of China. Most of them were more than 65 years old and had invested tens of thousands of dollars in more than HK$1million worth of Lehman-related derivatives.
The Hong Kong Association of Banks’ taskforce on Lehman derivative products published full-page advertisements in several newspapers, restating that it would give priority to cases involving customers aged 65 or older.
“We will continue to file cases with the Small Claims Tribunal and District Courts,” said Democratic Party legislator Kam Nai-wai, who has been helping investors pursue their cases. The party will file up to 10 cases this week.
He said banks were too passive in reaching settlementsand legal action would speed up the process.
Democratic Sha Tin district councillor Michael Yung Ming-chau, who had assisted Mr Ting, said it would be a win-win situation for investors and banks if they could settle before facing each other in court. “ Banks shouldn’t deal with the cases only after they see [plaintiff’s] lawyers.”
11 Nov 2008
Amy Nip
Two investors in Lehman Brothers derivatives who filed a case seeking refunds reached settlements with Wing Lung Bank yesterday, saying they will dismiss their suit after they receive compensation.
They were among the five investors who filed lawsuits on Thursday with the Small Claims Tribunal against Wing Lung Bank, Citic Ka Wah Bank and Mevas Bank. The cases are to be heard on December 29.
One of the investors, a 71-year-old surnamed Ting, said he was satisfied with the settlement, but refused to reveal details. He said his confidence in banks had been restored and that he would continue to use Wing Lung Bank’s services.
In 2004, Mr Ting invested HK$ 40,000 in Lehman Brotherslinked minibonds. He said the bank’s staff had misled him into thinking minibonds were like fixed deposits, and were backed by “sound and famous companies in the world”.
Meanwhile, other investors reached settlements with the Bank of China. Most of them were more than 65 years old and had invested tens of thousands of dollars in more than HK$1million worth of Lehman-related derivatives.
The Hong Kong Association of Banks’ taskforce on Lehman derivative products published full-page advertisements in several newspapers, restating that it would give priority to cases involving customers aged 65 or older.
“We will continue to file cases with the Small Claims Tribunal and District Courts,” said Democratic Party legislator Kam Nai-wai, who has been helping investors pursue their cases. The party will file up to 10 cases this week.
He said banks were too passive in reaching settlementsand legal action would speed up the process.
Democratic Sha Tin district councillor Michael Yung Ming-chau, who had assisted Mr Ting, said it would be a win-win situation for investors and banks if they could settle before facing each other in court. “ Banks shouldn’t deal with the cases only after they see [plaintiff’s] lawyers.”
SCMP:Legco likely to pass bill on minibond investigation
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=S33X9O24V0U1&linkid=992866db-c5c3-452b-8569-ab7277217713&pdaffid=8HM4kDzWViwfc7AqkYlqIQ%3d%3d
11 Nov 2008
Ambrose Leung Fanny W. Y. Fung
Lawmakers look likely to pass a resolution tomorrow invoking their special powers to investigate the Lehman Brothers saga, as intense lobbying from small investors increased the pressure on them.
The marked softening of the Democratic Alliance for the Betterment and Progress of Hong Kong, whose support would ensure the resolution’s safe passage, seemed to increase the likelihood the step would be taken, with some officials privately admitting that the inquiry was a foregone conclusion.
But bankers – who would probably be summoned before a Legco subcommittee if lawmakers passed the resolution – made a last-ditch effort to prevent that step.
In a letter to his Legco colleagues, finance sector lawmaker David Li Kwok-po warned that banks’ efforts to buy back minibonds and other investment products from affected investors could be hindered if the Legco’s Powers and Privileges Ordinance were invoked.
“Bringing the wide powers of the ordinance to bear and subjecting the banks to what amounts to unlimited power to demand documents and the appearance of bank mangers before the subcommittee will only draw resources away,” Dr Li said.
Other bankers voiced similar concerns in a full-page advertisement posted in local newspapers yesterday.
Saying many minibond holders seeking compensation had actually “ entered into contracts with full knowledge of the risk involved”, Dr Li warned that Hong Kong’s status as an international financial centre could also be damaged if foreign banks’ confidential commercial information surfaced during a Legco inquiry.
But with a majority of directly elected lawmakers supporting the move, and the required margin of support from functional constituency legislators just one or two votes away, it appeared likely that bankers’ hopes would be dashed after what was expected to be a lengthy debate tomorrow.
At present, the pan-democrats and trade unionists, plus the three Liberal Party members and some independents support the resolution.
The decision by the DAB will be crucial.
DAB leaders conceded that most the investors wanted a special inquiry. That came after about 200 people who had bought Lehman Brothersrelated investment products protested at the party’s headquarters, urging the party to support the resolution.
They chanted slogans and displayed placards, with three women in the crowd kneeling in front of party vice- chairwoman Ann Chiang Lai-wan to beg for help.
After receiving 1,850 signatures from the investors, DAB chairman Tam Yiu-chung told them that the party had to handle the matter cautiously, taking into consideration the progress achieved in recent days and whether such an investigation would prolong the compensation process.
The party will decide how its nine lawmakers will vote tonight.
Some independent lawmakers who have yet to make up their minds have also shown signs of supporting the resolution.
“I am inclined to support the victims. They have lost all of their savings. What else can legislators do to help them?” said Heung Yee Kuk leader Lau Wong-fat, who declined to say how he would vote.
Meanwhile, a government source said “the battle has already been lost” and further lobbying would be pointless because the DAB was likely to back the resolution.
“It is not the end of the world. The government has nothing to hide.”
Civic Party leader Audrey Eu Yuet- mee, who launched a mass e-mail campaign for the investors to petition lawmakers in support of the resolution, dismissed bankers’ concerns that invoking Legco’s special investigative powers would slow down the compensation process.
Minibonds are not corporate bonds, but consist of high-risk creditlinked derivatives. They are sold as a proxy investment in well- known firms.
11 Nov 2008
Ambrose Leung Fanny W. Y. Fung
Lawmakers look likely to pass a resolution tomorrow invoking their special powers to investigate the Lehman Brothers saga, as intense lobbying from small investors increased the pressure on them.
The marked softening of the Democratic Alliance for the Betterment and Progress of Hong Kong, whose support would ensure the resolution’s safe passage, seemed to increase the likelihood the step would be taken, with some officials privately admitting that the inquiry was a foregone conclusion.
But bankers – who would probably be summoned before a Legco subcommittee if lawmakers passed the resolution – made a last-ditch effort to prevent that step.
In a letter to his Legco colleagues, finance sector lawmaker David Li Kwok-po warned that banks’ efforts to buy back minibonds and other investment products from affected investors could be hindered if the Legco’s Powers and Privileges Ordinance were invoked.
“Bringing the wide powers of the ordinance to bear and subjecting the banks to what amounts to unlimited power to demand documents and the appearance of bank mangers before the subcommittee will only draw resources away,” Dr Li said.
Other bankers voiced similar concerns in a full-page advertisement posted in local newspapers yesterday.
Saying many minibond holders seeking compensation had actually “ entered into contracts with full knowledge of the risk involved”, Dr Li warned that Hong Kong’s status as an international financial centre could also be damaged if foreign banks’ confidential commercial information surfaced during a Legco inquiry.
But with a majority of directly elected lawmakers supporting the move, and the required margin of support from functional constituency legislators just one or two votes away, it appeared likely that bankers’ hopes would be dashed after what was expected to be a lengthy debate tomorrow.
At present, the pan-democrats and trade unionists, plus the three Liberal Party members and some independents support the resolution.
The decision by the DAB will be crucial.
DAB leaders conceded that most the investors wanted a special inquiry. That came after about 200 people who had bought Lehman Brothersrelated investment products protested at the party’s headquarters, urging the party to support the resolution.
They chanted slogans and displayed placards, with three women in the crowd kneeling in front of party vice- chairwoman Ann Chiang Lai-wan to beg for help.
After receiving 1,850 signatures from the investors, DAB chairman Tam Yiu-chung told them that the party had to handle the matter cautiously, taking into consideration the progress achieved in recent days and whether such an investigation would prolong the compensation process.
The party will decide how its nine lawmakers will vote tonight.
Some independent lawmakers who have yet to make up their minds have also shown signs of supporting the resolution.
“I am inclined to support the victims. They have lost all of their savings. What else can legislators do to help them?” said Heung Yee Kuk leader Lau Wong-fat, who declined to say how he would vote.
Meanwhile, a government source said “the battle has already been lost” and further lobbying would be pointless because the DAB was likely to back the resolution.
“It is not the end of the world. The government has nothing to hide.”
Civic Party leader Audrey Eu Yuet- mee, who launched a mass e-mail campaign for the investors to petition lawmakers in support of the resolution, dismissed bankers’ concerns that invoking Legco’s special investigative powers would slow down the compensation process.
Minibonds are not corporate bonds, but consist of high-risk creditlinked derivatives. They are sold as a proxy investment in well- known firms.
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