Monday, July 20, 2009
SCMP:Treat us the same as minibondvictims, say Octave Note buyers
21 July 2009
Investors who bought complex investment products - called Octave Notes - linked to Lehman Brothers have accused the government of offering them no help since the collapse of the US investment bank on September 15.
At a meeting last night at which they agreed to negotiate jointly for compensation, one tearful woman said: "As early as September 16, I already knew that my Octave Notes were worth nothing. But how come the government is only helping Lehman minibond victims?"
She was one of 80 investors at the meeting, which the Democratic Party organised.
A total of 48,000 Hongkongers put HK$20 billion into Lehman Brothers-linked minibonds - which, despite their name, are complex, credit-linked derivatives - and lost most of their money with the bank's collapse. The affair has spawned a Legislative Council inquiry and investigation by the city's two watchdogs of thousands of investor complaints that local banks mis-sold the products.
"We hope to press the government to handle the Octave Notes matter together with the minibond debacle," said Ran Leung So-chun, who bought notes worth US$130,000.
Those at last night's meeting had the same complaint as minibond buyers: bank staff neither properly explained to them the risks in buying the complex products nor performed risk assessments before they agreed to put their money into them.
Octave Notes were issued by US investment bank Morgan Stanley; 16 local banks sold HK$2.1 billion of them to about 8,300 customers between 2004 and 2007.
Like most minibonds, the notes contain synthetic collateralised debt obligations (CDOs) - conceptual products that mimic the financial health of a pool of companies. When these businesses collapse, the CDOs lose value. Many of the Octave Notes were connected to the performance of firms that went bust - among them Lehman Brothers.
Investors who bought complex investment products - called Octave Notes - linked to Lehman Brothers have accused the government of offering them no help since the collapse of the US investment bank on September 15.
At a meeting last night at which they agreed to negotiate jointly for compensation, one tearful woman said: "As early as September 16, I already knew that my Octave Notes were worth nothing. But how come the government is only helping Lehman minibond victims?"
She was one of 80 investors at the meeting, which the Democratic Party organised.
A total of 48,000 Hongkongers put HK$20 billion into Lehman Brothers-linked minibonds - which, despite their name, are complex, credit-linked derivatives - and lost most of their money with the bank's collapse. The affair has spawned a Legislative Council inquiry and investigation by the city's two watchdogs of thousands of investor complaints that local banks mis-sold the products.
"We hope to press the government to handle the Octave Notes matter together with the minibond debacle," said Ran Leung So-chun, who bought notes worth US$130,000.
Those at last night's meeting had the same complaint as minibond buyers: bank staff neither properly explained to them the risks in buying the complex products nor performed risk assessments before they agreed to put their money into them.
Octave Notes were issued by US investment bank Morgan Stanley; 16 local banks sold HK$2.1 billion of them to about 8,300 customers between 2004 and 2007.
Like most minibonds, the notes contain synthetic collateralised debt obligations (CDOs) - conceptual products that mimic the financial health of a pool of companies. When these businesses collapse, the CDOs lose value. Many of the Octave Notes were connected to the performance of firms that went bust - among them Lehman Brothers.
The Standard:Banks facing China claims
21 July 2009
Hong Kong bankers still trying to calm Lehman Brothers minibond investors are likely to face a second wave of claims _ this time from mainlanders.
The banks are expected to reach agreement with the Securities and Futures Commission this week about their settlement with local minibond clients, sources said yesterday.
But a group of mainland accumulator investors will hold a press conference in Hong Kong this week to seek compensation from Hong Kong banks, according to Sing Tao Daily, sister publication of The Standard. ``Some of the victims in our group have started litigation. We will fight against unscrupulous banks until the end,'' a representative of the group said in an e-mail.
Protection of Investors Association president Lui Chi-wah said Hong Kong banks have been promoting high-risk accumulator products in the mainland. Lui predicts the banks will face claims from investors who made losses.
State-run China Central Television ran two episodes recently on how Hong Kong banks sold accumulators to mainland investors. The investor group has set up a website to attract more people. Meanwhile, the 16 banks which sold Lehman minibonds have reached a tentative compromise with the SFC as they are reportedly willing to repay more of the collaterals sold. It was earlier reported that the banks agreed to pay investors 60 percent of the principal. On top of this they may now repay investors 30 percent of the value of collaterals sold, sources told Sing Tao Daily.
Assuming an investment of HK$100, banks will repay HK$60 plus an extra HK$21 if the collaterals are worth HK$70, taking the total settlement amount to HK$81.
A source said the Bank of China HK (2388) and Standard Chartered Bank (2888), the two largest lenders involved in minibonds distribution, were among the lenders seeking more time to agree on a compensation formula.
Hong Kong bankers still trying to calm Lehman Brothers minibond investors are likely to face a second wave of claims _ this time from mainlanders.
The banks are expected to reach agreement with the Securities and Futures Commission this week about their settlement with local minibond clients, sources said yesterday.
But a group of mainland accumulator investors will hold a press conference in Hong Kong this week to seek compensation from Hong Kong banks, according to Sing Tao Daily, sister publication of The Standard. ``Some of the victims in our group have started litigation. We will fight against unscrupulous banks until the end,'' a representative of the group said in an e-mail.
Protection of Investors Association president Lui Chi-wah said Hong Kong banks have been promoting high-risk accumulator products in the mainland. Lui predicts the banks will face claims from investors who made losses.
State-run China Central Television ran two episodes recently on how Hong Kong banks sold accumulators to mainland investors. The investor group has set up a website to attract more people. Meanwhile, the 16 banks which sold Lehman minibonds have reached a tentative compromise with the SFC as they are reportedly willing to repay more of the collaterals sold. It was earlier reported that the banks agreed to pay investors 60 percent of the principal. On top of this they may now repay investors 30 percent of the value of collaterals sold, sources told Sing Tao Daily.
Assuming an investment of HK$100, banks will repay HK$60 plus an extra HK$21 if the collaterals are worth HK$70, taking the total settlement amount to HK$81.
A source said the Bank of China HK (2388) and Standard Chartered Bank (2888), the two largest lenders involved in minibonds distribution, were among the lenders seeking more time to agree on a compensation formula.
Kedah, Malaysia
I am now in Kedah, Malaysia. I arrived on last Saturday. I shall return to Singapore on Wednesday.
Sunday, July 19, 2009
Petition to Prime Minister (3)
266 people have signed the online petition to the Prime Minister, asking the PM to help investors get the same type of compensation that is being offered to investors in Hong Kong.
Our target is to get 1,000 signatures by 29 August. Please pass the word around and get the other investors to help. For those who have already signed, please help to get other people to sign as well.
The petition can be found here.
Our target is to get 1,000 signatures by 29 August. Please pass the word around and get the other investors to help. For those who have already signed, please help to get other people to sign as well.
The petition can be found here.
Saturday, July 18, 2009
SCMP: Clear up the mess
18 July 2009
The incessant dispute over compensation for Lehman Brothers minibond victims could seriously tarnish Hong Kong's image as an international financial centre. And without proper closure, protests by victims will continue to be a common sight outside banks in Central. Nearly a year after Lehman collapsed, leaving behind HK$30 billion in now virtually worthless minibonds, some 40,000 local customers are still awaiting a resolution and proper compensation.
After the crisis exploded, all the political parties immediately swung into action to help victims, a special Legislative Council subcommittee was set up to investigate the debacle, and the government also moved quickly last October to push banks to devise suitable buy-back packages.
Despite the slow progress, we are beginning to see some breakthroughs in negotiations. There have been reports that 16 banks are offering to settle with minibond investors for about 60 to 70 per cent of their principal investment. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
But, Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the offer is unacceptable because the underlying assets are worth more than 60 per cent. Investors want to be fully compensated for their principal investments.
About 48,000 Hongkongers lost billions of dollars when the value of minibonds credit-linked to Lehman Brothers plunged after the US investment bank collapsed last year. Critics question whether banks that offer to buy back the minibonds at only 60 or 70 per cent should still have full title to the collateral.
The market values of collateralised debt obligations (CDOs) are determined by numerous factors, and a slight economic rebound in recent months could have pushed up their values. But the question is: does the modest recovery truly reflect the beginning of a bull market? We would do well to remember that we might not have experienced the full impact of the financial crisis.
All things considered, it is doubtful whether the market values of CDOs could retain the 60-70 per cent level for a sustainable period. Market trends are incredibly erratic, thus the buy-back offer is realistic and reasonable. The tug of war over compensation should not be allowed to drag on indefinitely; the longer the process drags on, the fewer benefits investors will receive.
It is understandable that investors want to hold out, hoping for a better deal. But it's baffling to see why the Securities and Futures Commission has been involved in negotiations. It has flatly rejected the offer on behalf of investors and asked banks to pay a higher value of the principal investment.
The minibond crisis has exposed a myriad of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of crisis management in the event of the failure of a large firm. And the SFC must shoulder a fair share of blame.
Frustrated at the lack of compensation, many minibond investors have criticised the lengthy negotiations with the sellers and the lack of clear guidelines from the regulators about handling their complaints. They are also confused as to where they should take their case - the Monetary Authority, which regulates banks, or the SFC, which regulates the securities market.
Still, we cannot ignore the fact that the SFC has failed to police banks and brokers that sold toxic investment products to ill-informed investors. It has been grossly negligent in performing due diligence in regulating Hong Kong's increasingly complex financial markets. And now it has put on a futile political show by assuming the role of saviour, which will benefit no one at best, and damage its reputation and that of the government at worst.
Our regulatory system has failed to evolve with the times, despite the emergence of increasingly obscure and complex financial products.
The ever-increasing amount of cross-sector selling has intensified calls for reform. But the key question is: do we have the will and the wit to move forward?
The incessant dispute over compensation for Lehman Brothers minibond victims could seriously tarnish Hong Kong's image as an international financial centre. And without proper closure, protests by victims will continue to be a common sight outside banks in Central. Nearly a year after Lehman collapsed, leaving behind HK$30 billion in now virtually worthless minibonds, some 40,000 local customers are still awaiting a resolution and proper compensation.
After the crisis exploded, all the political parties immediately swung into action to help victims, a special Legislative Council subcommittee was set up to investigate the debacle, and the government also moved quickly last October to push banks to devise suitable buy-back packages.
Despite the slow progress, we are beginning to see some breakthroughs in negotiations. There have been reports that 16 banks are offering to settle with minibond investors for about 60 to 70 per cent of their principal investment. This is similar to the Bank of China (Hong Kong)'s proposed settlement.
But, Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the offer is unacceptable because the underlying assets are worth more than 60 per cent. Investors want to be fully compensated for their principal investments.
About 48,000 Hongkongers lost billions of dollars when the value of minibonds credit-linked to Lehman Brothers plunged after the US investment bank collapsed last year. Critics question whether banks that offer to buy back the minibonds at only 60 or 70 per cent should still have full title to the collateral.
The market values of collateralised debt obligations (CDOs) are determined by numerous factors, and a slight economic rebound in recent months could have pushed up their values. But the question is: does the modest recovery truly reflect the beginning of a bull market? We would do well to remember that we might not have experienced the full impact of the financial crisis.
All things considered, it is doubtful whether the market values of CDOs could retain the 60-70 per cent level for a sustainable period. Market trends are incredibly erratic, thus the buy-back offer is realistic and reasonable. The tug of war over compensation should not be allowed to drag on indefinitely; the longer the process drags on, the fewer benefits investors will receive.
It is understandable that investors want to hold out, hoping for a better deal. But it's baffling to see why the Securities and Futures Commission has been involved in negotiations. It has flatly rejected the offer on behalf of investors and asked banks to pay a higher value of the principal investment.
The minibond crisis has exposed a myriad of problems in the financial regulatory system - loopholes in the law, gaps in the regulatory system, inadequate investor protection and a lack of crisis management in the event of the failure of a large firm. And the SFC must shoulder a fair share of blame.
Frustrated at the lack of compensation, many minibond investors have criticised the lengthy negotiations with the sellers and the lack of clear guidelines from the regulators about handling their complaints. They are also confused as to where they should take their case - the Monetary Authority, which regulates banks, or the SFC, which regulates the securities market.
Still, we cannot ignore the fact that the SFC has failed to police banks and brokers that sold toxic investment products to ill-informed investors. It has been grossly negligent in performing due diligence in regulating Hong Kong's increasingly complex financial markets. And now it has put on a futile political show by assuming the role of saviour, which will benefit no one at best, and damage its reputation and that of the government at worst.
Our regulatory system has failed to evolve with the times, despite the emergence of increasingly obscure and complex financial products.
The ever-increasing amount of cross-sector selling has intensified calls for reform. But the key question is: do we have the will and the wit to move forward?
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