23 July 2009
The tone of the beleaguered holders of Lehman minibonds has now softened, but many said yesterday they still find the compensation deal unacceptable.
A 74-year-old minibond investor surnamed Yiu said he wants the government to make the banks repay him 100 percent.
``I was about to renew my time deposit on November 2, 2007, when CITIC Ka Wah Bank cheated me to switch to equity-linked products,'' Yiu said.
Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the compensation agreement was ``not acceptable at all.''
``This is not making sense,'' Chan said. ``The guy who drafted up this agreement _ either he is doing some very tricky thing, or he does not understand Hong Kong people at all.''
One hundred members of the Alliance protested all day yesterday outside the office of the Securities and Futures Commission.
Alliance member Ng Shing-fung said he thinks the banks will still be able to make a profit after compensating minibond investors, so he will refuse to accept the proposal. ``They are simply cheating us once more,'' said Ng, 63.
Raymond So Wai-man, an associate professor of finance at Chinese University of Hong Kong, urged individual investors to take the compensation, as the value of minibond collateral could fall further. ``The monetary value of your minibond has effectively been locked up,'' So said. ``Not getting back the money, you cannot invest even when there is a better investment opportunity.''
Independent lawmaker Priscilla Leung Mei-fun said minibond holders should seriously consider the proposal because they will have to resort to lawsuits to get full compensation. Sixty percent compensation is a fair baseline, Leung said.
Chan said the problem is the settlement agreement does not apply to so- called ``experienced investors,'' defined as people who had invested in leveraged or structured products five times in the three years before buying minibonds.
Even conservative investors in Hong Kong may have been convinced by banks to put their money into a foreign exchange-linked deposit, he said.
``I tell you, Martin Wheatley has no sense about the Hong Kong people,'' Chan said. ``First he says `minibonds' does not mean `bonds,' then he comes up with this agreement.''
However, Chan admitted the basic framework of the agreement seems ``reasonable at first glance. But when you think more about it, it gives you the sense investors are being trapped.''
Chan estimated about half the members of his group may qualify as ``experienced investors'' and would not be eligible for compensation. He said the Alliance will meet Sunday to decide whether to pursue further action.
Minibond investor Wong Kin-ming, 54, said he thinks the government is treating the public unfairly. ``Government policies are two-sided,'' Wong added. ``Sun Hung Kai just paid us all back.''
Wednesday, July 22, 2009
The Standard:Nightmare nears end
23 July 2009
Banks have agreed to splash out more than HK$6 billion to buy back all outstanding Lehman Brothers minibonds.
By doing so, they seek an end to a saga that has run for more than 10 months, sparking deep anger and distress among investors.
The 16 banks that sold the complex products will offer about 29,000 Hong Kong investors - more than 90 percent of those in the SAR who bought the high- risk derivatives linked to the collapsed US bank - an average 70 percent of their investments.
That means banks need to pay out around HK$6.3 billion to repurchase the minibonds.
The scandal, which began last September, has fueled street protests and had senior financial officials testifying before the Legislative Council.
The deal announced yesterday was thrashed out with the banks by the Securities and Futures Commission and the Hong Kong Monetary Authority. It will "provide substantial benefits for the vast majority of customers holding minibonds that would not otherwise be received by them,'' said Martin Wheatley, chief executive of the Securities and Futures Commission, who described the deal as a "good compromise.'' Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung agreed. "Those accepting the offers will be relieved of the delay and uncertainty in going through the liquidation process,'' Chan said.
A bank must pay a price equal to 60 percent of the principal of the original investment for investors below the age of 65, and 70 percent for those aged 65 or more as at July 1. They can retain any coupon payments already received.
Once the underlying collateral is recovered by the banks, each of them will make a further payment of initially up to 10 percent of the principal of the minibonds to customers below the age of 65.
And if recoveries exceed 70 percent, the banks will pay the entire excess amount to those who have accepted the offer, which could take some investors' settlements to 100 percent.
For example, assuming an investment of HK$100 and the product's collateral is worth HK$40, an investor will first receive HK$60 and then another HK$10 for the collateral recovered, taking the total settlement to HK$70.
If the collateral is worth HK$80, the investor will get HK$80. If the collateral is worth HK$100, the investor will be refunded in full.
Banks will make available a total of HK$200 million to the trustee of the minibonds to assist in the recovery of the underlying collateral for each outstanding series of the product. Those who have already reached a settlement with the banks will not qualify for the buyback. However, the banks will make ex-gratia payments to those whose settlements were less than they would receive under the deal announced yesterday. Banks need to inform customers about the offer ``in an expeditious manner'' and put money in their accounts within 30 days of the offer being accepted, according to the HKMA.
Professional investors, including non-individual and experienced investors, are not qualified under the repurchase offer, Wheatley said.
The regulators will call off investigations into the sale and distribution of minibonds by the banks in respect of investors accepting the offer. But authorities will continue investigations if there are claims of deception or other crimes. ``We intend to allocate resources to handle non-Lehman complaints,'' said Choi Yiu-kwan, HKMA deputy chief executive.
Each of the banks will also engage an independent reviewer to examine systems and processes relating to the sale of structured products and then report to authorities. The banks must also commit to the implementation of all recommendations by the reviewer.
A qualified third party also has to be engaged to review and enhance complaint-handling procedures.
``The distributing banks should draw lessons from this incident and properly implement the agreement reached with the regulatory authorities'' on selling structured investment products, Ceajer Chan said.
Speaking on behalf of the banks, David Li Kwok-po, chairman of the Bank of East Asia (0023), said the agreement demonstrates their ``unwavering commitment'' to Hong Kong and the welfare of customers.
Ahead of the repurchase agreement by banks, only brokerages Sun Hung Kai Investment Services and KGI Asia had fully refunded their clients. That occurred earlier this year. As of July 16, the HKMA had received 21,490 complaints concerning Lehman-related products, including minibonds.
Banks have agreed to splash out more than HK$6 billion to buy back all outstanding Lehman Brothers minibonds.
By doing so, they seek an end to a saga that has run for more than 10 months, sparking deep anger and distress among investors.
The 16 banks that sold the complex products will offer about 29,000 Hong Kong investors - more than 90 percent of those in the SAR who bought the high- risk derivatives linked to the collapsed US bank - an average 70 percent of their investments.
That means banks need to pay out around HK$6.3 billion to repurchase the minibonds.
The scandal, which began last September, has fueled street protests and had senior financial officials testifying before the Legislative Council.
The deal announced yesterday was thrashed out with the banks by the Securities and Futures Commission and the Hong Kong Monetary Authority. It will "provide substantial benefits for the vast majority of customers holding minibonds that would not otherwise be received by them,'' said Martin Wheatley, chief executive of the Securities and Futures Commission, who described the deal as a "good compromise.'' Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung agreed. "Those accepting the offers will be relieved of the delay and uncertainty in going through the liquidation process,'' Chan said.
A bank must pay a price equal to 60 percent of the principal of the original investment for investors below the age of 65, and 70 percent for those aged 65 or more as at July 1. They can retain any coupon payments already received.
Once the underlying collateral is recovered by the banks, each of them will make a further payment of initially up to 10 percent of the principal of the minibonds to customers below the age of 65.
And if recoveries exceed 70 percent, the banks will pay the entire excess amount to those who have accepted the offer, which could take some investors' settlements to 100 percent.
For example, assuming an investment of HK$100 and the product's collateral is worth HK$40, an investor will first receive HK$60 and then another HK$10 for the collateral recovered, taking the total settlement to HK$70.
If the collateral is worth HK$80, the investor will get HK$80. If the collateral is worth HK$100, the investor will be refunded in full.
Banks will make available a total of HK$200 million to the trustee of the minibonds to assist in the recovery of the underlying collateral for each outstanding series of the product. Those who have already reached a settlement with the banks will not qualify for the buyback. However, the banks will make ex-gratia payments to those whose settlements were less than they would receive under the deal announced yesterday. Banks need to inform customers about the offer ``in an expeditious manner'' and put money in their accounts within 30 days of the offer being accepted, according to the HKMA.
Professional investors, including non-individual and experienced investors, are not qualified under the repurchase offer, Wheatley said.
The regulators will call off investigations into the sale and distribution of minibonds by the banks in respect of investors accepting the offer. But authorities will continue investigations if there are claims of deception or other crimes. ``We intend to allocate resources to handle non-Lehman complaints,'' said Choi Yiu-kwan, HKMA deputy chief executive.
Each of the banks will also engage an independent reviewer to examine systems and processes relating to the sale of structured products and then report to authorities. The banks must also commit to the implementation of all recommendations by the reviewer.
A qualified third party also has to be engaged to review and enhance complaint-handling procedures.
``The distributing banks should draw lessons from this incident and properly implement the agreement reached with the regulatory authorities'' on selling structured investment products, Ceajer Chan said.
Speaking on behalf of the banks, David Li Kwok-po, chairman of the Bank of East Asia (0023), said the agreement demonstrates their ``unwavering commitment'' to Hong Kong and the welfare of customers.
Ahead of the repurchase agreement by banks, only brokerages Sun Hung Kai Investment Services and KGI Asia had fully refunded their clients. That occurred earlier this year. As of July 16, the HKMA had received 21,490 complaints concerning Lehman-related products, including minibonds.
Help Minibond investors to secure the collateral
Mr. Tan
If govt is reluctant to force FI to compensate like what happen in Hk, perhaps you can suggest that it takes the leader role to help Minibond investors to secure the Collateral [GE capital bonds etc] which has up to 70% value for the benefits of the investors.
This is a concrete action that would help all to investors - whether they are compensated or not. Don't forget, many investors are compensated just 10%.
If you read bullet point 3, "banks will make available an amount equivalent to the amount of commission income received by it as a distributor of the outstanding Minibonds to the trustee of the Minibonds to assist in the recovery of the underlying collateral for each outstanding series of Minibonds"
Regards
Steve
If govt is reluctant to force FI to compensate like what happen in Hk, perhaps you can suggest that it takes the leader role to help Minibond investors to secure the Collateral [GE capital bonds etc] which has up to 70% value for the benefits of the investors.
This is a concrete action that would help all to investors - whether they are compensated or not. Don't forget, many investors are compensated just 10%.
If you read bullet point 3, "banks will make available an amount equivalent to the amount of commission income received by it as a distributor of the outstanding Minibonds to the trustee of the Minibonds to assist in the recovery of the underlying collateral for each outstanding series of Minibonds"
Regards
Steve
Petition to Prime Minister (5)
389 people have signed the Petition and provided their full particulars. This is much better than the optimists (including me) had earlier hoped. Our initial target was only 300 signatures. Some pessimists poured cold water on this effort.
Please help to get more people to sign the Petition and achieve the new target of 1,000 signatures.
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