Hong Kong and Singapore regulators pledged to support individuals who claim they suffered losses on investments in credit-linked securities in the wake of Lehman Brothers Holdings Inc’s collapse.
Hong Kong’s Securities and Futures Commission (SFC) said it may take “steps to protect” individual investors who complained that structured notes arranged by Lehman were not sold properly. The Monetary Authority of Singapore said it would punish institutions found to have misled investors, without mentioning the Wall Street firm that filed for bankruptcy last Monday.
“Many of these investors are old people relying on these investments to support their retirement,” said Albert Ho (何俊仁), chairman of Hong Kong’s Democratic Party. “We need intervention from the government and financial experts.”
Asian investors were roiled last week after Lehman filed the biggest bankruptcy in history, Merrill Lynch & Co and Bank of America Corp agreed to a merger and regulators pumped US$85 billion into American International Group Inc (AIG) to bail out the world’s biggest insurer.
Customers thronged the offices of AIG’s Singapore unit to terminate polices as the fallout from the collapse of the US subprime mortgage market spread.
The scale of problems for Hong Kong investors “is no doubt immense,” said Ho, who led investors to meet officials at the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank.
More than 10,000 Lehman Minibond investors in the city are affected, most with losses ranging from HK$500,000 (US$64,400) to HK$3 million, Ho said by phone yesterday.
One bondholder lost as much as HK$10 million, Ho said, declining to name the person.
Hong Kong’s securities commission and the HKMA met on Monday with representatives of investors and banks that sold Lehman Minibonds, the regulators said in statements posted on their Web sites.
“Complaints related to alleged mis-selling by banks are being referred to the HKMA for further action,” the SFC said in its statement, without being more specific
Investors in Hong Kong are considering taking legal action against Lehman, and may seek help from the Consumer Council, which has a fund that can support such lawsuits, Ho said.
“We still hope there are other ways, because lawsuits are very time-consuming and costly,” the lawmaker said.
Meanwhile, the Monetary Authority of Singapore pledged to punish financial institutions found to have misled investors in structured products.
“Where we have clear evidence in the current matter that a financial institution has breached our laws or regulations, we will hold the financial institution to account,” the authority said, without saying whether it has found examples of malpractice.
The Singapore authority also said that it would enhance education schemes so that investors better comprehend the risk and returns of their investments and don’t buy products they don’t understand.
New York-based Lehman created about US$30.5 billion of structured notes for clients, transactions in which a borrower issues debt tied to the movements of currencies, interest rates or securities, London-based data provider mtn-i said.
The deals typically involved swaps designed to protect issuers against currency and interest rate risks.
About 99 companies and multilateral agencies sold structured notes arranged by Lehman, mtn-i said on Sept. 18 after the securities company filed for bankruptcy. They must buy new hedges from other banks or else meet any obligations under the transactions themselves, mtn-i said.
The SFC and HKMA have set up enquiry hotlines for Lehman Minibond investors, their statements said.
The SFC said it has handled more than 780 enquires and more than 130 complaints about Lehman’s Minibonds, which are credit-linked notes issued by Pacific International Finance Ltd and arranged by Lehman.
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