SCMP:Watchdog to select minibonds case soon

Article

21 Jan 2009
Joyce Man

The Consumer Council will soon choose a representative complainant to support in legal action over banks’ sale of financial derivatives issued or guaranteed by Lehman Brothers.

The products lost much or all of their value with the US bank’s collapse in September.

Democratic Party legislator Kam Nai-wai held talks with council chief executive Connie Lau Yin-hing yesterday on when the watchdog would select a case, and its progress on dealing with the 7,000 complaints the party had referred to it about the sale of Lehman Brothers derivatives.

Some 43,700 Hong Kong investors bought Lehman Brothers derivatives, mostly minibonds, worth HK$15.7 billion. Despite their name, minibonds are not corporate bonds but complex, credit-linked derivatives.

Investors claim the products were mis-sold as low-risk.

The council has been sorting through complaints to single out cases suitable for help from its legal action fund, and has identified 45.

Mr Kam urged the council to consider not only cases that involved elderly or novice investors, but also less winnable cases. Banks were more willing to settle out of court with elderly and less experienced complainants, who had a higher chance of winning in court, he said. The council should choose some younger and well-educated complainants to send to court.

The Democratic Party said Ms Lau told it that taking a representative case to court would not have any impact on a class-action lawsuit investors may bring in a US court.