Hong Kong watchdog may sue banks

October 31, 2008
Shares

, HONG KONG, October 31 – Hong Kong\’s Consumer Council said Friday it was considering suing banks which allegedly mis-sold mini-bonds backed by failed US investment bank Lehman Brothers as risk-free investments.

The 50 cases the council was considering backing mostly concerned vulnerable elderly people who said their banks had not fully explained to them the risks involved when selling them the mini-bonds, a spokeswoman for the council said.

The complainants in the cases, which involved 14 banks, had invested between 100,000 and two million Hong Kong dollars (12,800 and 256,000 US) in the controversial financial products.

"We will continue our vetting to identify representative cases for legal action," the spokeswoman told AFP.

"We now have 16 million dollars in our legal action fund. But the government has promised that it will give us unlimited financial support once we have identified cases with good grounds," she said.

Johannes Chan, chairman of the council\’s legal action fund, told the South China Morning Post that their focus on elderly and poorly educated investors would give them a higher chance of success in court.

"It\’s easier to establish that their trust has been abused or that they have been misled than (to make the same case for), say, someone who has a university education and has invested for years."

Despite their name, the mini-bonds are complex financial products linked to a bundle of derivatives backed by Lehman, and their value plummeted after the investment bank collapsed in September.

The council said in a statement that it had received 3,638 complaints and 1,388 enquiries from investors.

Meanwhile, more than 100 investors protested outside the Hong Kong Monetary Authority, the city\’s de facto central bank, before marching to individual banks to demand a full refund of their investment Friday morning.

Individual banks, including the Bank of China (Hong Kong), have started to negotiate compensation deals with customers. But many of the cases remained left out as gathering evidence to prove mis-selling could be difficult.

All the banks have agreed to adopt a government proposal for them to buy back the products from customers at their current market value but the move failed to pacify investors who said they would only get back a portion of their investment.

Shares

Latest Articles

Stock Market

Most Viewed