Thursday, July 23, 2009

Hong Kong Maybe Refunding Up to 70% of the Minibond value

Hong Kong Securities and Futures Commission (SFC), the Hong Kong Monetary Authority (HKMA) and the banks distributing the Minibonds have just issued a joint statement on the following in relation to the repurchase of Lehman Brothers Minibonds from eligible customers:
  • Each of the banks will repurchase from each eligible customer aged below 65 all outstanding mini-bonds at 60 percent of their nominal value, and allow customers aged 65 and above to recoup at least 70 percent of their investments

  • Ultimate payout to investors may be higher if the banks are able to sell the underlying collateral linked to the minibonds

  • Each of the Banks will immediately implement special enhanced complaints handling procedures to resolve, in a fair and reasonable manner, all complaints in relation to the sale and distribution of other structured products

  • Each of the Banks: (i) will engage an independent reviewer, to be approved by the SFC and the HKMA, to review its systems and processes relating to the sale of structured products, to report to the SFC and the HKMA and will commit to the implementation of all recommendations by the independent reviewer; and (ii) will engage a qualified third party, as approved by the SFC and the HKMA, to review and enhance complaints handling procedures, and will commit to the implementation of all recommendations by such third party.
Eligible customers will not include professional investors, corporate/non-individual investors (with specified exceptions) or experienced investors (meaning investors who in the three years preceding their first purchase of Minibonds, executed five or more transactions in Leveraged Products, Structured Products or a combination of these products). The definition also excludes those customers who have previously settled claims in relation to Minibonds with the Banks.

At least now, the investors in Hong Kong know what to expect from the process of reimbursement, and everything is spelled out. Most importantly, it's not left to the banks to decide how to reimburse the investors! Compared to the MAS guidelines which I wrote about some time back here, HKMA has done a good job in spelling out the details, and getting all the distributors to agree to it. Kudos to them.

Somehow, I feel that we're short changed again!

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