2009年3月29日星期日

Shanghai Commercial Bank knew about CDO


上商副總經理張偉才、行政總裁郭錫志、副總經理朱嘉華


Many of the banks tellers cannot sell the Minibonds, the banks used senior staffs and newly hired university degree staffs to sell these false bonds and all of them have been trained about Minibonds and the CDOs involved. And banks top management had chosen which Minibonds the banks could sell depending on the profit margin. There were real bonds sold in HK and mostly were Hutchison bonds in the year around 2000-2003 and most likely HSBC sold these bonds while SCB were selling false Hutchison bonds (Minibonds link with Hutchison) which required police investigations that at these time all the Hutchison bonds they wanted to sell were actually Minibonds. When banks ran out bonds' lies, they started to sell new high risk structure products and pretended that these were low risk bonds. That why all banks and their senior staffs were all guilty in this HK bank mis-selling frauds, and should be charged by police. The HK government inaction only proves that they want to save the banks with the cover up of banks mis-selling frauds. Only Legco has the power to locate which high government officials are involved with this cover up. And most bank tellers now still work in banks have nothing to do with the bank mis-selling frauds for these people cannot received payback of bonus of sells of Minibonds, and these responsible are all hiding in the main office in central and inside bank managers office in all branches.


The links of CDO crisis are as follows:

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Boom_and_collapse_of_the_shadow_banking_system

SCB knew about CDO as they had sales managers in every banks to study these CDO inside Minibonds, and they knew about Lehman Brothers, Bear Stern as they cancelled the Constellation?(may be Victory Peak) from me as they knew Bear Stern was at high risk for defaults so as from Jenny Cheung, former sales manager from SCB in San Po Kong who quit in around 2007,2008. While SCB cover up these CDOs information ( http://minibondvictim.blogspot.com/2009/05/blog-post_10.html
http://us.ft.com/ftgateway/superpage.ft?news_id=fto070120071422352588&page=2

In 2008, SCB were selling LEBR 10Y, 15Y Callable Transatlantic Range Accural Notes from Lehman brothers instead of bonds. These notes were from offshore companies of Lehman brothers in Europe which was similar to Lehman ELN with no guarantee as from Minibonds. SCB knew that notes were traded between banks and corporation, while bonds were for customers of banks. Unlike what Joseph Yam was saying in Legco, Notes were not more safer in risk level than bonds, in 2008, US banks notes sales between banks should be very slow for these were high risk in most bankers minds, and that why SCB committed bank mis-selling frauds in selling those notes to their unsupected customers that did not watch US news.
http://blogs.moneycentral.msn.com/topstocks/archive/2008/06/05/will-lehman-crash-and-burn.aspx

http://www.toomre.com/taxonomy/term/30/1

http://optionarmageddon.ml-implode.com/2007/12/24/telegraph-10-trillion-of-losses/

Only Asian corporate bonds and government were low risks during that periods because of 2007 credit crunch and these can be sold thru private banking in HK such as UBS.

CNN money, which was responsible for the high tech bust in around 2000, also had this articles that everybody saw in Internet and watched on CNN in TV and that the articles that made me worry about CDO at that time. May be the voodoo economy follower Joseph Yam (not expert, because he is only a statistician) never learnt from experience and believed in this article and let the Minibonds busted later as he admitted in Legco sessions:
http://money.cnn.com/2007/11/28/magazines/fortune/fortune500/eavis.creditfix.fortune/?section=money_topstories

Further informations on HSBC wanted to take over Lehman in 2008:

http://www.forbes.com/2008/09/11/lehman-treasury-fed-markets-cx_er_0911outlook.html

http://www.marketwatch.com/story/hsbc-which-bank-is-it-buying-today-press-1-for-no-comment?pagenumber=1

The following rumor was started in 2007, and Lehman was not in good business climate either for banks to trade their notes:

http://dealbreaker.com/2007/05/has-lehman-lost-its-mojo.php

2009年3月28日星期六

Varies HK banks frauds


I got the following informations from people (mostly Singapore informations) in early version of discuss.com and from China economist as director of H-share company after they knew about how Shanghai Comercial bank started to sell Minibonds to me. Coorperate bonds will default and they paid higher interest, that why government bonds used to pay lower interest. HK banks such as Shanghai Commercial Bank did first sold coorperate bonds such as Hutchison bonds in year 2000, but they ran out of coorperate bonds for they could not compete with European private banks in Euro market, then HK gov. started to push Minibonds and the bank looked into the 100 or more CDO's inside Minibonds and all of them are safe and they sold these Minibonds to customers lying to customers that these Minibonds were much safer than coorperate bonds by putting these structure products as low risks. And top management in bank looked into these Minibonds and approved the sales. Shanghai Commercial Bank also knew that HSBC will look after the Minibonds if Lehman defaults. Then the bank run out of Minibonds, and they started to sell high risk DBS Constellation notes and Morgan Stanley notes to customers even thru they knew that these structured products were medium risk at that time. The sales people started to afraid and some quit but top management push for more sales to get higher profits for banks. In 2007, HKMA informed them what they had sold contains high risk CDOs. So the bank started to sell less Constellation Notes, but in order to keep much higher profit, the banks cover up these informations to customers and still rated these structured products as low risks to cover up these informations to their customers. In the meantimes, they started to sell more accumulators to their customers for bigger profits. Even after I complained to HKMA in Sept. 2008, the bank still rated Minibonds as low risks against HKMA rules and blames Lehman for the defaults and cover up the role of HSBC and put the loss to their customers. And the bank now start to trick customers to sell all their Octave notes in order to cover up that these structures products are high risks and only this months, the bank put high risk in their Octave notes.

For Standard Chartered Bank, the bank managers keep on calling their customers with deposits to buy ELN, and anybody that did not buy their Lehman ELN, they treatened the customers that they will close their banking accounts. My wife and her mother were treatened in 2008, but they still refused to buy ELN. But my wife friend did bought the Lehman ELN thinking she would get the stock back but these were false ELN now the values went to zero. Now Standard Chartered Bank is asking her to look for refund from Lehman Europe.

For DBS, the banks also urged their customers to buy into ELN, Constellation Notes and Minibonds. And since DBS is still among the small banks group in HK. I knew some customers did not believe the bank and withdraw their money from DBS to save the troubles. Others in internet believed in the bank and asked me to call them to see what they can do for their lost.

HSBC also called their customers in year 2008 to sell their ELI and other investment products, but they issued their own ELI with interest up to 10%, and values of their own ELI all dropped 70% after Sept. 08.

From the police headquarter, I was informed that for others banks, they all called their customers at home and pretended the minibonds were safe deposit. And the banks falsified the signatures if their customers were too old to come to banks. Many still don't know their saving are lost until they find out they received no interest payments and the cases keep on coming.

You have to see these happenings then you will believe what are happening in HK.

標籤: , , ,

2009年3月21日星期六

Shanghai Commercial Bank fails HKMA guidance


Yam distressed about unsettled issue on Lehman minibond
"24 Feb 2009

Content provided by:
http://finance.hktdc.com/content.aspx?data=banking_content_en&contentid=1072533&SRC=IN_FinNews&w_sid=194&w_pid=704&w_nid=10468&w_cid=1072533&w_idt=1900-01-01&w_oid=343&w_jid=

Joseph Yam Chi-kwong, the chief executive of Hong Kong Monetary Authority (HKMA), the city's de facto central bank, said he feels distressed that the reputation of Hong Kong banks has been hurt by the unsettled issue on Lehman Brothers minibond, the Standard reported.

Yam said, early last year, some banks failed to follow the HKMA's guidance to adjust the ratings of investment products when they turned more risky.Yam also said what the banks are doing in their banking business has been acceptable and the banking system is rather robust.

Meanwhile, the banking regulator was accused of failing to warn investors who expected to buy the Lehman Brothers-guaranteed minibond. Yam said, as a regulator, it is impossible to warn that a specific product or a specific financial organization is not doing well and ask investors to sell their products right away. "

So it is the HK banks duties to warn their customers and to sell high risk products. Banks such as Shanghai Commercial Bank that refused to put their structure products as high risk up to 28th Feb 09 (Shanghai Commercial bank put high risk in their bank statement only start in 1st March 09) are all quilty of bank frauds under HKMA rules.

Islamic bonds

What kind Islamic bonds Donand Tsang can sell?

[Home>>China >>
China Society HK to extend visa-free visits to nationals of six 6 Mid-East countries + - 08:35, January 30, 2008

http://english.people.com.cn/90001/90776/90882/6347625.html

Nationals from six Middle Eastern countries will have their visa-free visits to Hong Kong extended from 14 days to 30 from Feb. 4, Hong Kong's immigration officials confirmed here Tuesday.

The move had been announced by the Donald Tsang, chief executive of the Hong Kong Special Administrative Region (HKSAR) government, at a business luncheon in Saudi Arabia Tuesday, according to an statement from the HKSAR government.

Immigration Department of the HKSAR government said the privilege will be shared with Saudi Arabian, Bahraini, Jordanian, Kuwaiti, Omani and Qatari nationals.

Travelers from 170 countries and territories now enjoy visa- free access to Hong Kong for up to 180 days. Addressing the Riyadh Chamber of Commerce Industry luncheon, Tsang called on Saudis to take advantage of the new regulations and visit Hong Kong, highlighting its cosmopolitan appeal.

"Our Muslim community numbers about 80,000 with a history dating back to the mid-19th century when our first Mosque was built," he said. Tsang said he also saw considerable room to improve bilateral trade with the kingdom, especially given its dynamic expansion and Hong Kong's central position within Asia.

Outlining Hong Kong's plan to develop a market for Islamic finance, Tsang said the city can play a significant role in structuring and financing Islamic investment products to meet the needs of Mainland Chinese borrowers.

"A significant number of leading international banks in Hong Kong have already devoted considerable resources to the creation and servicing of Islamic financial products," he said, adding these products appeal to both Muslim and non-Muslim investors and issuers.

"There is evidence a large part of the demand for Islamic bonds comes from non-Muslim investors who have found the yield and structure of these products attractive.

Hong Kong is a good platform to service these investors," he said. Tsang started his visit to Riyadh Monday night and will later visit the United Arab Emirates, his last stop before returning to Hong Kong Feb. 1.

Source: Xinhua]

All the so called bonds i.e. false bonds that HK financial sectors sold here were PIFL(Lehman & HSBC) minibonds, DBS Constellation Notes, Morgan Stanley Victory Park Octave Notes ever since 2003. What can Donand Tsang nowadays starts to sell now with all these Saudi Arabian, Bahraini, Jordanian, Kuwaiti, Omani and Qatari nationals looking down their hotel windows seeing all type of demonstration against the Hong Kong banks everyday about mis-selling of Minibonds.

2009年3月10日星期二

Petition to HK govern.

PETITION TO HONG KONG GOVERNMENT

1. We write to petition the HONG KONG Government, particularly the HK Police Force, SFC and the Monetary Authority of HONG KONG, to conduct a full and independent inquiry in relation to the credit linked securities sold by various financial institutions in Hong Kong. These structured products include the Lehman Minibonds, DBS Constellation, Morgan Stanley Octave Notes .

2. Hong Kong people, including the persons who have signed this petition, lost their hard-earned savings by investing in these financial products. Such products clearly did not suit the risk profiles of these consumers. The consumers were not made aware of the high risks involved in the financial product when buying the product. They became innocent victims of misrepresentation by the financial institutions that distributed the structured products.

3. We now wish to be assured that those who invested in such financial products have not been victims of negligent and/or dishonest conduct and/or fraud by these financial institutions.

4. The Government has a duty to ensure that investment products are marketed and sold appropriately in our jurisdiction. Such products must be sold in a manner compliant with the laws of Hong Kong. Financial institutions, including their respective key management, that do not follow the laws or regulations applicable to them must be held accountable for such breaches.

5. Please commence a full and independent inquiry into the sale of structured products by various financial institutions in Hong Kong. If the inquiry deems necessary, the Attorney-General of Hong Kong should act against these financial institutions.

6. We also ask the Government to help these investors to claim fair and adequate compensation from these financial institutions for their losses which are caused by the misconduct of these financial institutions.

7. We ask the Government to act now and restore the peoples' faith in our financial system

Sincerely,

The Undersigned

2009年3月6日星期五

Lessons from Lehman Minihbonds

Webb-site.com looks beyond the Lehman minibonds fiasco and proposes three steps to reform the regulatory system for the sale of financial products. Without such reforms, there is a risk of either repeated crises or an outright ban on the sale of such products.

20th October 2008

Retail Financial Products poll results

As most readers will know by now, tens of thousands of retail investors in Hong Kong and Singapore have been affected by the failure of Lehman Brothers Holdings Inc. (LBHI), which went into Chapter 11 bankruptcy protection on 15-Sep-08. The focus of this article is not on cleaning up the Minibond debris, but on how we can reform the regulatory system for structured financial products to reduce the impact of failures like Lehman in future. We propose three main measures in this article. Without such reforms, there is a risk that the authorities may just ban retail sales of such products altogether. So if you are a distributor or issuer, you have an interest in supporting these measures too.

Background

Lehman created several special-purpose investment vehicles which issued unlisted structured financial products through retail distributors, i.e. banks and stockbrokers. The issuers were called Pacific International Finance Ltd (PIF), Atlantic International Finance Ltd (AIF) and Pyxis Finance Ltd (Pyxis). The products issued by PIF were marketed as "Minibonds", by AIF as "ProFund Notes" and by Pyxis as "Pyxis Notes". A list of these can be found on the SFC's web site. According to the SFC, the total outstanding principal of the products is HK$12.73bn, of which $12.57bn is PIF Minibonds. In addition, there were credit-linked notes which referenced LBHI, in the amount of $2.91bn. Altogether then, the exposure is about HK$15.6bn (US$2.0bn).

There are 36 different series of PIF Minibonds - the advertisement for the latest one, Series 36, is here, in which the coordinating distributor was Sun Hung Kai Investment Services Ltd (SHKIS, owned by Sun Hung Kai & Co Ltd, 0086.HK). The issue prospectus for Series 36 shows that the series was distributed by Chong Hing Bank, Dah Sing Bank, KGI Asia, Mevas Bank, Public Bank (HK), Wing Lung Bank and SHKIS. Other banks were involved in other series.

You will see that it does say on the front cover "The Notes are not principal protected". In this example, the investor was receiving a "coupon" of 5.5% in exchange for taking the risk that any one of 7 companies would default on their reference debts, in which case the holder would only get back whatever the defaulted debt was worth, if anything, minus expenses. The reference debts for 3 of them (HSBC Bank PLC, DBS Bank Ltd and Standard Chartered Bank) were subordinated notes. However, none of the 7 companies has defaulted - it was only the Lehman collapse which caused the problems.
Each SIV took the issue proceeds (minus commissions to the distributors and other expenses) and invested them in a bunch of collateral, including swaps with a Lehman entity guaranteed by LBHI. In our Series 36 example, the collateral was synthetic Collateralised Debt Obligations (CDOs). PIF entered into a swap with Lehman Brothers Special Financing Inc (LBSF) to swap the interest and principal from the CDOs for part of the amounts due on redemption of the notes. PIF also entered into a Credit Default Swap (CDS) with LBSF under which PIF received a payment in return for insuring the 7 reference credits against default. If any of them had defaulted, then LBSF would receive the collateral and PIF would receive the value of the defaulted debt. LBSF was guaranteed by LBHI. So in effect, Minibond investors were putting up cash to underwrite compound credit default swaps.

LBHI was also the guarantor of collateral for the ProFund Notes, the Pyxis Notes and for some series of Minibonds. On 17-Sep-08, as a result of the bankruptcy filing, Lehman Brothers Asia Ltd announced it had suspended the provision of quotes or liquidity in the products.

Three steps forward

If any good is to come from the Minibond saga, then there are 3 things that the Government and legislators should act on:

A unified financial services regulator
A statutory cooling-off period for cancellation of purchases of financial products
Mandatory disclosure of commissions in all marketing and contractual documents.

Let's deal with these in turn.

1. A unified regulator

With the best will in the world, we cannot expect a comprehensive and consistent approach to regulation when so many regulators regulate in the same space. Currently, we have four main regulators and four sub-regulators. The four main financial services regulators are:
the Hong Kong Monetary Authority (HKMA) which runs our currency board, manages our shrinking quasi-sovereign wealth fund (known as the Exchange Fund) and regulates banks;
the Securities and Futures Commission (SFC), which regulates exchanges, securities and futures brokers and fund managers, authorises fund prospectuses and has statutory oversight of false or misleading disclosure by listed companies under the so-called "dual filing" scheme;
the Mandatory Provident Fund Schemes Authority (MPFA), which regulates the retirement savings scheme; and
the Office of the Commissioner of Insurance (OCI), which regulates insurers.
The four sub-regulators are:
The Stock Exchange of Hong Kong Limited (owned by Hong Kong Exchanges and Clearing Ltd, 0388.HK) which regulates Listed Companies under the oversight of the SFC;
the self-regulatory Hong Kong Federation of Insurers (HKFI), which operates the Insurance Agents Registration Board
two self-regulatory bodies of insurance brokers approved by the Commissioner of Insurance, namely the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association.
Apart from arranging insurance for your home or car, the insurance agents and brokers do of course also sell long-term savings products such as endowment policies or unit-linked insurance.
This alphabet soup of regulators results in overlapping mandates as well as gaps between their mandates. There are duplications of resources, and inevitably inconsistent approaches to guidance and supervision of selling intermediaries. If a product is mis-sold by a stockbroker, you complain to the SFC. If it is mis-sold by a bank, you complain to the HKMA. And if a life assurance product is mis-sold by an insurance broker, then you are back in self-regulatory land.
Out of crisis comes reform. As we have said before, what Hong Kong needs is a single financial services regulator (let's call it the Financial Services Commission) which will regulate the issue, management and sale of all financial products, both assets (savings, investment and insurance products) and liabilities (personal loans, mortgages, credit cards and so on). This would combine the roles of the SFC, COI, MPFA and part of the HKMA. The HKMA could retain its role as a quasi-central bank, supervising capital adequacy of the banking system, running the currency board and managing the Exchange Fund, in which the money backing the peg and the public wealth are comingled.

2. A Statutory Cooling-off Period

After a failure like Lehman, arguments about mis-selling are bound to focus on whether the investor understood the product and whether the risks were properly explained to him, and whether the product was "suitable" for the investor. The only certain winners in such arguments are lawyers. Except in blatant cases, the argument will often come down to a dispute over what was said, while the bank will normally have covered itself with written documents which the client signed, acknowledging the risk and declaring that they had understood it. The document will often also contain a "no representations" clause which states that this is the whole agreement, and the client is not relying on any other representations made by the distributor and is relying only on the prospectus. So although we have laws against misrepresentation, it will be an uphill struggle for any client to bring a successful claim of mis-selling, unless they happened to have a recording of the over-the-counter conversation.
These sales often take place in a high pressure environment. The client might have walked into a bank to make a time deposit and walked out with a Minibond, never having had time to properly read or understand the product leaflet, let alone the prospectus. For this reason, many countries now have a statutory "cooling-off" or cancellation period, which allows the customer enough time to leave the "hot" sales environment and go home, talk to friends, family or advisers, read the documents and then change their mind and get their money back.
Hong Kong does have a cooling-off period, but only for Long Term Insurance Policies, under the Cooling-off initiative of the HKFI. This allows 21 days from the date of signing the application form, 14 days from the issue date of the policy and 5 days after the delivery date of the policy, whichever is later. During that period, the policyholder can cancel the policy for a full refund (less a market value adjustment where applicable).
A similar approach must be taken with unlisted structured products. Examples can be readily found in other markets. Australia has a 14-day cooling-off period for investment life insurance products, retirement savings accounts, various non-life insurance, many managed investment products and superannuation products. This is contained in Section 1019B of the Corporations Act 2001. In Singapore, in Jul-03, the Monetary Authority introduced a 7-day cancellation period for Unit Trusts.
Of course, some investors, even with a cooling-off period, will never inform themselves about what they have bought. In that case, they have nobody to blame but themselves. A golden rule of investing: if you don't understand what you are buying, then don't buy it.
For other consumer services and products too
This approach to consumer protection could and should be extended to other products and services where there is either a long period of payment obligations, a large purchase price, or a long period of service or product delivery. For example, a purchase of a timeshare in a holiday home, or the purchase of a new apartment, or an 18-month commitment to a pay-TV or mobile phone subscription. Cancellation periods should be long enough to allow the consumer to reach an informed decision (if they choose to inform themselves) but short enough to give the seller a binding contract within a reasonable period, to avoid abuse. We would suggest 14 calendar days excluding the day of the contract. Any deductible charges for use of the service during the cancellation period (e.g., phone calls or pay TV) or market value adjustment methods (e.g. a drop in unit trust NAV) should be disclosed at the point of purchase.
In the case of market value adjustments, they must be symmetric, allowing the buyer to keep any market gain as well as bear any loss up to the point of cancellation. Vendors should not be allowed to deduct selling commissions or expenses, otherwise the cancellation price could become a deterrent to cancellation in itself.
Initially, banks, phone and TV companies and other affected vendors might object to this proposal as an interference in private contract, but they would eventually realise that it also increases protection for them against allegations of mis-selling, because the consumer has had adequate time to fully understand what they have agreed to and seek advice if necessary. The vendor can then be more robust if a customer tries to wiggle out of a contract after the cancellation period has expired.

3. Mandatory disclosure of commissions

In the law of agency, it is illegal for an agent of a principal to receive a secret commission from a third party, unless the principal has consented. It is what is colloquially known as a "kickback". In financial services, we need to go further than that. It should not be possible to contract out of the disclosure. Too may banks and brokers put their staff forward as your "personal financial adviser" when in reality the bank is paid for sales by the issuer of the financial products, not by the purchaser. Deep in the small print of every contract, that fact is acknowledged but the amount is not disclosed.
In our example of Series 36 PIF Minibonds, the issue prospectus states on page 14:
"We will pay each distributor a commission based on the amount of Notes they sell. These commissions come out of the proceeds of issue of our Notes."
There is no disclosure of the amount. The advertisement (the only thing most investors read) didn't even disclose that a commission would be paid. The statement is also contradicted by a statement on page 19, which says:
"We always use all of the proceeds of issue of our Notes to buy the assets on which those Notes are secured." (emphasis added)
In our view, that's false and misleading. They didn't use all of the proceeds to buy assets - some of the proceeds are used to pay commissions to distributors.
A light bulb would go on in even the dimmest customer head if they were told, in every marketing document of a financial product, in clearly readable typeface, that the bank would be receiving 5% commission on each sale of the product - or whatever the rate and basis is. It would cause the customer to realise that at most, what they were buying was only worth 95 cents on the dollar at the outset - and probably much less, as it also has to include an expected profit for the issuer, otherwise they wouldn't issue it in the first place.
Similarly, how many people would commit to a 10-year life insurance policy, cancelling the previous one sold by the same agent before he moved to a new insurer, if they knew that the agent gets a commission equivalent to the first 9 months of premiums? This "twisting" is one of the reasons why insurance agency teams change hands so often - it gives them a chance to sell to the same customer again, or more accurately, to sell the customer to the insurer.

SFC response

The SFC is well aware of the hidden commissions problem but has made no visible progress in addressing it, perhaps due to lack of political support, in which case the Minibond fiasco now creates a window of opportunity. In a press release on the Selling Practices of Licensed Investment Advisers on 23-Feb-05, the SFC said:
"In addition, the SFC plans to consider and engage the investment advisory industry to explore information disclosure issues such as the feasibility and benefits of requiring investment advisers to disclose to investors the commission and rebates received from product providers."

Plan...consider...engage..explore...feasibility...how tentative can you get? On 13-Apr-08, some 5 months before Lehman imploded, Webb-site.com wrote to the SFC asking them what progress they had made in the last 3 years on this issue. Alexa Lam, the Deputy CEO and Executive Director of the Investment Products Division, responded on 16-Apr-08:
"Following the issue of the press release in February 2005 mentioned in your email, the SFC discussed with relevant stakeholders the question of disclosure of commission rebates by distributors to clients. Not surprisingly, distributors generally did not favour disclosure of commission rebates as they considered that they would be disadvantaged competitively. Of course in formulating our regulatory policy, we have to take tough action where doing so would be the right thing even though it is unpopular with certain sectors of the industry. But looking around it is true that there is no consistent approach to dealing with this issue among major markets."
Regulatory deficiencies in other markets should be no excuse for not putting our own house in order. Why must HK always be a follower and never a leader when it comes to better regulation? Hong Kong must act now to require full disclosure of what intermediaries are paid for distributing financial products, including but not limited to life insurance, unit trusts and structured products.

Conclusions

In the wake of the Minibond fiasco, there should certainly be political support for the three measures outlined above. We should note that there is an alternative school of thought circulating among policy makers that the retail sale of structured financial products should simply be banned, as it creates too much trouble when things go wrong. Webb-site.com is not in favour of prohibition - it goes against the principle of free markets. Besides, there are plenty of financial products out there with high risk, such as derivative warrants listed on SEHK, some of which are quite exotic, not to mention complicated combination bets on horse races at the Jockey Club. But given that the prohibition school of thought may gain traction, the issuers and distributors should strongly consider supporting the above three steps as a desirable compromise.
Footnote: derivative warrants

Somewhat forgotten by the media in all this is that LBIH also had outstanding 134 series of derivative warrants which were listed on the Stock Exchange. These were all suspended from trading on the bankruptcy. There has been less noise about that as most of them were call warrants which would have crashed in value with the market and may expire worthless anyway, although there were some put warrants on the HSI which would now be worth a lot more. 35 of the warrants expired worthless (not because of the bankruptcy) on 30-Sep-08. A similar thing happened when another derivative warrant issuer, Peregrine Investments Holdings Ltd, went bust in Jan-98.

Copyright Webb-site.com, 2008

2009年3月5日星期四

HK government on Minibonds saga

Hong Kong Finance chief given report on minibonds saga
January 3, 2009 by admin
Filed under: South China Morning Post
Joyce Man, South China Morning Post01 Jan 2009

The banking and securities regulators handed a report on the minibonds saga to the financial secretary yesterday, three months after investors started complaining.

The Monetary Authority and the Securities and Futures Commission filed the report, on the lessons learned and issues they identified during an investigation into complaints about the Lehman Brothers issued minibonds, to acting Financial Secretary Chan Ka-keung.

Although there has been speculation that the report would pinpoint a few banks, sources at the regulatory bodies said the securities commission’s investigation had highlighted more than 20 distributors that sold minibonds, including banks and brokers.

The report focused on the mis-selling of the investment product.
Minibonds are not corporate bonds, but consist of high-risk credit-linked derivatives. They are marketed as proxy investments in well-known companies.
Although the Monetary Authority regulates banks, it has referred all the cases to the commission for further investigation, the sources said.

The government would keep an open mind on any review of the regulatory system and on whether the city needed a single regulator for all investment products, a spokesman for the Financial Services and the Treasury Bureau said.
He said the government would probably publish the report but that the regulators who submitted it had expressed concern that doing so would affect the ongoing investigation and any improvements to the system.
The Monetary Authority and the commission declined to comment on the report.

Meanwhile, two leaders of Singapore’s Lehman investors flew to meet their Hong Kong counterparts yesterday in the hope of finding common ground for a class action in the US.

Both the Singaporeans and Hongkongers said they were considering inviting leaders for similar investors from Taiwan to form a Southeast Asian group to mount the suit on US turf. They would probably meet again soon in Hong Kong, which had greater political freedom than Singapore, they said.

Lung Tze Kuen, a Minibond Victims Group committee member, and Goh Meng Seng, a National Solidarity Party executive council member, met Hong Kong’s Kam Nai-wai –- a Democratic Party member –- and Peter Chan Kwong-yue, chairman of the Allied Victims of Lehman Products.

The four investors’ leaders hope to go to the US because the legal system there provides for class action, which Hong Kong’s does not.

Mr Lung added that the jury system and contingent fee –- where clients do not pay lawyers if they lose their cases –- would work in the favour of investors who decided to join the suit.

They attempted to identify commonalities in the products sold in the two cities that would allow them to unite for a class action in the United States.
Mr Chan said: “The Lehman products are very similar in their basic structures, in issuer, trustee, and even the law firms that drew up their documents.”

In Singapore, about 10,000 people invested S$500 million (HK$2.69 billion) in Lehman-related investment products, of whom 8,000 purchased minibonds, Mr Lung said.

2009年3月3日星期二

Canadian report on Minibonds in HK

Asian investors shaken and stirred by mini-bonds crisis

http://www.nationalpost.com/rss/story.html?id=981667

Asian investors shaken and stirred by mini-bonds crisis

Duncan Mavin, Financial Post
Published: Friday, November 21, 2008



Investors march to the government headquarters during a rally in Hong Kong, China, on Sunday, Sept. 21, 2008. More than 100 Hong Kong investors who purchased bonds issued by Lehman Brothers Holdings ...HONG KONG --

There are glaring parallels between the Lehman mini-bond debacle playing out in several Asian cities and Canada's ongoing asset backed commercial paper fiasco. There are some striking differences, too.In both cases, significant numbers of retail investors claim they thought they were buying low-risk savings products that turned out to be opaque financial derivatives. Both sets of investors are demanding their money back after the dud investments soured.That may be where the comparison ends.While hundreds of Canadians are still waiting to see if they will ever be reimbursed well over a year after the ABCP crisis broke, thousands of ordinary investors in Hong Kong and Singapore have taken to the streets to demand rapid action.Government buildings and the headquarters of banks that sold the mini-bonds have been beseiged by an angry, placard-wielding mob on a weekly basis. Similar protests are apparently planned for later this month in Taiwan.The result? Just weeks after the investors lost their savings, some banks in Hong Kong that sold the failed securities have already paid out to a handful of clients. In Singapore, too, banks have committed to reimbursing some investors soon, after the government said they should help "‘vulnerable customers" such as the elderly. In all, more than 100,000 people in Asia are thought to have bought in excess of US$4-billion worth of the duff investments between 2006 and the collapse of Lehman in September this year. The so-called mini-bonds, sold by banks and brokers across Asia, were actually not corporate bonds at all. The investments involved a complex structure of collateralized debt obligations and sometimes equity holdings managed by one firm -- often Lehman Brothers -- that handled a 'dividend' payment. The products offered a slightly better return than a standard deposit account, but ran into trouble when Lehman was forced into bankruptcy and could no longer meet its obligations. Products that were arranged by Merrill Lynch and others also collapsed because they had been backed by Lehman credit. While it remains likely some investors will lose at least a portion of their savings, governments in Hong Kong and Singapore are keen to show they are acting on the matter. Authorities in Hong Kong announced on Friday they had received almost 19,000 complaints alleging mis-selling related to the mini-bonds, and had referred 166 cases involving nine chartered banks to the city's securities regulator. Also, this week, the city's legislative council voted in favour of a special ordinance allowing lawmakers to force senior bankers and government officials to hand over confidential documentation and to appear at public hearings. The move follows a promise from Hong Kong's top politician Donald Tsang that the government will "punish" bankers or regulators found guilty of mishandling the saga.In Singapore, the government is taking a different tack and has said it is working with groups on efforts to restructure the investments.Meanwhile, some of Hong Kong's most high-profile lawyers, including Democratic Party chairman Albert Ho, have vowed to take the fight into the civil courts, too. Mr. Ho said this week that the banks involved had shown a poor attitude and had only approached investors under the threat of litigation, according to the South China Morning Post.The protesting investors have garnered much media attention with stories of life-savings lost and seem to have public opinion on their side. But that might not last, said David Webb, a former investment banker who is now a well-known governance advocate in Hong Kong. "If everything else is going down the pan, the sympathy for these people [who bought Lehman mini-bonds] will probably disappear," said Mr. Webb, who is also a member of Hong Kong's takeover and mergers committee. Already there are several facebook groups dedicated to pouring scorn on the investors, with many posters suggesting they should have looked more closely into their investments. Most of the minibond holders may end up getting a payout equivalent to the market value of their holdings, which would be significantly lower than their initial investment, Mr. Webb added.In Canada, several hundred retail investors were caught out when the country's $32-billion ABCP market froze up 16 months ago in August 2007. About $300-million is held by individual investors. A planned restructuring has missed several deadlines, and the group of lawyers and bankers tasked with resolving the crisis now claims it will do so by the end of this year. So far none of the noteholders have received a settlement. A report by investment industry regulators into the fiasco found that there were "inadequacies" in the selling of ABCP to retail customer

Asia tested but not yet found wanting

The Asia File

http://blogs.telegraph.co.uk/asi ... _yet_found_wanting_

by Ben Bland

Ben Bland is a freelance journalist based in Singapore. He will be traveling around the region looking at the impact of business on people, power and politics. He was previously The Daily Telegraph's stock market reporter.

Financial crisis review: Asia tested but not yet found wanting
Posted By: The Asia File at Dec 26, 2008 at 12:31:39
[General] While Europe and the US have been battling with the credit crunch since early-mid 2007, it was only in the second half of 2008 that the financial crisis truly hit Asia.But, with financial institutions strengthened (and more risk-averse) since the 1997 crisis and most governments having saved up large foreign currency reserves, Asia has so far weathered the storm with minimal pain.There have been no major currency collapses despite some fears that the Vietnam Dong was going to go the way of the Thai Baht in 1997 and the problems in South Korea. Only a few small banks have failed, most notably in Indonesia and Mongolia, and stock markets have, for the most part, carried on trading even while indices plummeted day after day.Governments and regulators have learned many lessons from previous crises. They have taken decisive action to limit the extent of the damage by cutting interest rates, injecting liquidity into the money markets and keeping a close eye on banks and stock markets. The extent of the response, outlined in more detail here by the World Bank, has been impressive.But the concern is that the knock-on effects of the financial crisis have only just started to be felt in Asia. The greater challenge will come as Asian economies - many of which are already in recession - continue to slow and demand for their exports in Europe and the US drops off further.Although it remains a taboo subject in Beijing, the more skeptical economists now fear that annual growth could fall below the all-important 7pc level under which China can no longer absorb its ever-growing workforce.If that happens, it could have all sorts of unpleasant social consequences. In Hong Kong and in Singapore, governments have already felt the pressure of the 'thundering herd' - as investors who lost everything after buying minibonds linked to Lehman Brothers, the collapsed US bank, took to the streets in unprecedented fashion.Politicians across Asia are hoping that they can mitigate the inevitable rise in redundancies and drop in living standards to head off any potential unrest. Up until now, most governments in the region have managed to do so. But, as the economic crisis deepens, this task will only get more difficult.

HK investors planning US suit in Lehman fiasco

[February 03, 2009]
http://www.tmcnet.com/usubmit/2009/02/03/3961812.htm
(Associated Press WorldStream Via Acquire Media NewsEdge)
HONG KONG

A group of Hong Kong investors in Lehman Brothers-backed financial products plans to sue in U.S. court after the Wall Street firm's collapse left their investments possibly worthless, a lawyer said.The lawsuit is expected to be filed this month in New York against European lender HSBC for its role in distributing the Lehman-tied investments, Patrick Daniels, an American attorney representing the investors, said late Tuesday.Investors _ among them retirees who sank their life savings into the products _ have faced billions of dollars in potential losses since the storied Wall Street firm filed for bankruptcy in September, leading to widespread anger, demonstrations and government probes.More than 40,000 Hong Kongers bought Lehman-backed investment products through banks and brokerages, with the total outstanding value of the products estimated at HK$20.2 billion ($2.6 billion), according to government estimates.The majority of the investments were labeled "mini-bonds," though they weren't straightforward corporate bonds but rather complex derivative products.For its part, London-headquartered HSBC provided the directors for the special investment company set up to issue the mini-bonds and served as a trustee that was supposed to hold the collateral backing the investment products. Other Hong Kong banks, not HSBC, sold the mini-bonds to retail investors.Daniels said HSBC was obligated to protect and represent the interests of investors."They failed in that obligation, and that's the case we are going to hold them responsible for," he said Tuesday following a meeting of Lehman investors in Hong Kong.An HSBC spokeswoman noted the bank did not directly sell the mini-bonds to investors."Will we defend ourselves vigorously," said bank spokeswoman Vinh Tran.The federal lawsuit will seek class-action status for the some 33,000 mini-bond investors, said Peter Chan, head of an investor group involved in the case.

Default on Octave note 10

The Morgan Stanley Octave Note 10 values has just drop to 0, and there are still nothing done for past months about my complaints to legco about Prof. Chan and his wife action in this matter
---------------------------------------------------------------------------------------Hello,For Octave Note 10 that I owned, the followinginformation is given by Shanghai Commercial Bank Ltd.

http://www.shacombank.com.hk/bankscb/pdf/b5_lboctave01.pdf

There is also government official involved in this case, pls see following:

"原帖由 winwin168 於2008-11-10 02:52 AM 發表

給各議員的信不信任陳家強動議親愛的議員們:

陳家強局長處理迷你債明顯角色衝突,懇請徹查自雷曼迷你債券事件發生以來,陳局長不斷把這產品合理化”認為苦主們是貪圖利益而購了相關產品,疚尤自取”,亦不斷將責任推卸給金管局及銀行銷售手法,意圖更進一步的把這種不應銷售給散戶的投資產品合理化,然而各位議員們你們可知道以下事情:
1. 陳家強局長太太為摩根士丹利的高層人員當陳家強局長首次公開對迷你債券事件表態是用上:巿民不應購買自己不認識及不能承擔風險的的產品,直至曾俊華司長才用上:對苦主深表同情的字眼
2. 摩根士丹利以"精明債券"的名稱,透過Victoria Peak International FinanceLimited這獨立公司發行多達二十多系列的迷你債券,結構跟雷曼擔保的迷你債券或星展的結構性票據,可謂一脈相承曾司長曾表示回購大部份苦主可取回六成,曾蔭權特首表示回購有六至七成收回時,陳局長毎急不及侍表示政府並無估計,亦提醒買了迷你債券的散戶,可能遠低於本金.陳局長何以能拿握得如此準確,其資來源又從何來,真的跟他太太没關係嗎?我們都好想清楚.
3. 在這次雷曼破產事件中,其中精明債券系列十至十二的結果也近似星展公布的結果,亦即我們苦主當中亦有陳局長太太銀行銷售的債券產品在此次雷曼事件中,摩根士丹利發行的精明債券十至十二亦跟星展的迷你債券同樣下,陳局長在星展公佈掛勾雷曼的票據等於零時,陳局長馬上澄清跟雷曼擔保的迷你債券不同,可謂此地無銀,同時亦強化了日後相同處理手法的合理性,為精明債券舖路.由於以上各點的存疑,懇請徹查及還苦主一個公道,亦還金管局與銀行一個公道,亦希望立法會有關專責小組可引用特權法,徹查局長的職責是否能公平公正地處理事件.迷你債券的苦主們其實我們並不分離的,無論是中了那種地雷,問題都是一樣:為何有毒投資產品可以出售?還大家一個公道"

The above link is http://www.discuss.com.hk/viewthread.php?tid=8456843&extra=page%3D2&page=34#509

Pls investigate.

Thanks
--- SL LEE <slee@legco.gov.hk
> wrote:
> Our Ref :
> Telephone: 2526 4027
> Facsimile 2521 7518>
> 4 November 2008> > > ,

> Dear >

> Complaint regarding the sale of investment products
> related to Lehman Brothers by banks>
> Further to our letter to you dated 26
> September 2008, this
> Secretariat has received your e-mail and fax on 30
> October 2008 providing
> supplementary information on the captioned
> complaint.>
> Please be advised that we will write to the
> Financial Services and
> the Treasury Bureau, the Hong Kong Monetary
> Authority and the Securities
> and Futures Commission for response. When we hear
> from them, we will make
> a report to and consult Members, and revert to you
> as soon as possible.> >
> Yours sincerely,>