Octave Notes investors slam ICBC for providing ‘misleading’ information

Octave Notes investors slam ICBC for providing ‘misleading’ information


Ian Sio Tou

The local branch of the mainland’s Industrial and Commercial Bank of China (ICBC) has landed in hot water after a group petitioned the local government yesterday to crack down on what they say was “misleading” information provided by the lender regarding credit-linked notes issued by Morgan Stanley, known as “Octave Notes”.

A representative of the roughly dozen investors in the Octave Notes acquired through ICBC also accused the Monetary Authority of Macau (AMCM) of “delinquency” in its supervision of the notes, which have plunged in value following links to suspect investment firms, such as Lehman Brothers, which were used as a reference entity for some series of the notes.

The representative, surnamed Mok, made the comments after handing in a petition to an official representative outside Government House yesterday, accompanied by directly-elected grass-roots lawmaker Au Kam San.

Mok, who has allegedly lost around one million patacas investing in the ill-fated notes, told reporters that her group had filed a complaint with the AMCM about ICBC staff deliberately concealing the risks of investing in the aggregated debt obligations.

“When the bank staff introduced the Octave Notes, I was misled into believing that this product is secure and it is a bond connected with the People’s Republic of China (PRC). As the staff continuously described Octave Notes as associated with PRC bonds, so I believed it was a bond issued by the PRC,” Mok said.

“I believed that they [Octave Notes] had the same security as a deposit, so I decided to buy them in 2007,” she added. “And then the bank told me my Octave Notes were worth nothing.”Mok also stated that both the AMCM and the local ICBC branch ignored her complaint, and said the AMCM failed to ensure investors had access to proper information about the investment product.

“I made the complaint to the AMCM last October and AMCM replied, but just said that they had informed the bank about my complaint. I also made a complaint to the bank, which just told me ‘you have already complained to AMCM,’” she said.

“I believe the AMCM has not fully exercised its supervisory powers in guaranteeing investors were informed about the risks of these investment products,” she added.

Meanwhile, Au told reporters that the AMCM was refusing to release the guideline that sets out procedures banks must follow when they sell investment products, claiming it was just an internal guideline for financial institutions.

“This guideline would give customers enough information to assess the risks involved. After examining the guideline, investors would know whether the banks have been complying with the guideline when promoting the new investment products. Obviously, the banks have not been complying with the guideline in introducing the Octave Notes,” Au said.