Paulson Justifies "Terrible" Choices - Bank Investment Consultant

Paulson Justifies "Terrible" Choices - Bank Investment Consultant

Henry Paulson confessed that one his lowest moments as Treasury Secretary came as he was about to deliver a speech just as Citigroup was starting to unravel in late 2008.

Paulson, who'd already worked to rescue Lehman, AIG, Fannie, Freddie, and Bear Stearns with the highly unpopular TARP bail-out funds, badly wanted to address Citigroup’s problems, but knew if he did not appear for the scheduled speech, it would read by the markets as a sign of more trouble.

He noted the irony of his presence in the Reagan Library: “I was in the temple of free markets and I was an interventionist.”

In an anecdote studded Q&A Wednesday morning at the Schwab IMPACT 2010 Conference in Boston, Paulson discussed how he rescued the financial system and saved the country from economic ruin.

To hear Paulson tell it in person, while he was an interventionist, he was a highly reluctant one. But you do things you don’t like when are living from catastrophe to catastrophe whose depths you do not want to discover. “These were terrible things we did, but consider the alternative,” he said.

As Treasury Secretary, Paulson said he enjoyed a year of essential relationship building before the crisis hit and knew there were problems in housing and mortgage markets. He and many others simply did not appreciate that the problems could lead to collapse of America’s premier institutions and eventually the entire financial system.

“A number of us thought [the residential real-estate problems] were contained... and that mortgages were safe investments,” he told Liz Ann Sonders, Schwab Chief Investment Strategist. “No one assumed there would be a really steep decline. That was missed. A lot of people pointed out the problems, but there were no solutions.”

Once he understood the gravity of the credit crisis, he asked both Congress and President George W. Bush for unprecedented authority as Treasury Secretary. Advisers warned him if he asked for unlimited authority, he would not get it. So he asked and got it under a different name, “unspecified authority.”

Paulson, self-described as a “straight shooter” and “decisive,” quickly showed how he would wield his “unspecified” power in his famous “bazooka” quote: "If you have a bazooka in your pocket and people know it, you probably won't have to use it.”

Asked if he regretted such bravado, Paulson never answered the question, but it’s clear he didn’t. Once he realized the “capital hole” at Fannie and Freddie, he used the bazooka and more powerful weaponry, metaphorically speaking.

“I really had to take the bazooka out. I actually out took a big bomb out and we did what we needed to do,” he said.

Stabilizing private and quasi public institutions, he reasoned, would “comfort” the markets. And he wrote the rules as he went, given regulatory authority was badly outdated and inadequate to deal with non-bank financial institutions.

“Housing policy was over stimulated. [Fannie and Freddie] held almost $5.4 trillion in mortgage securities with almost no regulation,” he said. He complained no one regulator had a comprehensive view of the financial system and that there was “overlap” between agencies. And there was little transparency in the financial markets.

He gave a gripping account of his bargaining for the TARP bail-out funds, which were hugely unpopular with the American public in a presidential election year. During one acrimonious TARP negotiation between Democrats and Republicans that became known as the “circus meeting,” he got down on one knee to “break the tension” and begged House Speaker Nancy Pelosi “not to blow this thing (TARP) up.”

“Republicans were a difficult lot to me,” he said in noting that they compared TARP to a stick in the eye. “Ninety percent of Americans were against TARP and 60% are against torture,’ he said.

He said several times that managing in government was much more difficult than in the private sector. He described this chapter in American financial history as a “collision between market and political forces.”

Asked why Bear Stearns, Merrill Lynch and other institutions were saved and Lehman Brothers wasn’t, his answer was simple: no buyer could be found for Lehman despite intense negotiations with Barclays’ Bank fell apart after Paulson grew frustrated with British regulators in holding up the deal. “They would not say no, but they just would not say yes.”

In a lighter vein, Paulson said he was asked three times by President Bush to take the Treasury job before he accepted. After all, his wife was a good friend and Wellesley classmate of Hillary Clinton’s and his left-leaning mother told him should be “ashamed of himself’ going to work for Bush, who Paulson came to like.

Paulson—Lehman Had to Fail; FinReg May Help Others: Paulson - CNBC

Paulson—Lehman Had to Fail; FinReg May Help Others: Paulson - CNBC

BOSTON—The government let Lehman Brothers fail during the financial crisis because there was no other choice, former Treasury Secretary Henry Paulson said Wednesday.


Mandel Ngan | AFP | Getty Images
Henry Paulson
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Addressing one of the chief controversies during the systemic collapse that began in 2008, Paulson said Lehman had neither the interested buyers that Bear Stearns had nor the access to government funds that saved American International Group [AIG 41.51 0.23 (+0.56%) ].

As such, there was no choice but to let Lehman fall in September 2008, a move often attributed as the proverbial last straw that broke the credit system and sent the global economy spiralling.

"They had a capital and liquidity problem and no buyer," Paulson told hundreds of investment professionals gathered at the Impact 2010 conference sponsored by Charles Schwab, later adding, "We were under intense pressure. It was a difficult period."

JPMorgan Chase [JPM 45.94 0.41 (+0.9%) ] swooped in to buy Bear Stearns when the venerable investment bank crumbled in March 2008, while the government used bailout funds from the $700 billion Troubled Asset Relief Program to rescue AIG.

"We didn't have TARP with Lehman Brothers," Paulson said.

The former CEO at Goldman Sachs [GS 166.1239 0.7839 (+0.47%) ] detailed the political difficulty in getting Congress to approve the rescue funds, a struggle recounted in Paulson's book, "On the Brink." Paulson also praised Congress for taking steps to prevent such a crisis from happening again.

"To me the big thing is if an institution should fail in the future, that no institution should be too big to fail," he said regarding the financial reforms.

"The book is about the collision of market and political forces," he said. "Everyone (in Congress) who made the vote for TARP knew they were making a politically unpopular vote."


"All I know is I did the very best I could under difficult circumstances."

Hank Paulson
Former Treasury Secretary
During the course of an hour-long conversation with Liz Ann Sonders, chief market strategist for Schwab, Paulson recalled some of the volatile events that occurred as the US financial system teetered on the brink.

Against a backdrop of the looming 2008 presidential election, Paulson had to steer the economy back from the ledge, using an unprecedented level of government intervention that required deft political maneuvering.

Paulson remarked that then-Vice President Dick Cheney said he "had never seen anything like" a caustic closed-door session between Democratic and Republican leaders as they tried to resolve the crisis. Paulson recalled walking into the session and trying to break the tension by dropping to one knee before House Speaker Nancy Pelosi and saying, "Nancy, please don't blow this thing up."

"We worked hard to make progress," he said. "It took the cirsis to get Congress to act."

He said the decision to let Lehman fail was difficult but there was little other option at that point. The only potential buyers for the investment bank were Bank of America [BAC 14.5099 0.0199 (+0.14%) ], which ultimately rescued Merrill Lynch, and Barclays [BCS 19.87 -0.34 (-1.68%) ], a purchase blocked by UK regulators.

Though AIG had "great mismanagement and was more like a big hedge fund," the company company's debts "were secured by the underlying insurance business" and thus a more viable bailout candidate than Lehman, which had suffered a liquidity crisis and had lost its financing partners on Wall Street.

"It couldn't have taken place at a worse time," Paulson said.

Despite "concerns about moral hazard," or creating conditions where other banks would act irresponsibly with the belief that they would be bailed out as well, Paulson said the conditions were too dire not to act.

"We were going to have five or six money market funds that were going to break the buck," he said, referring to the condition where a dollar invested in a fund was now worth less than that. "I thought in that month when the money market funds were on the verge of imploding that we were going to have an economic armageddon ... You could have easily had conditions that looked as bad as the Great Depression."

So would he do it again?

Taking the job as Treasury Secretary was a difficult choice for him, as he came from a Democratic background and had promised his family he wouldn't go to Washington. He joked that his elderly mother told him, "You started out with Richard Nixon and you ended up with George W. Bush. You should be ashamed of yourself."

Yet Paulson had kind words for the former president.

"The way he is perceived by most of the public is very different from what I saw," he said. "He was a good boss."

As for his own performance, Paulson takes solace in what has transpired since he left. He praised the financial reform legislation and believes it will have a positive effect on ending the too-big-to-fail aspect that helped create the financial crisis.

"All I know is I did the very best I could under difficult circumstances," he said. "I'm pleased we got Congress to act the way they did and prevent the collapse of the financial system."

和廣北及林炎南疑點

1) 和廣北及林炎南說: 一般估計銷售時間30-45分鐘. 填問卷又要多少時間? - 正常風險評詁要二十多, 三十分鐘. 如有其他產品也要多花十多分鐘, 迷債要四十多分鐘, 而且全都是錯的誤導銷售. 中銀有佷多客在等其他產品, 最多造二十分鐘 給客答風險問題時間也不夠.

查證: 星展葉約德答劉秀成問,說產品銷售要數小時. 答涂謹申問, 說要2-3小時. 荷銀朱仁毅答甘乃威問,說產品銷售要 45-60分鐘. 三者以中銀講的時間最精簡快捷, 肯定沒有解說產品內容.

2) 議員說: “產品審批結論2頁紙, 風險一句都沒有”. 和廣北辯稱, 是產品結構相似. 意思是: 前後產品差不多, 風險披露不再重復. 就照和廣北說法, 相類似的第一個產品風險披露該詳盡了吧. 拿出來看看. 假如第一個披露不足. 即是代表全部不足. 其他不同類別又如何? 特別是星債風險大不同, 盡職審查怎麼說. (這主要批駁和廣北在說謊.) - 他這說SFC就可去告中銀的是故意誤導高風險的CDO部份, 因不作解答, 因和廣北是知道CDO是高風險的.而產品章程必須交客戶, 並詳細解釋, 而中銀全沒有解釋高風險的CDO部份.

3) 和廣北說, 風險不匹配, 是客戶堅持要買是中銀無明顯證據, 而是故意詐騙客戶的, 因為沒有人會買高風險有CDO產品當為定期產品. 客戶投訴卻說是職員推介及遊說. 說法截然相反. 中銀以什麼機制來審裁, 憑什麼只說職員沒違規 - 這類產品要上級批的, 中銀無明顯證據說投訴有錯, 因銀行業銷售過程當時要是一定有記錄存擋, 有風險不匹配中銀就不理官戶手上的各種產品風險表格而大量自行加入假風險記錄. 中銀所有人審裁機制人員己犯違規銷售之一員了.

4) 和廣北說, 中銀職員一定會講解產品章程中5-8頁產品概要. 有指引嗎? 只講產品概要, 證監認可嗎? - 這己是故意誤導罪了
有研究過 "產品章程"的朋友嗎? 其中是否有明確的 "產品概要". 真能概括 "產品風險"嗎? 如只看 "產品概要", 又有哪些重大風險必定會遺漏?

中國銀行(香港)

中國銀行(香港)
和廣北總裁台啓，
我們是一群購買了雷曼迷債的中銀苦主 。但却沒有獲得應有的回購。
自從零九年七月廿二日的回購方案出台後，極大部份的合資格苦主已獲得六成或七成的回購。但我們却因為在購買迷債之前的三年內在中銀執行五宗或五宗以上的結搆性產品交易，便被剔除回購之列。我們很氣憤，更感到很無辜！証監会、金管局及＋六間銀行的閉門協議，再一次把我們推進深淵 ！因在事件發生之后，並無諮詢我們便蓄意強加給我們這些不公平、不合理的條款，分明是要分化苦主，製造矛盾，更誤導了全港市民以為雷曼迷債巳經解決。
今年一月八日証監会總裁韋栾礼曾於立法會明確承認這些銀行違規銷售迷債。銀行最後同意在不承認責任的情形下，只向所謂合資格的客戶提出回購。做法實在极不公平、极不合理！我們要問﹕既然事实証明銀行是違規銷售，為甚麽又要生安白造冤屈我們、說是不合資格呢？
至於星債，星展知錯能改，除了百分百賠償外，更另加利息。這才是真正解決問題的辦法。但是貴行却沒有此氣量，採取如星展的辦法以解決問題, 真是枉為國家銀行，利慾熏心，使各人受困, 沾污了國家企業的名譽。
雷曼巳倒閉了两年，我們這群苦主極大部份是退休人士，包括家庭主婦及長者，更甚的是我們全是 貴行的長期客戶,因為相信中銀是國家銀行，值得信任，却落得如此下場，令人氣憤。
胡主席曾說:” 要積極主动地處理好人民內部矛盾。” 老实說雷曼的問題一天未觧决，苦主一定不会罷休，這對香港的国际金融中心的聲譽和地位是個極大的損害。
我們要問 閣下是否要這样懲罰對中銀的忠心客戶呢? 日晒雨淋，於心何忍?

中銀雷曼自救組上
2010年10月23日

Hong Kong Proposes Allowing Class Actions After Lehman Losses

Hong Kong Proposes Allowing Class Actions After Lehman Losses
By Douglas Wong - November 5, 2009 11:01 EST

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Business Exchange Buzz up! Digg Print Email .Nov. 6 (Bloomberg) -- Hong Kong’s Law Reform Commission proposed allowing class-action lawsuits in cases such as the losses thousands of investors in the city suffered on notes guaranteed by failed Lehman Brothers Holdings Inc.

If there was misrepresentation in the advertising or prospectuses for such unlisted securities, investors could be able to litigate as a group, the chairman of the commission’s sub-committee on class actions, Anthony Neoh, said yesterday.

“This would be an additional weapon” for people without the financial ability to seek damages, he said.

The value of an estimated $1.8 billion of Lehman-backed products known as “minibonds” sold to more than 40,000 investors collapsed after Lehman’s bankruptcy, sparking street protests. Hong Kong banks in July offered to pay at least 60 cents on the dollar to them after regulatory and legislative investigations.

“The need for a new approach to handling multiparty claims has long been recognized,” said Nigel Francis, Asian disputes head at Minter Ellison in Hong Kong. Consumer-related claims might be more suited to class actions than complex misrepresentation claims involving securities, he said.

“Such claims, while they may involve a single product and some common issues, will each ultimately be decided on their own facts,” Francis said.

Class actions allow a representative of several people with a common complaint to litigate on the group’s behalf, with an aim of helping lower the costs for each individual.

Restrictive, Inadequate

A class action regime is appropriate for “a society that has become more advanced,” Neoh said today. Hong Kong currently only allows multiparty proceedings under rules the city’s chief justice criticized as restrictive and inadequate in 2004.

Yesterday’s proposals were published after three years of study by Neoh’s committee, which invited public comment until Feb. 4, 2010. Neoh said he then hopes to make final recommendations for the necessary changes to the law by November next year.

The 314-page consultation paper doesn’t recommend allowing lawyers to take cases on contingency, or being paid only if they win money for their clients. It also said that allowing litigation funding companies would require adequate supervisory measures to be in place.

“Lawyers shouldn’t have a financial interest in the outcome of a case,” said Neoh, a lawyer who acted for a retired couple who sued DBS Group Holdings Ltd. for failing to comply with securities laws while selling minibonds.

Allocating Risk

There are no concrete proposals on how to fund class actions and to allocate the risk of losing them if they were to be allowed, so the likelihood of a regime coming into effect in the next few years is low, said Gareth Thomas, Hong Kong commercial litigation head at Herbert Smith.

As of Oct. 28, 97 percent of the minibond investors eligible for compensation have accepted the settlement offer, according to the Hong Kong Monetary Authority.

The notes were guaranteed by Lehman and linked to debt of Hong Kong companies like Hutchison Whampoa Ltd. and Sun Hung Kai Properties Ltd. Among buyers were elderly and poorly educated people as well as mentally ill individuals, according to an investigation by the city’s central bank that was made public by lawmakers on April 28.

Battle for $1bn in Lehman assets goes to court

Battle for $1bn in Lehman assets goes to court
By Jane Croft in London

Published: October 10 2010 23:45 | Last updated: October 10 2010 23:45

Five Lehman Brothers entities are taking a battle over more than $1bn of assets to court in a case that underlines the complexity of unwinding the operations of the international bank.

This week the High Court in London will begin hearing a dispute between the administrators of Lehman Brothers’ main European operations and other Lehman subsidiaries to determine ownership of he securities, part of a series of internal transactions.

US bankruptcy law under scrutiny - The assets are currently held by Lehman Brothers International Europe (LBIE) but are subject to competing claims by five Lehman affiliates including units in Switzerland and Hong Kong.

The case centres on how the bank’s entities accounted for repurchase, or repo, transactions.

During the bank’s existence, the deals were straightforward internal trades designed to shift Lehman’s assets between its various operations, they are being broken apart as part of its 2008 collapse, which split the bank into hundreds of separate entities.

The case is the latest twist in a series of high-profile lawsuits stemming from the collapse of the US investment bank at the height of the credit crunch in 2008.

Lawyers predicted at the time that the complexity of the Lehman administration was such that it would lead to years of litigation and court hearings.

PwC, the administrators of LBIE, have already been involved in a number of cases including a legal fight over the $2bn of client money deposited with Lehman’s UK division which concluded this year.

In this case the Court of Appeal overturned an earlier decision that only Lehman clients who had money segregated for them were entitled to share in billions of dollars deposited with the investment bank’s UK division.

Just before the bank failed in September 2008, Lehman segregated some client money for a number of hedge funds such as GLG Investments and Paragon Capital Management Fund.

However, client money was not ring-fenced for other hedge funds such as CRC Credit Fund nor the affiliates of New York-based Lehman.

PwC, the administrators of Lehman Brothers International Europe, has now applied to the UK’s Supreme Court, the highest court in the land, for permission to appeal against the decision.

Last week a German court rejected a claim made on behalf of clients of LBIE for the return of $1bn of client money that had been deposited with a German affiliate prior to the bank’s administration.

PwC, as administrators of LBIE, filed a petition at a Frankfurt court to claim that $1bn plus interest be returned to LBIE by Lehman Brothers Bankhaus in Germany.

However, the Frankfurt am Main regional court ruled that the petition should be dismissed and upheld a decision by the Bankhaus administrator.
.

Lehman Bankruptcy Advisers’ Fees Top $1 Billion

Lehman Bankruptcy Advisers’ Fees Top $1 Billion

Lehman Brothers Holdings Inc. paid its lawyers and managers $51.8 million in September, putting total advisers’ fees over the billion-dollar mark after 24 1/2 months in bankruptcy court, according to a court filing.

Restructuring firm Alvarez & Marsal LLC, which runs the defunct investment bank through its co-founder, Bryan Marsal, led recipients with $356.4 million in fees for “interim management,” according to an Oct. 18 filing in U.S. Bankruptcy Court in Manhattan. Weil Gotshal & Manges LLP of New York has collected $237 million for acting as the lead bankruptcy-law firm.

Lehman, which pays advisers at the rate of $1.3 million every day of the year, calculated last month that its creditors may eventually recover an average of 15.8 cents on the dollar. The advisers haven’t faced major challenges from the bankruptcy judge or trustee who monitor such payments.

Lehman, once the world’s fourth-biggest investment bank, filed the biggest bankruptcy in U.S. history in September 2008 with assets of $639 billion. Creditors include Goldman Sachs Group Inc., UBS AG, the New York Giants professional football team and Abu Dhabi Investment Authority as well as individuals who hold Lehman bonds.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

致 和廣 北大人: 的公開信 -- 中銀雷曼苦主自救組

致 和廣 北大人: 的公開信 -- 中銀雷曼苦主自救組

致 和廣 北大人:

和廣北先生駕臨立法會, 為耳根清靜. 竟派職員把旁聽席全霸了. 好一派大官老爺風範. (為表敬畏, 以下尊稱: 和大人). 只可惜此文化與現代民主潮流格格不入. 再說, 論官兒, 特首也高過和大人一點點, 特首去立法會答問, 也沒有抬出“肅靜迴避”的官儀. 先前幾家銀行高管, 同樣去立法會應訊, 也不致于如此清場大陣仗. 人家非不能為, 仍不恥為也. 和大人, 不外乎幾個很多記者都知的苦主, 就算在那裡高嘆幾聲, 又能奈你何? 何必張揚霸道如斯.

上兩回答問, 面對事實証據. 面對議員質徇. 和大人根本詞窮理屈, 無以應對. 然而和大人勝在心黑臉皮厚. 夠胆顛倒黑白, 編造謊言. 明知宣誓作供講大話, 可能要面對刑責. 和大人之所以挺而走險, 無非想推卸責任, 不賠償苦主. 但, 能行嗎? 不提和大人那些不堪一駁的謊言, 也不提和大人及中銀高層的不道德沒良心。只稍替和大人撥打幾下, 就知道和大人的如意算盤根本打錯了。

首先, 和大人錯判苦主們的決心和能力。須知中銀很多做政府人員退休基金, 及老人家。 苦主們損失的金錢, 退休金, 辛苦積賺, 來之不易。甚至窮一生之積蓄, 以養老防病之用, 不明不白給騙走了。誰肯輕易放手?! 隨時間推移, 苦主們可用不少投資產品的銷售及風險規管知識法律, 明白何謂風險披露不足, 風險錯配, 培訓不足, 違規銷售。尋找証據, 而其中我已指控了。而警方商業罪案調查科指控成功的事例也會越來越多. 苦主們皆深信: 堅持到底, 就是勝利!

其次, 和大人意圖洗刷自己, 卻把前線員工擺上枱。前線員工與苦主, 本無仇怨。當年銀行培訓不足, 員工對產品一知半解, 要執行銀行促銷指引, 或為爭取業績, 主動進取. 披露不足, 銷售不良在所難免. 卻極少有人存心坑害苦主。如今惹下禍端, 和大人自己卸責, 逼員工去面對苦主指控, 甚至有數百事件有可能被入罪坐監。另一方面, 員工又看到熟悉的苦主不幸的遭遇, 自己竟然是幫兇, 免不了受良心遣責, 感覺裡外不是人。這樣下去, 遲早有不甘受辱之仕, 會拍案而起, 挺身而出. 到那時, 群起造反. 和大人必定內外困交, 非倒台不可。

再三強調, 中銀(香港)畢竟是國家銀行分支, 背負國家名譽, 兩年來雷曼事件的抗爭過程和事實的不斷披露。和大人們在毒債銷售上干了些什麼壞事, 上頭以至中央, 不會看不見, 聽不到, 。要知道, 如今基本國策是 “以民為本”, 上頭絕不會容許和大人們 “呃人老本”.

金管局總裁陳德霖於北京財資市場高峰會表示，該局將在短期內推出新的監管措施，要求香港銀行的財資市場從業員，提升專業知識水平，以及加強持續專業訓練，以及要求從業員必須遵守財資市場工會頒布的守則。這是為中央不滿的反應.

另外, 請和大人不可忘記, 這裡是香港, 講人權, 民主, 法治。有大量良心群體, 有社會輿論監督。有正義的財經專家們和律師們和議員們, 他們己經站在苦主這一邊. 即使金管, 証監自身有屎, 但為保住國際金融中心地位, 政府終須要有所交代。大不了多等1-2年, 立法會最終裁決, 中銀(香港)也肯定罪責難逃.

所以, 苦主們堅信: 這是最後的鬥爭, 已團結起來, 正義必定得申張, 欠帳必定討回來, 你們看吧 !! 奉勸和大人們, 認清形勢, 實是求是。拿出誠意, 承擔責任。反正遲早要賠, 不如早賠, 免得傷了客戶, 壞了商譽. 毀了前程.


中銀雷曼苦主自救組

2010年10月20日

While Lehman Brothers went bankrupt, advisers raked in $1 bn in fees - Hindustan Times

While Lehman Brothers went bankrupt, advisers raked in $1 bn in fees - Hindustan Times

Bad Credit: How S&P, Moody’s and Fitch Helped Cause the Housing Bubble

By Alain Sherter | April 23, 2010

“I spoke to Osmin earlier and confinned (sic) that Jason is looking into some adjustments to his methodology that should be a benefit to you folks [Chase].”

“Heard you guys are revising your residential mbs rating methodology - getting very punitive… heard your ratings could be 5 notches back of mo[o]dys equivalent. gonoa (sic) kill your resi biz. may force us to do moodyfitch only cdos!”

The first statement is from a February 2007 email from an employee of Moody’s (MCO), one of the three major credit ratings agencies, to a banker at JPMorgan Chase (JPM). The “methodology” in question refers to the way Moody’s rated mortgage-backed securities deals the banking giant was involved in. The second statement is from a May 2006 message from a UBS (UBS) banker to someone at McGraw-Hill (MHP) unit Standard & Poor’s, another major ratings agency.

Together, they’re evidence of a con David Mamet would admire (there are hundreds more such exchanges for any conspiracy buffs out there). If large financial firms masterminded the scam, stuffing junk mortgages into securities, CDOs and other instruments, the credit agencies were their able shills, rubber-stamping whatever paper came their way with an investment-grade rating.

As Sen. Ted Kaufman, D-Del., said this morning in a congressional hearing on the role of the rating agencies, “The big thing that was missing was the referees on the field.”

Or more accurately, the referees were paid off.

The ratings agencies business model is based on a flagrant conflict of interest — they’re paid by the firms whose credit they evaluate. That makes them vulnerable to pressure from investment banks and securities issuers, which naturally want a bullet-proof rating in order to attract investors.

In the years leading up to the housing bust, Moody’s, S&P and Fitch passed out AAA ratings like candy bars at Halloween. In mid-2007 and early 2008, with the real estate market in free-fall and mortgage delinquencies soaring, they suddenly started downgrading scads of formerly top-rated securities. In January of ‘08, for instance, S&P lowered ratings on more than 6,300 and 1,900 CDOs — in a single day. Then, the deluge. The bottom fell out of the secondary market for subprime loans, and the rest is history.

Why did this happen? An 18-month congressional inquiry into the debacle has identified a host of reasons. Here are five of the leading causes, as summarized by the Senate subcommittee on investigations, the panel hosting today’s hearing:

Competitive Pressures. Intense competition, including the drive for market share and need to accommodate investment bankers bringing in business, affected the credit ratings the agencies issued.
Failure to Reevaluate. By 2006, Moody’s and S&P’s knew their ratings of residential mortgage backed securities and CDOs were inaccurate and revised their rating models to produce more accurate ratings, but then failed to use the revised model to reevaluate existing RMBS and CDO securities. That delayed thousands of rating downgrades and allowing those securities to carry inflated ratings that could mislead investors.
Failure to factor in fraud, laxity or the housing bubble. From 2004 to 2007, Moody’s and S&P’s knew of increased credit risks due to mortgage fraud, lax underwriting standards and unsustainable housing price appreciation, but failed adequately to incorporate those factors into their credit rating models.
Inadequate resources. Despite record profits from 2004 to 2007, Moody’s and S&P failed to assign sufficient resources to adequately rate new products and test the accuracy of existing ratings.
Failed ratings. Moody’s and S&P each rated more than 10,000 RMBS securities from 2006 to 2007, downgraded a substantial number within a year, and, by 2010, had downgraded many AAA ratings to junk status.
Legal pressure for AAA ratings. Legal requirements that some regulated entities, such as banks, broker-dealers, insurance companies, pension funds and others, hold assets with AAA or investment grade credit ratings, created pressure on credit rating agencies to issue inflated ratings.
It was interesting during the hearing to hear former ratings agency execs express various shades of regret at their part in the mess. “I had this somewhat naive idea when I joined Moody’s that it was a particular quality Moody’s was offering, and that was something that the company was going to seek to defend over time,” said Richard Michalik, a former VP in Moody’s structured derivative products group at Moody’s. As it turned out, he went on to suggest, it was really all about the Benjamins.

For a change. Yet their testimony underscores a key lesson of this — and any — financial crisis: For all the focus on individual vampire squids, greedy CEOs and other villains in this affair, the collapse was systemic. It wasn’t a few bad apples; it was the barrel.

And here’s why that’s troublesome in this case. Nearly three years after the financial system caved in, no one seems to know exactly what to do with the credit agencies. The ratings system, while more closely watched, remains opaque. Pay can still be exchanged or play.

Meanwhile, the reform legislation under debate in Washington does nothing to change the status quo. Not that it’s too late. Lawmakers could still tack on amendments when the bill hits the Senate floor or goes into conference for reconciliation with the House measure.

The best change would be to end the practice of companies paying directly the credit agencies for a rating. The process also must become more transparent. Investors need to know who paid for a credit rating, how much and whether the rater provided any other services as part of the deal. It’s also critical to determine if an issuer or investment bank “shopped” for a given rating.

Trouble is, congressional support for such proposals is uncertain. The ratings agencies successfully lobbied against including similar provisions in the House bill passed in December. With a majority of lawmakers, and President Obama, eager to clinch the deal on financial reform, I don’t expect any wholesale changes to the Senate legislation.

I’d be shocked if we aren’t having the same discussion in years to come.

Credit Rating Agencies Still Live?

The big credit rating agencies pose an existential problem: Why are such hapless companies still alive when worthier financial firms are dead and buried?

After all, few businesses have performed worse in recent years than Standard & Poor’s, Moody’s (MCO) and Fitch Ratings. In a new paper, the Federal Reserve Bank of New York spells out just how poorly the three agencies fared in evaluating the quality of mortgage securities in the years leading up to the financial crisis. Before the housing bubble, the firms infamously whiffed on Enron, maintaining investment grade ratings on that corporate Ponzi scheme until days before it collapsed. Indeed, Moody’s stock price soared in the years following the debacle.

As University of San Diego law professor Frank Partnoy has written:

Credit ratings continue to present an unusual paradox: rating changes are important, yet they possess little informational value. Credit ratings do not help parties manage risk, yet parties increasingly rely on ratings. Credit rating agencies are not widely respected among sophisticated market participants, yet their franchise is increasingly valuable.

That value — or at least import — has been on display in recent weeks. Stocks tumbled recently after Fitch downgraded Spain’s credit rating. European officials also expressed frustration last month after S&P cut Greek and Portuguese debt, sending global markets reeling.

“Who is Standard & Poor’s anyway?” asked EU spokesman Amadeu Altafaj Tardio, peevishly, in wake of the turmoil.

A Nationally Recognized Statistical Rating Organization, for one. That unlovely designation is no small thing. In 1975, the SEC began certifying ratings agencies as NRSROs, which meant that the financial markets could regard their ratings as credible. That special status, which Partnoy calls a “regulatory license,” gave the anointed firms enormous competitive advantage and helped cement the dominance of the big three agencies.

More important, the label gave investors, bond issuers and other market players confidence — or the appearance of it — that a “AAA” rating meant something. And in an age when banks use securitization to pass along loans, and their underlying risks, to other parties, ratings became less a measure of asset quality than a government-endorsed stamp of approval. They became, in effect, a sales tool.

One element of financial reform being hashed out in Washington would abolish the use of NRSROs. In principle, that would open the ratings industry to new competitors and force regulators and investors to develop new ways of evaluating credit.

Another reason the ratings agencies retain their primacy is that they’re almost impossible to sue. Federal regulations largely insulate the firms from criminal or civil liability. Courts also have protected the firms’ market calls as expressions of free speech.

To get around the Constitution, judges have ruled, a plaintiff suing a rating agency would have to show that a firm not only made false statements, but also did so with “actual malice” — a high legal hurdle.

For perhaps the best explanation for the ratings firms’ seeming invulnerability, we must turn to the work of that major social theorist and philosopher: Charles M. Schulz. Like investors and the credit raters, Charlie Brown and Lucy van Pelt, of Peanuts fame, display a deep symbiosis. Charlie needs to kick that football, even as he knows that Lucy needs to yank it away at the last second. Each plays their part in a recurring tragicomic drama that ends in a pratfall.

The market, too, is a game. The winners keep teeing up the pigskin, and the losers keep yelling “Aaaaaargh!” Will changing the rules help? Maybe. The credit rating agencies may finally have worn out their welcome, as lawmakers ponder reform. Question is, what could take their place?

Credit rating firms criticised over financial crisis

Credit rating firms criticised over financial crisis

Senators say the rating agencies' analysis was not robust enough
The behaviour of two credit rating agencies in the run-up to the financial crisis has been criticised by US senators following an investigation.

The Senate committee said Moody's and Standard & Poor's instilled "unwarranted high confidence" in certain risky financial products.

It also said that they were influenced by the banks that paid their fees.

The committee will hear testimony from current and ex-officials of Standard & Poor's and Moody's later on Friday.

'Massive economic damage'

The Permanent Subcommittee on Investigations committee said the agencies must share some of the blame for the severity of the financial crisis.

It also said firms let their drive for profits affect the ratings they issued.

The panel's chairman, Democrat senator Carl Levin, said the agencies had let banks "sell high-risk securities in bottles with low-risk labels".

Senator Levin said once the crisis emerged rating agencies had failed to acknowledge the problems fast enough.

That, he said, led to mass downgrades of billions in investments, rocking the financial system and triggering the crisis.

"By first instilling unwarranted confidence in high risk securities and then failing to downgrade them in a responsible manner, the credit rating agencies share blame for the massive economic damage that followed," said Mr Levin.

中銀開審日期

New case no. is 【案件編號：DCCC527、528/10】

查 詢 聆 訊 日 期

案件編號 : DCCC 527 / 2010

(本資料下載於 2010 年 9 月 29 日 上午 8 時 8 分)
區 域 法 院 法庭

08/11/2010 上午
09:30 am 欺詐地或罔顧實情地誘使他人投資金錢的罪行
Offence to fraudulently or recklessly induce others to invest money
估計時間 - 6 日/Day(s)



涉失實推銷迷債
兩中銀經理不認罪 2010年6月2日

【明報專訊】兩名中銀香港女經理涉嫌違反《證券及期貨條例》，失實推銷雷曼兄弟相關產品，誘使8名客戶投資逾千萬元，兩人否認控罪，案件已排期於今年11月開審。

兩名被告戴晶(38 歲)及張瑰瑰(47 歲)分別面對1項及10項欺詐地或罔顧實情地誘使他人投資金錢罪，昨由數名同事陪同到庭。兩人將由資深大律師鄧樂勤代表。

Duncan, Peter N., S.C. 鄧樂勤 資深大律師

--------------------------------------------------------------------------------
地址:
香港金鐘
金鐘道89號
力寶中心第1期1401室


電話:
25212616

傳真:
28450260

電郵:
pnduncan@netvigator.com

執業範圍:
刑事/A1/A3/B2/C5/F1/I2/S2

學歷/資歷:
律師 (香港) [1976-1992], 律師 (英國) [1976 --], 法學士, 英國特許仲裁司學會院士

認許年份:
香港 (1992), 香港資深大律師 (2004), 英聯邦 (1970)

11月開審 涉款千萬

牽涉戴晶的案件排期至11月8日、一連6日開審，將傳召4名控方證人，其中一名為專家證人。至於張瑰瑰案件，則牽涉10名控方證人，當中2名為專家證人，該案排期至同月25日審訊，為期20天。兩被告續獲保釋。

控罪發生於2005年3月至08年2月間，戴、張涉分別向1名和7名客戶作出虛假陳述，即指產品沒有任何經濟損失的風險，總投資額達1021.1 萬元。

根據《證券及期貨條例》，任何人誘使另一人作出認購或包銷證券的協議，而作出欺詐或失實陳述即屬犯法，最高可判罰款100萬元及監禁7年。

【案件編號：DCCC527、528/10】

中銀(香港)總裁和廣北第二次立法會發言 :

和廣北第二次立法會發言 :

副董事長兼總裁和廣北回應指，香港的監管環境中，銀行銷售產品以披露為本，由客戶作出投資決定，雖然產品風險未必匹配，但該行已利用欺詐 失實陳述，罔顧實情，誘使蓄意遺漏某項事關重要的事實的銷售手法銷售，加上產品是透過公開發售，投資者簽署有關風險未能匹配的文件，已符合銀行欺詐銷售要求。

1. [銀行銷售產品以披露為主]. 和廣北自打嘴巴之說, 連本身銷售員工也不明白迷債產品的複雜性, 他們又怎能向客戶正確地披露呢? 立法會是否可要求中銀的銷售職員上去講解一下迷債的結構. 看他們是否知道?

2. 我相信中銀和廣北不是白痴, 他應心內明白為何超過70%的低風險投資者會簽署有關風險未能匹配的文件, 明顯地是受到中銀的銷售員失實誤導, 及利用客戶們對中銀的信任, 而誘導苦主們去簽了如此完全不合理, 不平等的文件.

3. 和廣北明顯地再一次將全部責任推給特區政府的金管局及證監會, 苦主們就根據中銀言論, 向[特區政府]要求賠償吧.

綜合和廣北的兩次立法會答話, 更令人相信他是一個無操守的專業金融家, 但另一方面, 他說出了迷債事件, 就是主辦機構設計毒債, 特區政府的監管機構失職, 加上銷售銀行高層的無恥貪婪, 而令四萬多市民變了今天的苦主.

連銷售員工本身也不瞭解這種複雜性的產品，怎樣向客戶披露呢？

中銀(香港)總裁和廣北心中有氣而己。他不滿監管機構沒有負起部份責任，故此在立法會上特地指出產品及名稱都是經他們審批才出售的。和廣北是老奸巨滑的銀行家，那有誠實可言？我相信他目睹苦主們天天在中銀門口坐示威抗議，嚴重影響了其招牌形像，而又眼見無能政府遲遲未想出撤底解決雷曼事件的辦法，所以他才有點兒急了。他為了銀行利益想，不願銀行負全責。在此情況下，他迫不得已，惟有硬著頭皮「拖埋無能的官府落水」。他這樣做，一來可掩飾老千銀行部份的醜行，二來也可淡化市民對銀行不良的印象，是一舉兩得也！

New Proposals to Regulate Mis-Selling of Investment Funds & Structured Products in Hong Kong

New Proposals to Regulate Mis-Selling of Investment Funds & Structured Products in Hong Kong
The recent global financial crisis has resulted in an upswing in regulatory action throughout world markets. In Hong Kong, the Securities and Futures Commission (“SFC”) has proposed a slew of new requirements, some of which have already been implemented retroactively and without industry consultation. In this article we examine these ongoing developments in SFC policy and their effectiveness in reaching a fair balance between investor protection and costs to the investor and the financial industry.
- Timothy Loh, Solicitors

http://www.legal500.com/assets/images/stories/firmdevs/timo33253/090121_sales_regulation.pdf

Regulatory

Regulatory

1
Clifford Chance
Herbert Smith
Linklaters

.2
Allen & Overy
Richards Butler in association with Reed Smith LLP
Simmons & Simmons

.3
Allens Arthur Robinson
Baker & McKenzie
DLA Piper
Deacons
Freshfields Bruckhaus Deringer
Lovells
.
Dechert LLP in association with Hwang & Co
Jones Day
Mallesons Stephen Jaques
Mayer Brown JSM
Slaughter and May
Timothy Loh, Solicitors
.
Clifford Chance has one of the biggest practices in Hong Kong, acting for CITIC Pacific, Citigroup, Macquarie, Deutsche Bank, UBS, Morgan Stanley and Bank of China. Clients praise the lawyers’ ‘experience and expertise’, singling out Martin Rogers, who ‘has been in Hong Kong for a long time and is very up-to-date on the thinking of the local regulators’. Matthias Feldmann and Donna Wacker recently made partner, joining Mark Shipman. The team has been involved in several SFC investigations against financial institutions, and is drafting the regulations governing the new Hong Kong Mercantile Exchange.

Herbert Smith has a reputation for contentious work, handled by Mark Johnson, Gavin Lewis and Tim Mak, and can call on Ashley Alder and John Moore for non-contentious matters. The practice has advised on internal investigations on insider dealing, market manipulation and derivatives trading, and worked on SFC and HKMA investigations including the Lehman Brothers mini-bonds issue. Partners are ‘very smart and diligent’ and ‘efficient in terms of turnaround’.

Linklaters ‘considers all the business aspects of a transaction’ and ‘has the ability to apply the law to actual working issues’. Carl Fernandes and Marc Harvey focus on non-contentious and contentious work respectively. Other significant individuals include recent partner Umesh Kumar and Melvin Sng. The practice advised Merrill Lynch on non-US regulatory aspects of its merger with Bank of America, and handled the restructuring and disposal of Lehman Brothers Asia. Additional clients include HSBC, RBS, Standard Chartered Bank and BlackRock.

Allen & Overy has dealt with the loss of Simon Berry to Latham & Watkins LLP by transferring non-contentious specialist Alan Ewins from London, to join litigator Angus Ross. This move has paid dividends, with clients saying ‘Alan has made a very good impression - he is proactive, goes the extra mile and is very dynamic’, while ‘Angus is personable and a very experienced litigator’. Others add that ‘they have a pragmatic approach to matters’, but ‘they need more depth of experience in their junior to mid-level associates’, though hiring senior associate Abdulali Jiwaji from Lovells may help in this. The practice advised UBS on disclosure issues in Hong Kong, Kazakhstan and Papua New Guinea, and Standard Chartered Bank on the acquisition of Cazenove Asia.

The ‘quality practice’ at Richards Butler in association with Reed Smith LLP has an excellent reputation for contentious work, led by Jonathan Green, and coverage of financial services regulatory issues spearheaded by David Morrison. Clients include CITIC Group, Li & Fung, ANZ and PCCW.

Simmons & Simmons focuses on the regulation of financial services across the region, covering investigations, enforcement, compliance and, with the addition of Sau Wing Mak, SFC-authorised retail structured products. Paul Li and Rolfe Hayden ‘are undoubtedly expert in their fields and combine a tremendous working knowledge with excellent client service’.

Allens Arthur Robinson’s non-contentious practice is led by Matthew Barnard, who ‘has a deep understanding of the financial services regulatory framework in Hong Kong’, and handled the SFC licence application for Citadel Derivatives Group. Contentious specialist Simon McConnell has ‘a pragmatic approach to litigation’. Clients are ‘impressed with the practice’s business acumen and industry knowledge, and the precision of the advice’, and say the group has ‘an excellent understanding of our operational model both locally and globally’.

Baker & McKenzie’s cross-practice model draws on expertise in banking, dispute resolution, tax, real estate and insurance. Milton Cheng leads the practice ,while Andrew Lockhart advised ICBC International (formerly ICIC) on the transfer of assets and liabilities to ICBC Asia.

DLA Piper covers not only financial services regulation, but spans across competition issues and FCPA investigations, with the hire of David Cox and consultant Tham Yuet Ming from in-house roles. Christopher Clarke advised Cheung Kong Infrastructure on listing rules relating to its $733m disposal of Outram to Hong Kong Electric.

Deacons handles financial services compliance, run by Jane McBride, and contentious work such as the insider dealing cases handled by practice head Joseph Kwan. Clients say ‘they’re very knowledgeable’ and ‘very plugged in to the regulators’. Rory Gallaher is also recommended.

Freshfields Bruckhaus Deringer advised Nomura on its acquisition of Lehman Brothers’ assets in Asia, and Credit Suisse on the disposal of its asset management business in Asia to Templeton, both handled by Rob Ashworth. Richard Chalk is highly regarded for his contentious work.

Lovells’ partners stand out for the ‘excellence of their work and their professional integrity’, with clients adding ‘they are technically strong, hardworking and eminently likeable’. Key individuals include Mark Lin and Gary Hamp.

Dechert LLP in association with Hwang & Co deals with contentious and non-contentious work for investment fund clients, especially regarding compliance with US regulations such as the FCPA and SEC rules. David Chu and Henry Wang are the key partners.

Jones Day has more of a contentious focus, particularly in lead partner Simon Powell’s niche area of telecoms regulation. Powell acted for i-Cable WebServe and Hong Kong Broadband, as well as for former members of Lehman Brothers’ in-house legal team in relation to the mini-bonds investigation. Clients are ‘happy with the response times, level of knowledge regarding key issues and commercial focus’.

Clients recommend Mallesons Stephen Jaques ‘for great depth across the whole spectrum of regulatory work’ and say ‘they are in touch with recent developments’. Richard Mazzochi and Hayden Flinn handle licensing and compliance for clients such as General Electric, Credit Suisse and Goldman Sachs. Simon Clarke leads on contentious work, while Adeline Chin went in-house at PricewaterhouseCoopers.

Mayer Brown JSM handles compliance issues for financial institutions from start-ups to well-established names, including ABN AMRO, ANZ, HSBC, BNP Paribas and Commerzbank. Sara Or leads the practice, while Philip Smith covers regulatory work for funds.Slaughter and May’s main contact is dispute resolution partner Mark Yeadon, who advises on regulatory investigations of financial institutions, including fraud and shareholder disputes.

Timothy Loh, Solicitors brings its local knowledge to bear, with clients saying the firm ‘shows total commitment and has all the required expertise to cover our needs’. Name partner Timothy Loh ‘has excellent credentials with regulators’.

Dispute Resolution: International & Hong Kong Law: China/Hong Kong

Dispute Resolution: International & Hong Kong Law: China/Hong Kong

HK Law firms are eagerly working with HK banks to cover up banks mis-selling frauds.

Due to the number of tables in this section, the editorial is in alphabetical order by firm name.

Allen & Overy LLP
THE FIRM A&O's corporate and financial institution clients provide a broad range of disputes for this team. The Hong Kong-based team is known for its work on banking litigation and regulatory disputes. The PRC offices are also primarily engaged in contentious matters in the financial sector, including derivative disputes. The PRC team advised a major Chinese bank on its obligations under a refund guarantee in relation to 11 shipbuilding contracts between Chinese shipbuilders and overseas shipowners.

Sources Say: "The lawyers are well versed in strategy and really know what they are doing."

KEY INDIVIDUALS Peter Thorp is the Beijing office's managing partner and "a solid performer," particularly in arbitration proceedings. Angus Ross is one of the principal litigators in Hong Kong, and clients describe him as "a calm, collected and efficient communicator." Respected commercial disputes lawyer Simon Clarke joins the firm from Mallesons in June 2010, and is admired for being "a diligent and combative lawyer, and a good team member to have on side."

Clifford Chance LLP
THE FIRM Clifford Chance was an early entrant into the PRC, and its Mainland China offices complement a market-leading Hong Kong presence on contentious aspects of corporate and finance transactions. The Hong Kong office is best known for its regulatory and contentious banking work; the team followed up its high-profile work on the RREEF fraud matter with the representation of Golden Screen in a major joint venture shareholder dispute. Other quality clients include PCCW, Shell and Morgan Stanley.

Sources Say: "An active, high-quality and respectable resource." "A market-leading firm on account of its excellent quality, high-calibre work and rapid turnarounds."

KEY INDIVIDUALS Market sources respect Brian Gilchrist for being "a stout opponent and civilised operator, with an enviable reputation in general commercial litigation." "Highly incisive litigator" and regulatory expert Martin Rogers enjoys "a deservedly formidable reputation" in town, and is credited with taking the practice forward to the position it now occupies in the market.

Deacons
THE FIRM It was an interesting 2009 for Deacons, following the merger of the Australian side of the firm with Norton Rose. This leaves the Hong Kong office as an independent entity, and market sources are watching keenly to assess the impact this will have on what has historically been a highly profitable enterprise. Its traditional strengths lie in insurance and smaller local disputes. Work highlights include acting for a senior investment bank executive to counter allegations of insider trading, and advising on issues connected with the Lehman Brothers minibonds.
Sources Say: "Expedient and high-quality advice across a broad area of law."

KEY INDIVIDUALS Robert Clark is admired for his "fluent command of the law; he is great to have on side in really tough and complicated disputes." Trilingual general commercial litigator Joseph Kwan is visible on a number of law society panels, and is "a sound and proficient choice of solicitor." In addition to general commercial disputes, Richard Hudson has proven expertise in contentious insolvency matters. Clients speak of his "high-quality advice and willingness to discuss and clarify the situation before acting."

Linklaters
THE FIRM In the PRC this UK magic circle firm builds on a sound corporate and finance client base to assist clients when deals turn contentious. It recently acted for Big Four accountancy firms on an inspection of audit engagements in China, and continues to count COSCO and HSBC as clients. The Hong Kong office has a particular profile in financial services and regulatory work. It has acted for Ernst & Young on an alleged auditor negligence action; other clients include Merrill Lynch, GDF SUEZ and HSBC.

Sources Say: "Faultless service and comforting bench strength."

KEY INDIVIDUALS Joint managing partner and China head of litigation Marc Harvey wins considerable recognition for his "insightful and sharp strategic thinking; he intuitively understands where clients are trying to get to." "Capable and flexible,"Melvin Sng is a recognised presence, especially in contentious regulatory and restructuring work. Beijing-based counsel Chen Jiyuan is the main contact for enquiries.

Mallesons Stephen Jaques
THE FIRM This firm has done much to shake off its reputation as a construction-dominated outfit, and its involvement in high-profile disputes, including banking and regulatory work, is testimony to this development. The practice has responded appropriately to the loss of practice head Simon Clarke to Allen & Overy, with the recruitment of barrister and arbitration expert Neil Kaplan.Recent work includes acting for a number of banks on disputes relating to alleged mis-selling, and for a Japanese contractor on a construction dispute concerning Bangkok airport.

KEY INDIVIDUALS Paul Starr is "a proficient and sound tactician" who divides his time between construction and general commercial disputes.

Mayer Brown JSM
THE FIRM This practice is one of the longest-established in Hong Kong, celebrating its 147th year of involvement in some of the territory's most notable local disputes. It recently acted for the Hong Kong Hospital Authority on a judicial review application concerning childbirth hospital fees. Other clients include Bank of China (Hong Kong), the Hong Kong Jockey Club and Swire Properties. Now part of Mayer Brown, it is particularly respected for its large and committed disputes team, and for having little of the lawyer transiency that can dog some international firms in Asia.

KEY INDIVIDUALS The "efficacious and highly impressive"Nicholas Hunsworth heads the dispute resolution practice and is considered "wholly worthy of recognition as one of the strongest operators here."Jacob Tse is a frequent sight in medical and hospital matters, and is admired for his "methodical and persistent approach."

Wilkinson & Grist
THE FIRM This 150-year-old commercial litigation outfit acts for some notable players, particularly in the finance industry, including Grant Thornton Hong Kong and The Bank of East Asia. It also acts on proceedings related to the Nina Wang matter.

KEY INDIVIDUALS Senior partner John Budge is the practice head, and wins market recognition for being "an aggressive litigator but also a fair and reasonable communicator." Insolvency and disputes expert Keith Ho has had a busy year with the Nina Wang work.

和廣北在立法會宣誓作供講大話

和廣北在立法會宣誓作供講大話

中銀(香港)總裁和廣北先生, 10月5日, 10月8日兩次出席立法會聆訊. 五次回應四位議員, 關於中銀風險錯配, 違規銷售, 將高風險結構性債券, 70%售賣予低風險客戶群時. 反覆強調:

中銀職員只提供資料, 不會提供投資意見. 是客戶自己對這類高風險產品有興趣, 主動查詢. 中銀職員會再三提醒客戶, 風險匹配的差異. 若客戶還是希望購買時, 職員會向客戶提供產品章程, 引導客戶閱讀章程 (5-8頁), 並清晰解釋, 討論. 証實客戶瞭解產品. 甚至會安排高級職員對某些長者提供個別協助.

哇 ! 和廣北竟然大白天在立法會上, 多次顛倒黑白, 大話講到滴水不漏. 令人歎為觀止

和先生的[人格]和[道德]去了那裏呢? - 作者: 中間人

以下是中銀香港總裁和廣北在立法會的其中幾句說話 :

{中銀香港對雷曼迷債評級為高風險產品，主要是因為迷債是不保本的投資工具，但投資者認為迷債有固定回報。至於迷債的名稱有否誤導，他指迷債名稱是發行機構提供，亦經過監管機構同意，而中銀香港沒有就名稱與相關機構探討。}

作為一個[專業]人員, 既然事前已知雷曼迷債是高風險投資產品, 絕對不適合一般的[普通市民]投資者購買, 而竟不顧一切地銷售給這些只求有[固定回報]的投資者. 他~~和先生知否定期存款也是[固定投資回報]的產品嗎? 而風險就比迷債低得多嗎? 他竟然用[迷債有固定回報]來做籍口, 銷售給那些非專業投資者, 甚至是那些只能接受最低風險的投資者.這對於他~~和先生是金融界的專業人員資格, 實在是一種極大 [侮辱].

請問 和先生 , 如果有機構將[白粉]包裝成[麵粉], 而無能的政府竟然不檢查清楚, 便讓他們過關, 和先生明知是[毒品], 作為專業人仕, 仍然去做分銷商嗎? 而其理由就是[麵粉]名稱是發行機構提供, 亦經過政府監管機構同意, 而和先生沒有就名稱與相關機構探討. 於是[毒品]也可照賣給任何市民了.作為一個人或專業人員 , 請問 和先生的[人格]和[道德], 又去了那裏呢? 仰或和先生根本就沒有呢?

Equity-Linked Notes

http://www.ulb.ac.be/cours/solvay/farber/VUB/10%20Lehman%20Brother%20Equity-Linked%20Notes.pdf

Equity-Linked Notes
An Introduction
An Equity-Linked Note (ELN) is an instrument that provides investors fixed incomelike
principal protection together with equity market upside exposure.

Lehman Equity Linked Notes (ELN)

Lehman Equity Linked Notes (ELN)

http://www.investmentlawyer.net/lehman-equity-linked-notes.php

If you invested in a Lehman Brothers Holdings, Inc., ("Lehman") issued Equity-Linked Note ("ELN"), which provided for "100% principal protection," and you lost a substantial portion or all of that investment, you may have a meritorious claim for your economic loss.

An ELN is a type of Lehman structured product that is a security issued by a brokerage firm and traded in secondary markets like shares of common stock. These investments offer part of the upside from owning stocks but limit the loss of at least the principal of the investment, which can be returned to the investor upon the maturity of the note. An ELN is structured by combining a long zero-coupon bond position (a right to the value of the bond upon its maturity, however without any interest payments) with a long call option (a right to sell a specific number of equity positions of a stock in the future at a set price at a set time). The return on the bond within an ELN is not based upon a fixed interest percentage of the bond, but on the appreciation of a single stock, basket of stocks, or equity index (the "underlying equity"). Thus, the ELN is a debt instrument where the final return is based on the return of the value of the principal of the bond investment along with the appreciation of the underlying equity. The bond provides the note buyer with protection of their principal, while the call option allows them the ability to realize potential gains on top of their principal investment.

ELNs were once sold only to sophisticated investors, however in recent years Lehman structured products have been increasingly sold to unsophisticated investors. ELNs are difficult to evaluate and monitor, as well as have high hidden costs, including taxes on profits, and are illiquid. As a result, these types of investments are almost never suitable for unsophisticated investors under securities laws. Although the bond portion of an ELN is protected against risk from the market, it could still lose its value where the issuer of the bond goes bankrupt and can no longer pay back its obligations. When Lehman Brothers went bankrupt, all of the holders of Lehman Brothers ELNs lost most of or all of their principal investment.

Many of the Lehman Brothers ELNs were publicized as able to provide "100 protection of the principal" of the investment, as late as July and August 2008, and in some cases less than 1 month before Lehman Brothers went bankrupt in September 2008. In other cases, Lehman Brothers ELNs were sold by other investment banks, such as UBS, Wachovia, Merill Lynch, Citigroup, or others, who did not disclose that the ELNs were issued by Lehman Brothers and were at risk in the case of a Lehman Brothers bankruptcy. In both of these cases, the investors may have a strong claim against either Lehman Brothers or their brokerage firm.

Investors who specifically asked for investments that protected their principal may also have a strong claim. Brokers who advised their clients that Lehman Brothers ELNs were safe investments for risk-adverse clients may be liable for misrepresentation. Hundreds, if not thousands of clients have come forward since they lost a substantial portion or all of their Lehman Brothers ELN. Many of these investors have solid claims that they may bring through arbitration procedures with the Financial Industry Regulatory Authority (FINRA).

If you are someone you know has lost money investing in these products, Napoli Bern Ripka LLP can help. Please call us at (212) 267-3700.

Structure Products mis-selling frauds of BOC

1. BOC did not train their front line staffs on impact of CDOs involved with Lehman and non-Lehman related products and never dared to inform the public about their frauds.

2. For BOC ,there were no reviews of marketing materials, and took no responsible for caring of all their structure products sold while other banks did look into these materials as BOC was the last bank in HK to stop selling of these products and that led to create huge number of old retiree in HK to buy these products in 2008. All their middle management, Law Hong Ping Lawrence, Chiu Man Ming, Wong Wai Sang Herman, Wong Chung Yiu Edmond, Wong Hang Mei, Hsu Ton Min Michael are all responsible.

3. There were no checking, supervising and recording of their bank staffs on duties that involved in telling lies in assessing customers' suitability, and explaining of these investment products covered nothing of the CDOs involved.

4. HK Vocational Training Council that used to train blue collar workers and is not familiar with structure products were used for competence test on investment knowledge, and training materials from VOC should be studied and to be showned to public of BOC as laughing stocks of the world financial centers.

5. BOC middle management instructed their staffs to ask their customers to read the propectus and marketing leaflets themselves so as to commit crimes of SFC ord. sec. 107. Legal & complaince dept. was used by BOC to cover up their bank frauds as none concrete answers could be found from their answer of complaints so as to commit more frauds against rules of HKMA.

6. There were no procedures from BOC middle management for their staffs with recordings during the sales of these structure products just as all private bankings are all doing for many years, and these stupid banking system helped their staffs to committing crimes in changing the mismatch of their low risk rating to high risk rating and many of staffs had broken the SFC ord. sec 107 already.

7. Most of the yearly risk accessment done by BOC changed from high risk to low risk and the bank never corrected these errors in wrong mis-selling and never cared about their customers as private banking does.

8. BOC staffs performed cold calls on sales of bonds and if time allowed, gave informations on other very high risk structures products informations to their customers as bonds equivalent.

9. No time limit were set by BOC for sales staffs and no supervising were done for all these mis-selling while in private banking, the director would sometimes comes and meet with their customers to check if any problems arise. BOC is doing private banking business but never done any supervising jobs in management.

Minibond salesperson in Hong Kong is Mr. Chin Yee Yap and he now works as an advisor to Bank of China. Lehman ELN salesperson is Mr. David Lam. Both these person reported to Mr. Kirk Sweeney, Head of Sales for Lehman Brothers Non-Japan Asia, who was also Hong Kong Branch manager. Mr. Sweeney is now Head of Sales for Nomura in Hong Kong.

Minibonds were rated high risk, banker says

Minibonds were rated high risk, banker says

Dennis Eng


Bank of China (Hong Kong) sold about HK$5.8 billion worth of Lehman Brothers-related minibonds that the bank rated as high risk, vice-chairman and chief executive He Guangbei told legislators yesterday.

The bank was the largest local distributor of minibonds guaranteed by Lehman. When the Wall Street giant went bankrupt in September 2008, Hong Kong investors lost billions of dollars on minibonds that became worthless. Minibonds are high-risk, credit-linked derivatives.

"We did rate the minibonds as high risk, the reason being that it was not principal protected," He said.

Testifying for the first time before a Legislative Council panel investigating the Lehman minibond debacle, He (pictured) defended the bank's sales of the minibonds between 2003 and 2008, saying they accounted for just 1.74 per cent of its total retail structured financial products of roughly HK$330 billion. He said, given the low interest rate environment at the time, there was keen market demand for the minibonds, which offered higher returns.

Different series of the minibonds were sold but not all were distributed by the bank. The fifth, sixth and seventh series were not sold because of the market downturn due to the outbreak of the Sars virus. Series 36 was also not sold by the bank in March 2008 because of "uncertainties in the market" as rumours spread of the deteriorating investment banking situation in the US, He said.

He, who appeared before the panel with his deputy, Lam Yim-nam, said all bank staff were kept abreast of the latest situation in the US from August 2008 to help answer any customer queries about their investments.

Two of the bank's staff were charged in connection with the sale of the products in March this year.

A settlement offer by 16 banks to buy back soured minibonds from about 25,000 investors meant those who accepted the terms would recoup between 60 per cent and 70 per cent of their initial investments.

He and Lam will appear before Legco again on Friday.

October 5, 2010

Information of training models of bank of China from Regina Ip :

http://hk.myblog.yahoo.com/hanhoco/article?mid=2175

HONG KONG, Oct 06, 2010 (AsiaPulse via COMTEX) --

HONG KONG, Oct 06, 2010 (AsiaPulse via COMTEX) --
Highlights of today's newspapers:

SOUTH CHINA MORNING POST:

- Bank of China (Hong Kong) sold about HK$5.8 billion worth of Lehman Brothers-related minibonds that the bank rated as high risk, vice-chairman and chief executive He Guangbei told legislators.

意圖詐騙與罔顧實情的誤導 ─ 再析第107條

意圖詐騙與罔顧實情的誤導 ─ 再析第107條


當曰的立法目的為保護小投資者, 立法前身為S.107 (保護投資者條例)

. 欺詐， 失實陳述，罔顧實情，誘使

. 虛假 ，具誤導性或具欺騙性的陳述

. 承諾

. 預測

. 蓄意遺漏某項事關重要的事實

囗供的作用及注意事項



. 不是證據

. 可以自己寫，自已最好先寫一份

. 以時序一步步寫完

1. 時間 ， 2. 曰期 ，3. 地點 ,

4. 緣起 ， 3. 過程，6. 結果

准備你自已的資科檔案 , 將文件排序 , 在囗供中直接引述 . 文件 1 , 2 , 3 等等

要求負責探員的聯絡 , 跟追情況

任何刑事檢控 , 控方要證明兩樣事 :

1. 事實的發生真相 ( 例如 假債券)

2. 犯罪的意圖 (欺騙你)

超過合理懷疑說任何人用欺詐（Fraudulent）或魯莽（Reckless）的失實陳述（Misrepresentation），誘使他人買賣受規管的投資計劃，皆是犯法的事情。若然銀行職員犯法，那並不會是一個人的事，一定是結構性的問題。換言之，由高層到前線僱員，有串謀犯法的責任，最終理應一併被控告。

有百分之九十八苦主已經與銀行和解，那只是民事上不再追究的和解，刑事行為是影響社會安寧的行為，是公眾的事，若有任何協議要求苦主放棄刑事上的追究行為，這協議一定沒有法律效力。任何人企圖妨礙苦主在刑事調查中與警方合作，例如不做證人等，會構成妨礙司法公正之罪。

《證券及期貨條例》第107條的標題是“欺詐地或罔顧實情地誘使他人投資金錢的罪行”。定義該條法例的罪行有兩個關鍵詞，“欺詐”及“罔顧實情”，任何行為是干犯這其中一項的話，就屬干犯該項條例的罪行。


“欺詐”是指有主觀意圖的，在定罪方面對證據的要求是比較高的。“罔顧實情”則不一定要證明是有意圖地犯罪。在法律的層面，只要在客觀上造成某種後果，無須去證明是否有主觀意圖與否，就會被認定干犯某項罪行。例如，酒後駕駛造成他人生命財產傷害，該肇事者只要被證明是酒後駕駛，就會被定罪。


該種罪行所造成的社會後果是嚴重的。如果我們應用這些概念到雷曼事件中，就不難理解“107條”的定罪條件了。


首先，作為證券銷售企業或職員是領有法定牌照的專業企業及人員，是必定要知道及遵守所有相關法例及行為操守，對產品盡職審查的責任，確保客戶明白產品重要資料及全部風險的責任，確保合理地向客戶提供建議的責任。


其次，作為一個專業的證券從業員來說，就必定要知道及遵守本行業的職業道德規範。而私有財產是社會的道德及法律的重要基石，罔顧實情地誤導他人造成他人的財產損失，是對社會的損害。因此無論是否被證明有否主觀意圖，都是犯罪。


我們以雷曼苦主所反映的最普遍的事實來進一步分析。


以股票掛鈎票據(ELN)為例，如果證券銷售職員只說這種票據的最大風險是，當所掛鈎的某只股票跌至某個指定價位，投資者變為持有該只股票 , 分銷銀行在銷售時，鮮有提及其零售商的角色 , 利用香港公司法(CO) 『零星破碎』的漏洞，通過私人配售，避過證監會的審核；


再以迷債／星債／精債為例，如果證券銷售職員只提及迷債／星債／精債債券的最大風險是迷你債券所掛鈎的那幾家大企業發生債務事件或倒閉，投資者才會損失本金。 而且儘管抵押品是3A評級，這CDO不是公司企業債。


上述兩個案例的證券銷售職員就干犯了罔顧實情地誤導他人投資金錢的罪行，因為實情是投資股票掛鈎票據的最大風險是投資者有可能會損失全部所投資本金，而投資迷你債券的最大風險不僅是迷你債券所掛鈎的那幾家大企業發生債務事件或倒閉，還有背後數也數不清的CDO風險。 銀行作爲分銷商，有責任向客戶提供所有相關的資料。如果知道抵押品也是信貸掛鉤產品，還可能跟多至100多個不知名公司的信貸事件掛鉤的話，那就不會去買了。


當然，僅僅是上述控告並不足以令法庭定罪，這就牽涉到證據及舉證責任。就雷曼事件而言，控辯雙方都有舉證責任。簡單一點地從雷曼苦主的角度來講，重點證明個人的實際情況是要求中低風險的定期及債券，因此相對容易。比較普遍的證據是要證明該產品高風險是不適合本人購買的，其次是證明其投資意願是保守的，沒有意願去冒損失全部投資資金的風險。雷曼產品購買者都是不合適的, 職員不理解並不跟客戶解釋提醒哪些迷債/星債/精債 的特徵和相關風險, 而苦主是被詐騙成可以購買高於自己承受能力的產品的投資者，因此相信大部份雷曼苦主是不難舉證的。

許多的銀行銷售職員把雷曼相關結構性產品說成是低風險定期存款，或另類定期存款，或定期存款的代替產品，不一而足；又例如將迷債／星債／精債債券說成是低風險債券，而沒有解釋這是一種高風險結構性產品；又有甚至不作任何解釋，只是說該產品的利息是多少，有超級市場的購物券之類，等等。這些說法都是罔顧實情的失實陳述。沒有披露“星債”的相關連公司的“首先失責”條款及披露 迷債／星債／“精債”的特性: 作為抵押品的CDO是也是信貸掛鈎產品，裡面掛鈎的百幾間公司資料, 以及其中若干公司出事,債券就會被提前贖回的重大風險.


相對於雷曼苦主，銀行職員的舉證責任則更重：因為在實際上他們要證明有做到某些必須要做的事情；舉證無罪更困難：他們要證明在推銷產品的當時，已經完全了解產品的性質、結構、風險和合理解說；又他們要證明在推銷該產品予投資者時，在所有的情況下都是合理的。產品的主要特徵和（導致‘不保本’的）重大風險跟苦主買入產品是了解的完全不一樣的。蓄意遺漏某項事關重要的事實， 就此一舉證而言，銀行職員是很困難去證明自己是無罪的。銀行職員罔顧他們所銷售產品的實情，罔顧投資者的意願，罔顧投資者的資產安全，為了迷債的傭金，有意無視對迷債的無知、就不下工夫去瞭解迷債的真相，銀行相關管理 , 批核銷售部門及職員對於銀行銷售的產品有沒有進行謹慎的盡職審查，不少銀行用「中風險投資」 評級 。銀行有意低估迷債的風險評估也就是干犯了第107條所定義的罪行。