Investors appeal against ruling on Lehman-linked losses

Investors appeal against ruling on Lehman-linked losses

04:46 AM Mar 19, 2011SINGAPORE - A group of 213 investors, in a bid to recoup S$18 million in losses tied to failed American investment bank Lehman Brothers Holdings, has urged the Court of Appeal to overturn a ruling that dismissed their claim.

DBS Bank, which sold credit default swaps linked to Lehman, had inconsistencies in the investment's prospectus and pricing statement, the investors said in their appeal. DBS had declared the investments to be worthless after Lehman collapsed in 2008.

The inconsistency stemmed from "an obvious clerical error", Judge Lee Seiu Kin said in a Dec 10 ruling, dismissing the lawsuit. Statements on how the investment value would be calculated in a credit event, such as Lehman's collapse, were not meant to be comprehensive, mathematical formulae and were instead general descriptions, he said.

"While DBS insists on holding us to the strict terms of the contract, they seek to avoid liability by relying on what they call a clerical error," the group, represented by lawyer Siraj Omar, said in a statement on Friday.

DBS had sold its DBS High Notes 5 as a safe, low-risk investment, lulling the investors into having a "false sense of security", the group said.

The appeal is scheduled to be heard in the week of May 23.

Ms Jenny Lee, a DBS spokeswoman, said the bank does not comment on legal matters in progress.

Singapore's central bank in July 2009 banned 10 financial institutions, including DBS, from selling structured notes, such as credit default swaps, following claims by investors that they were misled on products tied to Lehman. DBS had its ban lifted in February last year, after it strengthened its internal procedures relating to advisory services across all investment products.

Investors in Singapore bought S$508 million of structured products linked to Lehman, which lost most or all of their value when the lender filed for the biggest bankruptcy in United States corporate history. BLOOMBERG