Legco members still look into Lehman CLN products

Our Ref : CP/C 635/2008
Telephone : 2526 4027 / 2869 9225
Facsimile : 2521 7518

13 April 2011

Complaint regarding the sale of investment products
related to Lehman Brothers by banks

Further to our letter of 24 September 2010, this Secretariat has relayed your concern and request to the Hong Kong Monetary Authority (HKMA). On the Members' instruction, this Secretariat is now providing the HKMA's reply to you for your perusal.

According to HKMA, we note that your complaint is concerned with six investment products, including three Minibonds (i.e. Minibond Series 20, 21 and 34), two Lehman-related credit linked notes (CLN) (i.e. Octave Notes Series 10 and Constellation Note Series 63) and one non-Lehman-related CLN (i.e. Octave Note Series 6B).

For the three Minibonds, we understood that you and Shanghai Commercial Bank (SCom) have entered into settlement agreement under Lehman Brothers Minibonds Repurchase Scheme. HKMA stresses that unless dishonesty, fraud or other criminal elements are involved, HKMA does not intend to continue its investigation into the case of any eligible customer who has accepted the repurchase offer made by the distributing bank.

For the non-Lehman-related CLN, which matured on 15 February 2011, we note that the principal and the final coupon payment of the product have been credited to your account maintained with SCom. Moreover, HKMA has informed that you had withdrawn your complaint in relation to this product with the HKMA through SCom on 28 February 2011.

For the two Lehman-related CLNs, SCom has already notified you that the expiry date of the settlement offer had been extended to the second half of 2011. As you has not indicated to SCom that you would refuse to discuss the settlement matters with SCom, the settlement negotiation between you and SCom is still in progress.

The Members have acknowledged that there is a settlement negotiation for the two Lehman-related CLNs, thus they have instructed this Secretariat to keep in view of it. This Secretariat would then consult Members on its result and get back to you in due course.

Thank you for writing to us.

Yours sincerely,

(Miss Amanda LEUNG)
for Secretary General