October 27 Protest

To give our viewers first hand information on the development of the Lehman Brothers minibond scandal, we have attended the protest held this morning at Central.

Protesters gathered at the Hang Seng Bank Headquarters and went to Public Bank(Hong Kong), Chiyu Bank, Industrial and Commercial Bank of China (Asia) and Bank of China to express their discontent on these banks' reactions to the Lehman Brothers minibond incident.

We were able to interview investors who put their money in Nanyang Commercial Bank for their comments on this incident.

Our interviewees showed us the promotion brochures of these minibonds.

300 investors who purchased derivative investment products at DBS attended a meeting this morning.

Kam Nai-wai claimed he was told that some investors has reached an agreement with their banks.

"Some banks have approached us and expressed that they do not wish that the case would be brought to courts," he said. "But I personally think that the whole process would speed up if we go to courts."

The Secretary for Economy and Finance, Francis Tam Pak-yuen stated that they have received over 1200 complaints, worth over HK$700 million.

Angry investors protest

Around 100 investors protested to the Monetary Authority and the Securities and Futures Commission this morning.

They include customers of Citic Ka Wah Bank, Chong Hing Bank, DBS Bank, Citibank, Standard Chartered Bank, ABN Amro, Royal Bank of Scotland and Dai Sang Bank.

The customers expressed that the banks had deceived them into putting their life savings into the high-risk investment products and urged the banks to make full repayments.

Although DBS has announced that they will notify clients about their compensation, protester Wong Kam-chuen, who invested over HK$2 million in the bank's retail structured notes, claimed he heard nothing from DBS.
"The bank staff could not tell me when the investigation will finish. I really have no idea of when I can have my money back," said Mr Wong.

Investors do not accept DBS pay-out

DBS is willing to give a pay-out to investors but they are not accepting it because it is far less than the total amount of investment.

The bank will compensate the full amount of investments to some of the investors but it is believed that most of them will not get all their money back.

DBS will be sending out the first batch of compensation letters to some of the investors (the total number of investors who bought the Lehman Brothers minibond in Hong Kong and Singapore amounts to 7700 people). After the investors accept the pay-out, they would deposit the money into their accounts next week.

DBS will pay out $414M

DBS will begin paying up to HK$414 million to investors who have invested about HK$1.86 billion in Lehman Brothers-linked derivative investment products after investigating that the way these were sold did not meet the bank's standards.

It was important for DBS to 'do the right thing' and 'in cases where our standards are not met DBS will not hesitate to make cash compensation', said Richard Stanley, chief executive of DBS (Hong Kong).

The bank would not comment on what the breakdown of the refund would be and which clients (if any) would have priority or what criteria it would use.

More scandals on promotion methods

After a meeting between investors and banks, more scandals, especially on the promotion methods of the bank, are uncovered.

Reports show that consumer banking staff of various banks encouraged investors to apply for personal loans to purchase the Lehman Brothers derivatives. Now, these people not only lost their principal and the interest pay-out, but they also carry a large amount of debt under their names!

Investors vow to carry on with the fight

Many holders of the Lehman Brothers minibonds were not impressed by the banks' offer to buy them back at current market prices.

They vowed to carry on fighting for a full refund, while others said they would not accept any buy-back that values their investment at less than 70% of their purchase price.

"Before, the estimated value averaged between 60 to 70%," said Peter Chan Kwong-yue who represents many Lehman minibond holders. "Later, this average may be 50% or may fall to 20% because there is no indication as to how long the buy-back process is going to take."

"Such a buy-back is worthless," said Siu Kwai-ching, 50, who invested around $6 million in these minibonds through Bank of China (Hong Kong). "We are not backing off."

On the other hand, some investors are considering a buy-back. "It depends on how they value my investment," said Mr Chan Hong-yuk, 63, who spent around HK$1.2 million on the minibonds and would accept a buy-back at 70 to 80% of what he paid. "A low valuation of say, 10 or 20%, would certainly be unacceptable...I had some sleepless nights. I worked hard for all my life and the investment is almost all the money I have."

'I don't think that it is a bond.'

A minibond is very obviously a derivative.

"Maybe some people think it is a bond. I don't think that it is a bond," said chief executive, Donald Tsang Yam-kuen, at a radio phone-in.

Note: A derivative is a financial instrument that derives its value from an underlying security. Minibonds comprise high-risk, complex credit-linked derivatives.

Oh no! What would be the investors' response to this?

Confirmed refund from DBS

An 84-year-old woman and her mentally ill son who bought derivatives sold by Lehman Brothers have reached an agreement with DBS on a partial refund, said Chan Kam-wah, the woman's younger son last night.

The reasonable settlement might put more pressure on the other banks to offer their investors a refund.

This is the first sign of resolution since the investment bank went into bankrupcy and came a day after Chief Executive Donald Tsang Yam-kuen demanded banks to respond.

Mrs Chan and her elder son bought 'global corporate basket credit-linked notes' from DBS in 2006 and 2007.

They have met with Linda Wong, DBS Regional Head of Consumer Banking, to disclose the settlement.

DBS denies refund reports

DBS denies reports of a refund and said it had 'not made any settlements with any parties on the grounds of alleged mis-selling'.

Sorry to disappoint all the investors out there - AGAIN!

The Chief is losing patience

"They cannot keep dragging on," said the chief executive after delivering his policy address. "Considering this situation, I am now requiring that banks reply this week."

With the evidence that the Monetary Authority has of mis-selling by some banks on hand,Financial Secretary, John Tsang Chun-wah, proposes that banks buy the minibonds they sold at the current market value.

The Monetary Authority has already received over 9200 complaints about the sale of the minibonds. "It would set up an independent panel to mediate with banks in cases where it finds evidence of mis-selling," said Mr Tsang.

Wow! Finally some 'good' news to all investors out there!

Government: Banks shoud buy back troubled bonds

Our government urges banks and brokers embroiled in the minibonds debacle to buy back the investments to bring an end to the investors' misery.

The market values the Lehman Brothers minibonds, originally worth HK$12.7 billion, at HK$7.24 billion.

Some of the minibonds are almost worthless while most of them are still worth around two-thirds of that the investors paid.

The government hopes that investors would be able to get their money back before the end of this year.

So does this mean most people will get two-thirds of their money back?

Drug Dealer?

"I have never thought that I would be a 'drug dealer'!" said an sales representative with over 30 years of experience, who was responsible for promoting Lehman Brother's minibonds.

A lot of us working at a bank aim at getting an extra two or three months salary as their year-end bonus, so some of us might not follow the correct procedures when promoting these products.

"30 of my long-time clients have bought the minibonds, they did not come back and complain to me, but that made me feel even worse. I feel extremely guilty and I don't know how to face them. I worry that some of them might end their lives because of this!" she said.

"I never had second thoughts when I got the information of Lehman Brother's minibonds in 2003," she said. "The company is rated AAA and has business relations with major companies and corporations all around the world. Everyone was confident in its products."

The minibonds became high-risk products in 2005 but they never understood why. The companies the minibonds are linked with are all large companies. It should be very safe.

The minibonds became a high-risked product because they are linked with many different companies and are then divided up. The accrual basis is unclear. At this moment, a lot of people are still confused with the way these minibonds operate.

"There are so many different products in the market and it is impossible to explain about each and every one of them to all our customers, especially the elderly," she said. HKMA has a regulation stating that for the clients aged over 65 request to add high-risked products into their portfolio, the request would have to go through specific procedures.

"We have to write a report stating that we have clearly explained to the client the risk of the product," she said. "The investment cannot be 100% of the portfolio's worth and we need to get our manager's approval before carrying on with the investment and have to send a copy of the investment portfolio to our headquarters to be put on file."

"Some people ignored these rules and skipped these procedures in this case," she said. "These policies came up during recent years so a majority of the investors purchased the minibonds when the regulations were not as strict."

What are the banks intentions?

Even after the banks knew Lehman Brothers is in trouble, they never stopped promoting the minibonds to their clients.

Dah Sing Bank client, Ms Ng, bought HK$580,000 worth of Lehman Brothers product after she was told that this is a low risk investment that guarantees 100% of her principal. After extensive reports of Lehman Brother's bankrupcy, Ms Ng was told by the sales representative that when the product was promoted to her, they already knew Lehman Brothers was having troubles!

Another Mevas Bank customer who prefers to be unnamed has lost HK$4 million. She was told that the deadline for purchasing the minibonds is soon approaching and thought that her money went into a safe investments, like what she usually invests in. No detailed explanation was given to her on what products she bought and not until after she has signed all the forms, she was given the risk assessment form to fill out. "After I knew that Lehman Brothers went into bankrupcy, I asked that staff from the bank and she confirmed that my money was put into the most high-risked investments!" she said.

After reading these reports, one might think: What are the banks' intentions to sell these products to its customers - AFTER knowing that Lehman Brothers is in trouble???

Legislative Council members stand out to help victims

This morning, Legislative Council Member, Hon Leung Kwok-hung accompanied investors to the Bank of China headquarters in Central to demand for a meeting with the bank after they refused to talk to its investors concerning their minibond investments.

The majority of minibond investors are clients of Bank of China but they have never take any action to talk to their investors.

Investors gathered at Charter Garden and have invited Mr Leung to accompany them during their demonstration.

In the eyes of the public, Mr Leung always helps the underprivileged to fight for rights and benefits. Can his voice be heard by BOC executives this time?

At a press conference yesterday, Audrey Eu Yuet-mee, SC, JP, claimed that the Civic Party has contacted Bank of China several times but have failed to arrange any meetings with them.

Soon after the press conference, the Party announced that BOC has promised that they will arrange meetings with the investors next week.

Will the meetings bring a ray of light into the life of the miserable and angry investors?

HSBC sends out breach of contract notice

HSBC, one of the trustee of the minibonds, announced that they have already sent out a breach of contract notice to Lehman Brothers.

Investors holding series 21 and 27 were entitled to receiving the interest payout on September 15, the same day that the investment bank announced that they applied for bankrupcy protection.

But would this notice help the investors to at least get some interest back - or would it result in another disappointment for thousands of people out there?

Bad News: Mevas Bank denied refunds

Mevas Bank issued a denial that they gave a client full refund.

Other banks that sold the minibonds including Standard Chartered, Fubon Bank, DBS, Chong Kong Bank, Citibank, Wing Lung Bank, Bank of China (Hong Kong), Chiyu Banking Corporation, Nanyang Commercial Bank and Shanghai Commercial Bank claimed that they did not make any refund agreements with their clients yet.

Bank of East Asia and Citic Ka Wah Bank said that they were processing the complaints.

Kam Nai-wai is not confirming or denying the reports that he said an investor got his/her money back but he only said Meva Bank's denial was no surprise and they do not want other investors to know about this!

Although the rumor might prove to be false again, but this should be able to raise the hope of some of the investors - or would this bring a larger disappointment?

Our government talks to the banks

Our government has met with bank representatives this morning attempting to discuss the matter at hand and to think of ways to solve this problem.

Professor K.C. Chan, SBS, JP, Secretary for Financial Services and the Treasury and representatives from the Securities and Futures Commission and the Hong Kong Monetary Authority met with 16 banks and 3 agencies and trustees who sold the Lehman Brothers minibonds.

"We are asking banks to work with the supervisory organisations and investigate on the cases of complaint," said Professor Chan. "We explicitly asked banks to deal with the individual cases seriously and quickly."

The Hong Kong Association of Banks is preparing to set up a team to follow-up with the complaints and assist the investors.

The Hong Kong Monetary Authority announced that they have received 3555 reported cases from investors on 30 September - 16 days since the news reported that Lehman Brothers went into bankrupcy.

Are the investors really getting a REFUND?!

After false rumors saying that Fubon Bank will compensate the principal to their minibond investors (the bank denied such actions yesterday), another bank is rumored to return its investors' money...

Rumors say that Mevas Bank has offered to return an investor's money!

But is it true?

Democratic Party legislator-elect Kam Nai-wai claimed that investor asked that their case be withdrawn from the list of those who needed help because the bank had offered to return their money.

Investigation suggests that Hongkongers have invested a total of HK$15.6 billion in these minibonds or derivatives - and are facing substantial loss.

No representative from the bank, or its parent company Dah Sing Bank, has admitted or denied the story.

So no one really knows if the investors would have a chance of getting their money back...

Another meeting - but what are they really doing??

The investors of Lehman Brothers minibond held several meetings with ABN Amro and Secretary for Financial Services and the Treasury Chan Ka-keung yesterday to express their discontent on the banks that did not fully show the risk of Lehman Brothers minibonds when selling.

More than 20 investors handed in a complaint letter and demanded for a meeting with senior management. Maria Leung, ABN Amro's head of consumer clients in Hong Kong, said they have contacted all their clients that bought the minibonds to alert and update them with the situation.

"...our relationship managers followed the appropriate processes governing client suitability and sales, in accordance with our own policies and regulatory requirements," she said. "The bank would be happy to arrange a meeting."

Investors also went to the Monetary Authority to request assistance from the executive director, Raymond Li Ling-cheung and went for a private meeting with lawmaker Chan Kam-lam of the Democratic Alliance for the Betterment and Progress of Hong Kong.

Over 2000 complaints already!

Reports show that the HKMA has already received over 2000 cases of complaints concerning the misleading and harmful promotion methods of banks concerning the Lehman Brothers Minibonds.

Obvious cases of misleading selling methods will be first investigated and more resources would be put into their investigation.

Professor K.C. Chan, SBS, JP, Secretary for Financial Services and the Treasury reminded the people with such investments that the most effective way is to report to supervisory organisations should they feel that the banks has mislead them. He stated that the commission is actively investigating and paying close attention to the development of this incident.

Finally - some actions by our government

Martin Wheatley, JP, Chief Executive Officer of Securities and Futures Commission Hong Kong said the promotion and selling methods of the Lehman Brothers Minibond is under investigation.

"Local and overseas investors have never expected that such a large organisation will go bankrupt," he said.

The commission was attacked for insufficient supervision. "Banks have the responsibility to clearly explain the risks of the products and make sure that the products suit their clients' portfolio," Mr Wheatley said. "We are collecting information on how the products were promoted and after our investigation, we would be able to make a conclusion and see if the current supervisory system has room for improvement."

Democratic party's response

10 days into the Lehman Brother's scandal...what is the democratic party's response?

Today, the Democratic Party organised a discussion with around 600 investors and suggested three tactics to cope with the situation.

Tactic 1: Litigation.

Hon. Albert Ho Chun-yan said they will begin their actions by filing a complaint to the Consumer Council on the harmful selling methods of the banks. "Elderly, retired people; Those who originally put their money in time deposits but were persuaded to invest in the minibonds; and those who were persuaded to buy the minibonds after the problems were discovered, that is around August. We will provide assistance to these people first."

Tactic 2: Pressurise the Banks.

The Party suggested that the affected people can be divided into different groups, according to the banks that they have bought the minibonds. Kam Nai-wai claimed around 1700 people sought for help from the Democratic Party with the largest proportion of them as investors of the Bank of China.

Tactic 3: Reorganise the whole incident.

Laurence L.J. Lee (Barrister) claimed that the investors should recall how they were being persuaded to purchase the minibonds.

Questions to consider:

1. Who persuaded you?

2. Did any other staff from the bank approach you?

3. Did they talk to you when you renewed your time deposit or did they call you to persude you?

To all the affected people: do consider these methods...maybe they might help you get your hard-earned money back!

Mr GREEDY...?

Many may be thinking...

Did the investors' greed lead them to this kind of situation?

Today, over 20 'victims' went to the Consumer Council to complain about the banks' selling techniques and request for compensation.

A retired couple invested HK$7.2 million of their savings and pension in minibonds sold by Lehman Brothers. They were told that there are no risks in their investment.

Now, they might lose all their money...

Do they deserve this?

Investors Profile

Name:
Mr Choi

Total amount of Investments:
HK$1.52 million

Invested in:
Mini-Bonds offered by Bank of China, Sun Hung Kai Finance and Lehman Brothers

What he said:
The advisors at my bank MISLEAD me! I never knew that the underwriter of bonds was Lehman Brothers! I used to put all my money in time deposits. They called me to promote this product and told me clearly that this is LOW RISK! They never told us that the products were sold by Lehman Brothers! I only knew when they called me a few days ago and informed me that my deposits may be TOTAL LOSS!



Mr Ho said:
Many investors are middle-aged or retired. The staff at the banks so me that the investment is very safe and even better than time deposits. That's why I invested in it! I've never heard what is Lehman Brothers and I didn't know that if the underwriter goes into bankrupt, my investments would be all GONE!

This is a - black hole...

It's already a week after the bankrupcy.

The loss of investors is like a BLACK HOLE! No one can make an estimation of how much money world-wide minibond investors have lost.

Over 100 investors went to Hong Kong Monetary Authority to talk to Securities and Futures Commission and HKMA representatives.

Investors claim they were never told by the bank that Lehman was the underwriter of the minibonds and were told that the risk of putting money is extremely low.

The Government is asked to investigate the problem.

But will they give the public a satisfying answer??

Personal Finance 101

Many might think...what is a Minibond?

The main difference between a bond and a minibond is that it requires (MUCH) less principal to buy compared to the traditional bonds (- that's what made it so attractive!)

The least amount of purchase usually ranges from ten thousand Hong Kong dollars to fifty or sixty per unit.

The distributor is usually a Cayman Island-registered company. They chop up the bonds (which only the rich people can afford!) and sell it through retail banks in Hong Kong to accumulate principal and purchase blue-chip bonds (usually the financial institutions are the trustees of these bonds).

The minibonds consists of high-risk derivatives like synthetic collateralised-debt obligations (CDOs) and credit default swaps (CDS) and were marketed as proxy investments in well-known companies such as Hutchison Whampoa and the Hong Kong and Shanghai Bank Corporation (HSBC).

In the past few years, Lehman Brothers sold over 10 billion worth of Minibonds.

This is our understanding for the time being...

Hope you get it!

Upcoming CRISIS!

The news of LEHMAN BROTHER's bankrupcy caused extreme chaos at Wall Street yesterday. US and European governments are holding meetings to prevent financial crisis.

The Hang Seng Index and Nikkei dropped 6.5% and 5% respectively.

Established in 1850, LEHMAN BROTHERS experienced the 1929 Great Depression and many financial crisis. The announcement led to many questions on whether the mortgage problems in US will be worsened?

The company was ordered to stop all its businesses at all offices and keep all assets untouched.

Lehman - BANKRUPT!

One of the oldest AND the forth-largest US-established investment bank, LEHMAN BROTHERS, announced its bankrupcy today.

The share price of the company decreased sharply after Merrill Lynch sold a large amount of its shares at an extremely low price. This has also caused the Dow Jones Industrial Index to drop by 288.55 to 11133.44 just 10 minutes after the market opened.

We wonder what consequences would be caused by this shocking news?