The announcement from receiver PwC marks the final step in a saga which began with the collapse of the US investment bank in 2008. Thousands of Hong Kong investors had bought so-called Lehman minibonds from a total of 16 distributing banks on the premise that the structured products were a low risk investment. When the bank collapsed in 2008 all of these investors lost their money.
Since then, the Securities and Futures Commission and Hong Kong Monetary Authority have worked with the banks and trustees to try to recoup the investor’s losses.
Today’s announcement marks a final step in this process which has seen all the involved banks make amendments to their sales and due diligence processes, particularly in relation to the development and distribution of structured products. The banks have also already paid back HK$600m to the minibond investors since July 2009.
PwC’s announcement, also said investors can now expect to receive 1.6% more than was agreed by the banks in March – which in itself was a substantial increase on the 60% initially agreed by the banks in July 2009. The new deal will mean the average eligible investor, depending on which series of minibond they were invested in, can expect to receive between 85% and 96.5% of their initial investment.
Welcoming the announcement, SFC acting chief executive officer Alexa Lam acknowledged the work the banks have done since July 2009.
“Today’s announcements signal the final step to be taken by each of the 16 banks under the agreement reached in July 2009,” she said.
“Since then, each of these banks has implemented a repurchase scheme at its expense, instituted internal re-engineering programmes for systems and controls governing the sale of structured products, implemented the enhanced complaints process and all 16 banks have created a fund out of their Minibond commission income to pay for the return of the collateral to the maximum possible extent.”
