Dispute centre set for launch
The government-funded Financial Dispute Resolution Centre will start operation from Tuesday, using mediation and arbitration for customers seeking claims of up to HK$500,000 against their banks or brokers.
'Mediation or arbitration is much cheaper and quicker for investors to solve their disputes with banks or brokers than taking the cases to the court. This is a win-win situation for both sides,' said barrister and centre chairwoman Teresa Cheng Yeuk-wah.
'We hope to use a better way to solve disputes than putting things to the court. The [centre] now provides a new alternative for investors to seek claims.'
The centre, which needed HK$15 million to set up and will cost HK$55 million a year to run, will be funded by the government, the Securities and Futures Commission and the Hong Kong Monetary Authority for its first three years and by financial institutions thereafter.
Barrister Sou Chiam is the centre's chief executive.
The decision to set up a resolution centre came in the wake of the Lehman Brothers minibond fiasco, in which more than 20,000 investors complained in late 2008 that they had been misled by banks and brokers into buying products linked to Lehman. Their investments became worthless overnight after the US investment bank collapsed in September 2008.
Minibond investors, however, will not be able to take their cases to the centre as it will only handle disputes that occurred within a year of the complaint.
Cheng expects the centre to be able to handle 1,000 to 2,000 cases a year.
'According to experience overseas, 70 per cent of the cases can be solved through mediation. Hong Kong does not have too many instances of mediation. We hope the new centre can change that,' she said.
Centre director Connie Lau Yin-hing, who is also the chief executive of the Consumer Council, said the council had received 282 complaints against banks and financial firms regarding investment products or credit cards so far this year. The number is up 28 per cent from the same period last year.
'We have seen an increase in customer complaints against the financial services sector. The [centre] would provide a new channel to solve these disputes,' Lau said.
Investors will be able to file complaints to the centre from Tuesday. Small cases will be handled by in-house mediators while the larger claims of up to HK$500,000, will be put in the hands of independent mediators chosen by the complainant and the financial firm in the dispute.
Mediation in a standard, four-hour session for these bigger cases will cost HK$12,000, of which the customer will pay HK$2,000 and the financial institution HK$10,000.
If the mediation process fails, investors can apply for an arbitration ruling on whether the financial institution in question must pay compensation. The results of these arbitrations can be appealed in court.
Cheng said that while the centre would keep the cases confidential, it would inform the financial regulators if it found massive malpractice or misconduct in a complaint.
The number of people that have applied to the Financial Dispute Resolution Centre to be a mediator