Broker compensates minibond investors
A second brokerage has agreed to give full compensation to clients to whom it sold Lehman Brothers-linked minibonds after the Securities and Futures Commission issued a reprimand. KGI Asia will pay the five clients HK$1.6 million.
In its reprimand, the commission raised concerns about KGI's assessment of the risks of investing in minibonds; the training it gave staff to ensure they understood those risks; measures to ensure staff gave advice suited to clients; and the records the brokerage kept of advice given to clients.
KGI agreed to an independent audit of its internal controls, systems and procedures, and accepted that if similar problems were found in the 18 months following the review, its licence would be partially suspended.
The repurchase comes after Sun Hung Kai Financial offered to reimburse HK$85 million to 310 customers of its subsidiary Sung Hung Kai Investment Services.
Some 48,000 Hongkongers invested HK$20 billion in minibonds and related complex, credit-linked derivatives issued or guaranteed by Lehman Brothers. When the US investment bank collapsed in September, they lost much or all their value.
Peter Chan Kwong-yue, chairman of the Alliance for Lehman Brothers Victims, which represents minibond investors, said the investigations into Sung Hung Kai and KGI showed some issues involving Lehman product sales were universal.
The investigation of banks, which sold the bulk of the derivatives, was too slow, he said. The commission and the Monetary Authority should jointly investigate complaints.
Meanwhile, the Democratic Party said 11 minibond investors would apply for a review of the transfer of their compensation cases from the Small Claims Tribunal, where they do not need to pay for lawyers, to the District Court, where they do.
