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Enoch Yiu

About 70 per cent of clients at collapsed CA Pacific Securities will receive all their money back under a compensation package worth $412 million - the highest payout stemming from a brokerage collapse in Hong Kong.

 The stock exchange and the Securities and Futures Commission yesterday unveiled the package after the exchange council approved a $150,000 compensation limit for each client.

 The package will fully cover 70 per cent of the 5,212 claimants, who together claimed a higher than expected $2.4 billion after the brokerage collapsed on January 19.

 The first compensation payments are expected to be paid in the autumn.

 Clients who lost more than $150,000 will be able to make claims for additional compensation from the broker's liquidation process.

 CA Pacific has $900 million worth of shares on hand which will be repaid to clients.

 The $2.4 billion in claims is far more than the $1.4 billion in shares calculated by the provisional liquidators to be owed to clients, based on the company's records.

 SFC chief counsel Raymond Tang Yee-bong said the discrepancy might be due to some clients exaggerating losses and some making claims without deducting loans from the firm.

 Under the package, all cash clients and margin clients who did not use credit lines between June 1 last year and the broker's default, will receive a maximum compensation of $150,000 each.

 Margin clients who used margin facilities would not get compensation because they traded through the broker's margin finance company which was not covered by the exchange compensation fund, Mr Tang said.

 The $150,000 compensation limit for each client is lower than the $200,000 originally proposed - a result of the recent collapse of two other brokers and concerns the size of the total payout would soon exceed fund resources.

 In January, the Government, the stock exchange and the SFC agreed to boost the exchange compensation fund from $480 million to $1.08 billion, with the exchange and the SFC each agreeing to inject up to $300 million.

 Mr Tang said the CA Pacific compensation model would be used as a reference for the collapsed Forluxe Securities and Ming Fung Group's Chark Fung Securities. But he said he gave no guarantees payment would exactly follow the CA Pacific model.

 The SFC would seek to change legislation to allow payments to be made in batches rather than waiting for all claims to be vetted.

 The Government later said it would propose law changes to facilitate the compensation package, including allowing the SFC to contribute part of its reserves to the compensation fund, introducing a per claimant compensation limit and allowing repayment of individual claims after applications were verified.

 It said the compensation fund would be sufficient to make the repayments but the Government would make a loan to top up the fund if it fell below prudent levels.

 Before the package was announced, a group of CA Pacific clients protested in front of the exchange and the SFC offices to demand full compensation.

 The Democratic Party said it was opposed to lowering the individual compensation limit to $150,000 and demanded margin clients be paid as well.

 It said it would demand changes to the package when the Government tabled the legislation in Legco.



Clients in line for maximum $150,000 each in $412m package