Progress of the HKMA's investigations in Lehman-Brothers-related cases

The biggest issue in financial services in Hong Kong over the last 12 months has been the collapse of Lehman Brothers and the knock on effect it had in relation to various structured notes purchased by members of the public in Hong Kong.  After street demonstrations, formal inquiries and various investigations a process of settling the claims of disgruntled investors and referring specific cases of alleged misselling to regulators is well underway.  The following press release from the HKMA (who regulate banks in Hong Kong) was released on 21 August:

The Hong Kong Monetary Authority (HKMA) announced today (Friday) that there are another 24 Lehman-Brothers-related cases (all non-minibond cases) reported under disciplinary consideration, bringing the total number of cases under disciplinary consideration to 954. These are cases which have gone through detailed investigation by the HKMA.

"A number of cases are at a very advanced stage of the enforcement process. Before making a final determination in these cases, we have to go through due process to ensure fairness, including giving the subjects of investigation an opportunity to be heard," said an HKMA spokesperson.

Since 17 October 2008 the HKMA has referred a total of 501 Lehman-Brothers-related cases (unchanged from last week), involving 16 banks, to the SFC for further action. These cases have been reviewed by the HKMA, which has determined that there are sufficient grounds for referring them to the SFC to facilitate its investigations into banks.

The HKMA has, up to 21 August 2009, received 21,635 complaints concerning Lehman-Brothers-related products, of which 21,274 complaints have gone through the preliminary assessment process. As a result of the assessment, the HKMA is currently investigating 6,346 cases and seeking further information on 11,853 cases. A total of 2,121 complaints have been closed as there was not sufficient prima facie evidence found after the preliminary assessment process or no sufficient grounds and evidence found after the detailed investigation (A table summarising the complaints received so far is attached). “The closure of these cases will not affect the top-down investigations being undertaken by the SFC at the bank level,” the HKMA spokesperson said.

Since 7 August 2009, 16 minibond distributing banks have begun the issue of repurchase offer letters to eligible customers (about 25,000 customers) under the Lehman Brothers Minibonds Repurchase Scheme. Up to 19 August 2009, 9,328 customers have responded to the repurchase offers, of whom 9,219 customers or 98.8% accepted the offers.

"Eligible customers should consider carefully the terms of the offer and his or her personal circumstances before deciding whether to accept the offer from the distributing banks," added the HKMA spokesperson.

A set of questions and answers has been prepared to provide further details on the Lehman Brothers Minibonds Repurchase Scheme. It can be found at http://www.info.gov.hk/hkma/eng/new/lehman/lehman.htm.

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