Subcommittee report on Lehman Brothers Minibonds and structured financial products
6 Jun 2012
The Securities and Futures Commission (SFC) has noted the report published by the Legislative Council Subcommittee to study issues arising from Lehman Brothers-related Minibonds and structured financial products and a separate report tabled by individual Subcommittee members.
The SFC will study the reports including the recommendations and will continue to work with the Government and the Hong Kong Monetary Authority in enhancing investor protection in Hong Kong.
Shortly after the collapse of Lehman Brothers in 2008, the SFC initiated top-down investigations into all distributors of Minibonds resulted in agreements with banks and brokers which have enabled the return of approximately $8.88 billion to more than 35,000 eligible customers and a further $955 million in compensation under the enhanced complaints handling procedure which remains in progress.
The use of the banks’ commission revenue from the sale of Minibonds to fund the trustee action to secure the return of collateral has provided additional returns to the vast majority of retail investors who have received in total between 85% and 96.5% of their initial investment (Note 1).
The SFC also implemented a package of enhanced investor protection measures in 2010 to strengthen the regulatory regime governing the offering of investment products and will set up an Investor Education Centre in the fourth quarter of this year to take up broader investor education responsibilities covering the entire financial services sector (Note 2).
The SFC will continue its efforts in refining structured product regulation through full collaboration with the Government and working with regulators locally and overseas, including the International Organization of Securities Commission’s working group on retail structured products, which seeks to analyse trends and developments in retail structured products and to recommend best practice regulatory responses among global regulators.
1. For details of Lehman Brothers-related issues, please visit: http://www.sfc.hk/web/EN/regulatory-functions/enforcement/enforcement-actions/ad-hoc-issues.html.
2. For details of the enhanced investor protection measures, please see SFC’s press release dated 28 May 2010.
Page last updated : 1 Aug 2012