Thursday 27 November 2008

HK Banks May Violate US Laws with Minibond Buy-Back

However, sources close to the Hong Kong Association of Banks told the Sing Tao Daily its legal consultant had found that the plan could violate US laws that prohibit anyone other than Lehman’s liquidator from handle its assets.

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Guanyu said...

HK Banks May Violate US Laws with Minibond Buy-Back

AFP and Joyce Ma
27 November 2008

Hong Kong’s banks could be forced to halt a plan to buy back from investors the minibonds linked to Lehman Brothers as it might infringe US bankruptcy laws, newspapers said on Thursday.

The buy-back programme, proposed by the government to pacify tens of thousands of investors who claimed the banks had mis-sold them the policies as risk-free, was originally scheduled to kick off next month.

However, sources close to the Hong Kong Association of Banks told the Sing Tao Daily its legal consultant had found that the plan could violate US laws that prohibit anyone other than Lehman’s liquidator from handle its assets.

The plan will potentially be postponed or abandoned outright because of the legal hurdle, the newspaper said.

“We are still awaiting further legal advice. Meanwhile, the work in our committee which set the prices for the buy-back programme is continuing,” a spokeswoman for the association told reporters.

More than 40,000 Hong Kong investors, including many retirees, put a total of HK$15.7 billion into mini-bonds and other complex financial products backed by Lehman Brothers.

However the Wall Street icon filed for bankruptcy in September as it buckled under the weight of US subprime, or high risk, mortgage failure.

The investors mounted protests against the banks, the government, and the city’s financial regulators, urging a full refund.

Peter Chan wong-yue, chairman of an investors action group, the Allied Victims of Lehman Products, has criticised government officials, banks and the association for going back on their word. “You can’t say one thing one day and turn around to say something else the next day.”

The investors have an expectation that the association would announce buyback values at the beginning of December and considered it a sign of faith.

“If you’re handling the buyback, you should have known that there were legal problems earlier. They should have checked. This is the most basic step,” he said.