DBS Hong Kong agrees to pay 83.7 mln USD for Lehman note customers

Hong Kong's Securities and Futures Commission and the Monetary Authority jointly announced Wednesday an agreement had been reached with DBS Bank Hong Kong unit in relation to its distribution of Lehman Brothers-related constellation notes.

The bank agreed to 651 million HK dollars (83.7 million U.S. dollars) to its customers who purchased constellation notes and who were classified by the bank, at the time of purchase, as low- risk customers.

DBS Hong Kong will pay them a resolution amount equal to the total value of their investment in the notes plus an amount equal to the interest that would have been payable on that amount if it had been placed with the bank in a fixed-term deposit between the date of the investment and today's date, less the amount of coupon payments already made to them, according to the agreement.

The agreement will allow some 2,160 accounts of the low-risk customers who accept the resolution scheme to receive their investment back, together with interest less the coupon payments they have already received as note holders and complaints from high-risk investors obtain the benefit of a full review of their case under the enhanced complaint handling procedures.

It will also make top-up payments to those low-risk customers with whom the bank has entered into settlement agreements to the extent such payments are needed to ensure those customers are treated in the same way as other low-risk customers.

The bank has also agreed to review complaints regarding the constellation notes transactions of customers who were classified as having a higher risk profile and to review the customer complaints in relation to the distribution of unlisted structured products other than the Lehman Brothers-related Constellation Notes under the enhanced complaint handling procedures.

The Securities and Futures Commission and the Monetary Authority consider the bank's resolution scheme as reasonable and appropriate in light of their regulatory concerns and the agreement is in the public interest.

The Commission said they will not take further enforcement action against the bank and its employees in relation to the distribution of constellation notes save for any act of dishonesty, fraud, deception or conduct that is criminal in nature.

The Monetary Authority also informed the bank it was not its intention to take enforcement action in relation to Lehman Brothers-related constellation notes cases that involve low-risk customers who accept the offer.

Around 43,700 Hong Kong people, including DBS Hong Kong customers, invested nearly 15.7 billion HK dollars in products issued or guaranteed by Lehman Brothers.

Most of these products were called mini-bonds, although they were not bonds but complex and high-risk structured products. When Lehman Brothers collapsed in September of 2008, many of these products became worthless or nearly worthless. (one U.S. dollar equals to 7.776 HK dollars)

Source:Xinhua