HONG KONG - HONG Kong investors who bought complex financial products backed by collapsed US investment bank Lehman Brothers were considering suing the institutions who sold them, a lawmaker said on Tuesday.
Investors argued that the banks who sold the instruments guaranteed by the failed Wall Street titan did not fully explain the high risks associated with the products.
'The investors are considering mounting legal action against the banks for misrepresentation,' Albert Ho, chairman of the Democratic Party and a lawyer, told AFP.
Many of the investors, who paid a total of 12.7 billion HK dollars (S$2.30 billion US), had been sold mini-bonds which are based on derivatives linked to major firms' stocks but are worthless if the guarantor goes bankrupt.
'These products used to be sold by only investment banks to clients who had at least 1 million US dollars,' said Mr Ho.
'But a few years ago, commercial banks wanted to snatch a piece of the pie and started to convince their elderly customers to buy the mini-bonds without explaining to them the risks involved,' he said.
Mr Ho said investors will meet the city's Consumer Council on Thursday to see if they can get legal and financial assistance to try and recoup their losses.
Mr Ho said many of the bond holders were retired and had put all their savings into the investment because they trusted their banks.
A meeting held on Monday night with investors was attended by 800 people, Mr Ho said. Some of them held a protest on Sunday to urge the government to provide assistance.
The Hong Kong Monetary Authority said it would investigate if 21 sellers of the mini-bonds had mis-sold them, according to a report in the South China Morning Post.
The Consumer Council said it had received a handful of enquiries from the investors and would consider their application for its legal assistance fund if it thinks they have a case, a spokeswoman for the council said.
Lehman Brothers collapsed last week under the strain of the US subprime, or high-risk, mortgage crisis, sparking turmoil on financial markets across the world. -- AFP