Jul 23, 2009, 5:07 GMT
Hong Kong - Hong Kong investors who lost money on mini-bonds issued by the failed investment bank Lehman Brothers Holdings Inc are to be paid about 6.3 billion Hong Kong dollars (923 million US dollars) under a scheme involving 16 banks, a media report said Thursday.
The deal, which was thrashed out between the banks and regulators, was aimed at resolving a 10-month wrangle that led to angry street protests and an inquiry by local lawmakers, the Standard newspaper said.
Under the proposal, banks that sold the mini-bonds on behalf of Lehman Brothers, which collapsed in September, must return 60 per cent of the original investment to investors below the age of 65, and 70 per cent for those 65 and older as of July 1.
The payments would be made to about 29,000 investors in Hong Kong who represent more than 90 per cent of all those who bought the bonds.
Despite their name, mini-bonds were high-risk derivative investments. Many retail investors said they were not told of the risks when they invested in the bonds, which led to suggestions that banks that sold the bonds were guilty of misselling the products.
Hong Kong's investment watchdog, the Securities and Futures Commission, said the agreement would 'provide substantial benefits for the vast majority of customers holding mini-bonds that would not otherwise be received by them.'
Commission chief executive Martin Wheatley said the deal was a watershed. 'This is a huge settlement,' he said. 'It is unprecedented, certainly in Hong Kong and most other jurisdictions around the world.'
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