21 Feb 2009
HONG KONG: Financial services chief Chan Ka-keung told the first Legislative Council hearing on the minibonds saga Friday that he was unaware of Lehman Brothers ill-starred minibonds before the collapse of the investment bank in September.
Chan's testimony, offering the first official account of the investment debacle, drew criticism that the government is concerned only with helping financial institutions weather the financial storm, while ignoring the interests of small investors.
The Secretary for Financial Services and the Treasury said he is concerned about the turbulence in the financial market and that he's been concerned about structural investment instruments such as Accumulator, since early 2008.
Legislators at the hearing referred to a speech made by Chan last May in New York. He told his New York listeners that the roots of the sub-prime crisis arose from credit rating agencies and the system of risk control. The Lehman minibonds somehow escaped his radar. Minibonds and other Lehman-related instruments chewed up HK$20 billion involving more than 48,000 accounts.
"The earliest I knew about minibonds was after the collapse of Lehman Brothers," he testified, in response to questions from legislator James To.
Chan did not elaborate.
The regulatory bodies, the Hong Kong Monetary Authority and the Securities and Futures Commission, raised no alarm to government as financial derivatives and structural investment instruments entered a period of severe turbulence in early 2008, he said.
Chan paused before responding to a question from wholesale and retail sector legislator Vincent Fang. Chan was asked the reasons for his lack of awareness of minibonds before Lehman Brothers collapsed.
"It is impossible to have a regulatory system that ensures no single incident of irregularity can happen," he said. "The close of Lehman Brothers was all of a sudden. It was a major incident. We are determined to improve our system."
Chan, admitting that some investors were misled, said the government has "no role" in deciding whether investment products should be banned from the market.
Regulatory bodies are responsible for determining whether financial institutions have made accurate disclosures concerning financial instruments. Agents for these products have responsibility to assure the products are suitable for the market, especially for investors in positions of vulnerability.
"The role of the government is to give statutory power and resources to regulatory bodies to perform their jobs," he said.
The government is not involved in day-to-day operations of the regulatory bodies, he added.
Labour sector legislator Ip Wai-ming criticized the government for not even being aware of the minibonds until they surfaced as a huge problem.
Legislator Regina Ip said the government should ban the sale of high risk products to individuals. She pointed out banks were still selling the disaster-bound instruments as late as August.
Real estate and construction sector legislator Abraham Shek criticized Chan for giving unsatisfactory answers before the hearing.
Hearing chairman Ho Chung-tai said he is satisfied with progress of the enquiry, though he noted that Chan "was not used to giving evidence under oath".
Chan will return to give further testimony before the hearing on Tuesday.
Saturday, February 21, 2009
Thursday, February 19, 2009
SCMP: Treasury chief becomes first to face Legco panel over minibonds
20 Feb 2009
Paggie Leung
Secretary for Financial Services and the Treasury Chan Ka-keung is expected to face tough questions over policies and regulation of financial products today when he makes his first appearance at the Legco subcommittee investigating the Lehman Brothers minibonds fiasco.
Professor Chan, who will be the first to face the 22-member subcommittee set up to study issues arising from Lehman Brothers-related products, will attend a three-hour open hearing from 10am.
The chairman of the subcommittee, Raymond Ho Chung-tai, said yesterday that questions would focus mainly on the government's regulatory framework for structured financial products and dealings in securities, the sale of minibonds, and its policies on investor protection.
"The minister will be accompanied by a legal adviser - Department of Justice deputy law officer Cathy Wong Pui-ming - and Cheng Yan-chee, deputy secretary for financial services and the treasury," Dr Ho said. A written statement that had already been submitted by Professor Chan would be made public after the secretary confirmed it as evidence.
Peter Chan Kwong-yue, chairman of Allied Victims of Lehman Products, hoped the investigation would force the government to take responsibility for its role in the debacle. "Until now, the government has not shown accountability," he said. "Why were all these high-risk derivatives allowed to be marketed and sold as low-risk financial products?"
Hong Kong investors lost billions of dollars on minibonds guaranteed by Lehman Brothers when the US investment bank went bankrupt in September 2008. Minibonds are not corporate bonds, but consist of high-risk, credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
Mr Chan said the chief executive and the financial secretary, who urged banks to buy back all the minibonds, should also be summoned.
Professor Chan's deputy, Julia Leung Fung-yee, and the heads of the Monetary Authority and the Securities and Futures Commission will also testify. Witnesses will testify under oath.
Professor Chan, who will be the first to face the 22-member subcommittee set up to study issues arising from Lehman Brothers-related products, will attend a three-hour open hearing from 10am.
The chairman of the subcommittee, Raymond Ho Chung-tai, said yesterday that questions would focus mainly on the government's regulatory framework for structured financial products and dealings in securities, the sale of minibonds, and its policies on investor protection.
"The minister will be accompanied by a legal adviser - Department of Justice deputy law officer Cathy Wong Pui-ming - and Cheng Yan-chee, deputy secretary for financial services and the treasury," Dr Ho said. A written statement that had already been submitted by Professor Chan would be made public after the secretary confirmed it as evidence.
Peter Chan Kwong-yue, chairman of Allied Victims of Lehman Products, hoped the investigation would force the government to take responsibility for its role in the debacle. "Until now, the government has not shown accountability," he said. "Why were all these high-risk derivatives allowed to be marketed and sold as low-risk financial products?"
Hong Kong investors lost billions of dollars on minibonds guaranteed by Lehman Brothers when the US investment bank went bankrupt in September 2008. Minibonds are not corporate bonds, but consist of high-risk, credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
Mr Chan said the chief executive and the financial secretary, who urged banks to buy back all the minibonds, should also be summoned.
Professor Chan's deputy, Julia Leung Fung-yee, and the heads of the Monetary Authority and the Securities and Futures Commission will also testify. Witnesses will testify under oath.
Selling a property - some views
1. The report is good for those who do not have the time to do some research. The content of the report can be obtained from various property websites.
2. This is an isolated case. I guess it's bad luck for the owner to get only 1 buyer who pressed down the price. The buyer has insider news.
3. There are situations where desperate sellers who wants to get rid of the property fastest at a discount in order to tie over a crisis. Perhaps the price this agent brought in was the ONLY offer for the period they market. The sale took place at a time of transition when property market was about to take off.
4. Flipping a property for a fast gain is common practice, but hiding information/providing misleading information/not giving a seller a "best" deal is sinful of a property agent.
5. in all industries, there will be black sheeps. there should be some systems of control to weed them out. the housing agents industry is one desperately in need now.
6. Willing buyers vs willing sellers. Do ur homework. DON'T BLAME ANYONE. BE SMART!
7. Middle men are dangerous.
8. All property agents should be regulated. There are simply too many fly-by-night agents in Singapore.
9. Better engage an agent (pay him a fee and transfer the accountability risk to him) to do it.
10. Invite prospective buyers (not agents) to send in their quotations with a description of the properties listed in the newspaper.
Wednesday, February 18, 2009
Survey: Selling or renting a property
The newspaper carried the story about a property agent being sued by the seller for giving bad advice to sell a property at below the market value. The property was sold to the buyer (who was a friend of the agent) who then re-sold the property at a big profit.
The court decided in favour of the plaintiff and required the property agent to compensate the original owner for the loss.
What is your view on this matter? Survey.
Here are the survey results.
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