Source: Business Times,  18 Dec 2008

More than 90% of complainants have been interviewed, says MAS

Most investors who claim to have been mis-sold structured notes linked to bankrupt Lehman

Brothers will be told the outcome of their complaint from mid-January, the Monetary Authority of

Singapore (MAS) said yesterday.

Over 90 per cent of the investors who have complained have been interviewed, and the 10

financial institutions that sold the products have reached ‘provisional decisions’ on about four in

five of these cases, MAS said.

As at Dec 14, the 10 institutions had received 4,978 formal complaints – 815 for DBS High Notes

5, 4,001 for Lehman Minibonds, and 162 for Merrill Lynch Jubilee Series 3 LinkEarner notes.

In a few ‘clear-cut’ cases, investors have already been told the outcome of their complaints, MAS

said. But most investors will only find out next month, pending final reviews and checks by the

institutions.

Also, ‘from a review of a sample of cases, it seems clear that some complainants should be

prepared to take responsibility for their investment decisions’, MAS said.

Shane Tregillis, MAS deputy managing director for market conduct, said: ‘We have asked the

institutions to conduct some final due diligence on the remaining complaints to ensure that they

have taken into account the independent persons’ recommendations, likely issues arising from

any MAS investigation findings and to check for general consistency in the application of the

complaints resolution framework.

‘This is expected to take a few more weeks.’

Although that will mean a delay in notifying investors, ‘we believe that the final outcome will better

serve investors’ interests’, he added.

About 10,000 retail investors here are believed to have invested more than $500 million into the

Lehman-linked products.

MAS said that it has been working closely with the independent parties appointed to oversee the

financial institutions’ handling of customers’ complaints. MAS is also conducting its own

investigations of the selling policies and practices at each institution, including the training and

supervision of relationship managers, and its due diligence into the structured notes. It will

provide an update at the end of January.

In Hong Kong, 17 banks have settled 616 cases where customers claimed that they were missold

products linked to Lehman, the Hong Kong Monetary Authority (HKMA) said yesterday,

reported Bloomberg.

Those customers bought some HK$257 million (S$48.9 million) worth of such products. Banks

there are in the process of settling another 1,000 claims involving HK$429 million invested in the

products, a HKMA spokesman told Bloomberg.

3 December 2008

Siow Li Sen
The Business Times

Minibond investors have just been dealt a fresh blow – restructuring options are no longer on the table following legal challenges arising from the bankruptcy of Lehman Brothers.

It also means that the receivers cannot sell the underlying collateral of the Minibond notes while
the lawyers fight over them, a process which can go on for at least two years.

Last night, the trustee said that lawyers acting in the Chapter 11 proceedings for Lehman
Brothers in the United States, which structured the Minibond products, have reserved the right to
challenge all aspects of the unwinding process.

‘As a result, throughout the various stages of the unwinding process, there is a strong possibility that there will be legal challenges to resolve, which could result in prolonged litigation, before proceeding to the next stage,’ said HSBC Institutional Trust Services (Singapore) Limited.

‘Hence, both the trustee and receivers are not able to give any valuations at this stage, and
appeal to investors to understand that the unwinding process is likely to take considerable time,’ it said, adding that the receivers and trustee will act to safeguard the interests of the noteholders.

It also said that restructuring is not viable at this stage. ‘The restructuring proposals previously received with respect to the Minibond notes have been ruled out as an option for now, due to the legal issues and complexity involved in unwinding the structures,’ said the trustee.

In October, three financial institutions were said to be submitting restructuring proposals which
would essentially mean taking over the underlying securities and holding them until maturity.
The restructuring proposal held out a slim hope that there might be some money for investors
upon maturity.

Investors bought the defaulted Minibonds arranged by Lehman Brothers worth $508 million over
the last two years, of which $375 million worth was sold to about 8,000 retail investors through
nine distributors.

HSBC said that three receivers from PricewaterhouseCoopers (PwC) Singapore have been
proceeding with an orderly unwinding of the Minibond note structures including the various swaps in the structures.

Even this is being challenged by the lawyers, and HSBC and the receivers said that they are
aware that Lehman might intend to challenge certain aspects of the unwinding process.
Dominic Nixon, one of the three receivers, said that they were working as quickly as possible to
get a resolution for noteholders here in Singapore.

‘Due to the multitude of factors that are not within the immediate control of the trustee and
receivers, this cannot be resolved within a short span of time.

‘The receivers expect the process could take at least two years or more,’ he said.
The Monetary Authority of Singapore (MAS) said that the independent financial adviser, Deloitte
& Touche Corporate Finance Pte Ltd (DTCF) concurred with the decision of the receivers to
terminate the swaps.

‘In addition, pending further clarity over the legal issues and the resolution of any litigation
involved, DTCF understands that the receivers are not presently able to either restructure the
notes or to realise value by selling or liquidating the underlying collateral,’ it said.

In Hong Kong, the legal challenge has tripped up a buyback process. Banks there had agreed to
buy back the Minibonds after mass protests from aggrieved investors.
A report from the South China Morning Post last week said that a taskforce which agreed to a
government proposal for banks to buy back the Minibonds after valuing them had to discuss
whether US bankruptcy laws would prevent them from doing so.

MAS also said that the latest developments do not affect the handling of complaints of Minibond investors who felt that they were mis-sold. ‘We require distributors to have a rigorous process to look into every complaint and to ensure that legitimate grievances are dealt with fairly, regardless of the outcome of these legal issues,’ it said.

Noteholders who are not satisfied may have their complaints referred to the Financial Institutions Dispute Resolution Centre for mediation or adjudication.