A counsel for the Securities and Futures Commission revealed yesterday that the commission had completed an investigation into the Bank of China which sold Lehman Brothers minibonds.
Daniel Fung SC, told the Court of First Instance that the watchdog had wound up all investigations into the bank which sold the complex derivatives which became worthless when Lehman Brothers collapsed in September 2008.
On July 22, 2009, the securities watchdog and the Hong Kong Monetary Authority said in a press release that they had discontinued investigating complaints from investors who had accepted settlements with the 16 banks that sold Lehman Brothers minibonds.
Fung's revelation sparked strong criticism of the SFC from the Alliance of Lehman Brothers Victims for a serious lack of transparency.
Alliance chairman Chan Kwong-yue said in court that the group had heard the news of the investigation's completion only yesterday.
The parties were in court to attend an application by a woman who bought Lehman Brothers minibonds from the Bank of China, for a judicial review into decisions by the SFC and the HKMA to stop investigations into and sanctions against 16 banks which sold the so-called minibonds.
The woman, Shek Lai-san, argued that the decisions to stop probes had been made in the light of the banks' buy-back scheme which offered to repay investors between 60 and 70 per cent of their losses.
Daniel Fung, for the SFC, yesterday told the court that Shek's understanding of the investigation into the BOC was mistaken. She had complained that the probe had been discontinued when in fact it had been completed.
Mr Justice Andrew Cheung Kui-nung, however, expressed concern over the way the July 2009 press release was worded. It had said the investigations were "discontinued" rather than completed, and he ordered the SFC to file an explanation within three days.
Shek, 49, an unemployed divorcee, lost HK$40,000 on minibonds bought through the Bank of China in 2008. The bank had made her a buy-back offer but she had not accepted it and the offer had lapsed. She did not file complaints with the bank or authorities.
She was represented by Philip Dykes SC, and supported in court by more than 50 investors from the alliance and lawmaker Leung Kwok-hung.
Shek herself did not attend.
Dykes submitted it was unreasonable and unlawful for the watchdogs to have halted investigations in light of the buy-back scheme. He said the SFC had no power, under the SFC Ordinance, to stop a probe before it was completed, and similarly for the HKMA.
Fung warned that the buy-back agreements would be upset if the judicial review application succeeded. He also said the SFC was empowered to discontinue investigations and had not acted outside its powers.
Johnny Mok SC, for the HKMA, said Shek had never lodged a complaint with the HKMA before she sought a judicial review.
