For 99 percent of Lehmanminibond investors who have agreed to payouts from banks, the agony may be over. The incident is, nevertheless, a harsh lesson for all.
Financial services officials have been seeking alternatives to strengthen Hong Kong's financial structure, as the shock waves were felt here following the collapse of Wall Street investment bank Lehman Brothers in fall 2008, setting off the chain reaction that resulted in the global financial tsunami.
The SAR government has completed its studies, and insiders say it will likely propose the creation of two new authorities - one to educate investors, and the other to handle their complaints.
The proposal is to be announced today for consultation.
Currently, market regulators - the Securities and Futures Commission, and the Hong Kong Monetary Authority - are not empowered to deal directly with investment-related complaints. As in the Lehman fiasco, they could at most look into the sales tactics to establish whether there were breaches of regulations.
The mass protests by minibond investors in the past year showed it would also be in the interest of Hong Kong to have a mechanism dedicated to handling similar conflicts.
The industry was recently sounded out on the idea. One can tell by the name that an investor education authority would teach the public to be smart investors, who know what they are investing in. But a mediation center is by nature bound to be more complicated since it would have to deal with the conflicts between contentious parties.
Without a mediation center, the courts are the venue to solve differences. But courts can be prohibitively expensive for small investors and - as seen in the Lehman case - investors are tempted to take to the streets to air their grievances.
The mediation center that officials have in mind is expected to be dedicated to dealing with banks, brokerage firms, and their clients. It would provide a low- cost and less hostile environment for the parties to sort out differences through mutual give-and-take, so that settlements can be reached without the need for lengthy and costly court battles.
Once complaints are taken up by the future mediation center, the concerned banks and brokerage firms cannot refuse to join the process.
The proposal has merit. The mediation center would substantially beef up investors' protection by providing a clear channel to address disputes.
Although the plan appears to benefit investors more, bankers are said to be receptive, as they believe it will be conducive to fostering positive client ties.
Mediation will be conducted confidentially. For the banks, it would be more preferable to enlist a third party to handle conflicts with clients, rather than having to deal with clients directly. Nothing could be worse than seeing disgruntled clients camping outside their offices day after day.
Maybe this is the silver lining in the whole dark Lehman saga.
