Hong Kong's securities watchdog said Wednesday it had launched an investigation into the possible mis-selling of complex financial products backed by collapsed US bank Lehman Brothers. The Securities and Futures Commission (SFC) said it would examine whether the products had been mis-sold to retail investors, who have complained the full risks of the instruments were not fully explained.
"Having conducted several meetings with mini-bond investors in the last few days to hear their grievances, we have decided to conduct formal investigations into allegations of mis-selling by certain licensed intermediaries," the SFC's chief executive Martin Wheatley said in a statement.
The investigation will look at three institutions who sold Lehman-licensed mini-bonds, which are based on derivatives linked to major firms' stocks but are worthless if the guarantor goes bankrupt.
Investors who had bought 12.7 billion Hong Kong dollars (1.63 billion US) of the products had Tuesday threatened to sue up to 21 institutions who had sold them, lawmaker Albert Ho told AFP. Ho said many of the bond holders were retired and had put all their savings into the investment because they trusted their banks. Lehman Brothers, one of Wall Street's most established banks, collapsed last week, sparking turmoil on financial markets across the world.