Questions to HKMA and Legco Lehman Incidence Investigation Committee

 Dear Legco Member, Dear HKMA Officers,

We are writing to you to express our questions and disagreements on the “Report of the HKMA on Issues Concerning The Distribution of Structured Products” (“the HKMA Report”). We respectfully request that Legco Lehman Incidence Investigation Committee (“the Legco Committee”) investigates questions below regarding Banks’ wrong-doing in conjunction with the sale of minibond to retail investors, and moves towards proper compensation for minibond victims. We also respectfully request that HKMA addresses each question below to the Legco Committee and to the public.

The key issue with Minibond is not about weather it declared “principal protected” or not. It is about the flagrant and recurring misrepresentation and omission of its true nature and risk. Lehman bankruptcy was only a trigger, to make the public realize the undisclosed nature and risk of the minibond.

Minibond Brief

1. Minibond is “Secured collateral and Swap” per SFC summary.
- Minibond collateral was mostly AAA-rated (Synthetic) CDO that is different from AAA-rated conventional bond.
- On the surface, Minibond included 5-7 Credit Default Swap (CDS) with 5-7 well-known A/AA-rated companies as reference entities.
- In the Minibond collateral, there were more than 100 CDS with more than 100 reference entities whose credit ratings were in categories ranging from AA to sub-investment grade. For example, collateral of Series #19 included 125 CDS with 125 reference entities and would lose 100% principal upon the 10th credit event in respect of reference entities. Collateral of Series #27 included 155 CDS with 155 reference entities of which 25 were sub-investment grade.
- Reference: The structure of Minibond Series 19 and collateral information:
http://chukwokhung.mysinablog.com/index.php?op=ViewArticle&articleId=1634112.


Conduct at Point of Sale

The HKMA Report Section 3.11-3.18 “Conduct at Point of Sale” listed responsibilities that financial intermediaries or HKMA/SFC registered staffs should follow.

2. The HKMA Report omitted the fact that banks consistently failed to offer collateral information to minibond buyers. Although banks are required to ensure adequate disclosure of relevant material information on the minibond.

The Minibond was in fact credit-linked to “7+125” reference entities (Series 19), instead of credit-linked to just 7 well-known companies. Information regarding the hidden 125 CDS in collateral, i.e. the CDO collateral information (transaction document), holds the most important elements necessary to correctly assess the true risk of the Minibond. Information regarding the undisclosed 125 reference entities (in collateral) obviously carried far more risk than the 7 well-known reference entities.

Banks gave clients prospectuses that dedicated many pages on the rating and risk of the 7 well-known reference entities and the impact of any default event. But banks never offered clients CDO collateral information containing details regarding the number / name / rating of reference entities and the impact that their default would have on the Minibonds collateral.

The true risk of the minibond greatly depended on the number / name / rating of the reference entities in the collateral and the rules regarding their default event. For example, for the 125 reference entities in the collateral, the rule on the default event was: “the 10th default event would result in 100% principal loss”. If the rule were “the 110th default event would lead to the 100% principal loss”, the risk level of the minibond would be significantly changed. However, all the rules on the default event and the numbers / names / rating of the reference entities was never discussed to minibond buyers.

No professional intermediary could have valued the Minibond using only the information provided in prospectuses. Why did banks consistently fail to offer and/or discuss CDO collateral information to buyers over the past few years? Did banks fear that the details in collateral would scare retail clients away? Did banks consider the CDO collateral information as irrelevant to the true risk of the Minibond?

- Why did the HKMA Report omit the importance of CDO collateral?
- Why did the HKMA Report fail to identify such a flagrant and recurring mistake (on CDO collateral) committed by banks?
- Did the HKMA Report consider the collateral information as immaterial?
- Did the HKMA Report consider that the CDS information detail in the CDO collateral was immaterial, as long as the credit-linked to 7 well-known Reference being explained?
- Did the HKMA Report consider that the historical default rate of AAA-rated conventional bond over the past 25 years 1981-2007 could be used as reference for the default rate of AAA-rated (Synthetic) CDO?


3. The HKMA Report failed to identify that Banks’ due diligence was insufficiently thorough over the past few years’ minibond sale. Evidence includes:

- Banks never cautioned clients that minibond was not invested into any debt / bonds issued by any of the 7 reference entities.
- Banks never cautioned clients that AAA-rated securities/or AAA-rated CDO is not the same as AAA-rated conventional bond. Banks never cautioned clients about the risk related to CDO collateral.
- And, banks never mentioned to clients that minibond was, in fact, not only credit linked with the 7 reference entities, but also credit-linked with over 100 reference entities in the collateral. For those reference entities in the CDO collateral, Banks never cautioned clients that some of them could be at sub-investment grade and a 8%-10% default rate (in the reference entities) would result in 100% principal loss in collateral.

Why did the HKMA Report fail to find the (systematic) insufficient due diligence by banks?

Product Information

4. The HKMA Report Section 3.8 failed to notice obvious misleading statements in the prospectuses.

The HKMA Report defended the issuer by quoting “Our Notes are not principal protected; you could lose part, and possibly all, of your investment” and “The Notes are not principal protected” from Issue Prospectuses.  The language “not principal protected” intended to suggest caution but it is unreliable because it is by definition true of any debt obligation that is not cash collateralized.

However, the HKMA Report failed to notice the following misleading statement in the Issue Prospectuses.
(i) In the page 9 of Issue Prospectuses: “Are our Notes principal protected?
Our Notes are not principal protected: if a credit event happens to any one of the 7 reference entities before the maturity date, you will lose part, and possibly all, of your investment”.
(ii) In the page 10 (Series #27) of Issue Prospectuses:
“Who should buy our Notes? Are they suitable for everyone?
Our Notes are not suitable for everyone. (…).
Our Notes are only suitable for investors who are:
looking for fixed rate quarterly interest income (…),
confident that none of the 7 named reference entities will be affected by a credit event. (….)”.

Both statements in plain English clearly and effectively suggested that: (a) the “not principal protected” was conditioning on the credit event of 7 reference entities;
And (b) if you were confident on the 7 reference entities, the Notes was for you.

Banks staff confirmed such understanding, either due to their lack of knowledge on the true risk of minibond, or due to their fraudulent intention. Although the truth is that the minibond was affected by the credit event of “7+125” reference entities (Series #19).

Why did the HKMA Report fail to notice above misleading statements?
What was the HKMA Report’s finding on the reasons that banks staff did not advise their clients on the true risk of minibond?


5. The HKMA Report failed to find that many Banks downplayed minibond risk level.

Banks such as Shanghai Commercial bank / Wing Hang Bank /etc, rated most (if not all) minibond series as “Medium Risk Investment”, considerably downplaying the product’s risk level. Banks either did not understand the true risk of minibond or intentionally tried to downplay the minibond’s true risk level, for the sale of minibond.

Why did the HKMA Report fail to notice such systematic mistake by banks?

6. Did HKMA consider a complex credit derivative product like minibond as suitable for retail banks to understand and able to brief the true nature and risk correctly to retail clients?

If yes, to what extent, was this demonstrated by HKMA’s investigation?


7. What were conclusions of HKMA Report’s investigation for the following respect?

(7.1) What kind of training and training material did banks receive (from Lehman or related marketing agency/ etc.) prior to deciding minibond sale?

(7.2) What kind of training & training material, and minibond sale procedure guideline did banks give to their staff on such complex credit derivative products?

(7.3) Banks staff were required to passing the Program & Issue Prospectuses to clients, and telling clients about the risk of “credit-linked to 7 well know reference entities”. Was that all a bank staff required to advise a client at the point of sale? If not, what was other advises that banks staff were required to give to clients regarding s the minibond’s true nature and risk?

(7.4) What kind of information did banks consider as minibond relevant material information? Did banks consider collateral information (collateral transaction document) as immaterial to the true risk of minibond?

(7.5) Did the HKMA’s investigation demonstrate that all the minibond distributors/banks shared the similar view as Sun Hung Kai Financial (who was co-distributor for minibond) as in the minibond news release below?

(i) Quotes from Sun Hung Kai News Release on Minibond Series#28 (Oct.2006)
[ Mr. Francis Wong, Head of Structured Products Distribution of SHK Securities Limited, said, “Minibond Series 28 is the ideal choice for investors who desire to yield a stable income in view of the interest rate trends that may fluctuate. Being linked to a basket of shares of high-quality international financial institutions, this minibond series renders to investors potential total returns of as high as 51.50%, provided that no credit event arises during the period. Investors could secure assured positive returns in the subsequent years when the interest rates are predicted to be on the downturn”. ]
http://www.strategic.com.hk/files.news/minibond%2028%20-%20press%20release%20_eng_final.pdf

(ii) Quotes from Sun Hung Kai News Release on Minibond Series#29 (Nov. 2006)
[According to the SFC research titled "Retail Structured Notes Market in Hong Kong amid a Rate HikeCycle", credit-linked notes are among the most popular structures, taking up 42% of the market for structured products. A 100% year-on-year growth for credit-linked notes has been recorded for two consecutive years in the local market, especially with those that are linked to well-known entities. (…) Branding is also a key consideration to be successful in retail structured product market.
(….)
Mr. Francis Wong, Head of Structured Products Distribution of Sun Hung Kai Financial, said, "The constantly growing investors' demand for a stable source of income explains the expanding appetite for credit-linked products. The simple yet flexible structures the various Minibond Series offered are well-liked over the years. Investors are entitled to rosy potential returns of 48.00% in Minibond Series 29, given that no credit event occurs. ]
http://www.strategic.com.hk/files.news/minibond%2029%20-%20press%20release%20_english.pdf

(iii) Quotes from “The Standard Finance” (13 Aug. 2007)
[ (……) (Zoe Leung, deputy head of structured products distribution at Sun Hung Kai Financial) Leung (……). "Our product is linked to high investment grade financial institutions like Merrill Lynch, Morgan Stanley and Goldman Sachs," she (Zoe Leung) says.
The spread on bonds issued by these investment banks are seen to be volatile lately, but this has had no impact on their fundamentals, Leung points out. (…...)
"The product appeals to those who like time deposits”, Leung says. ]
http://finance.thestandard.com.hk/chi/money_news_view.asp?aid=51085



Respectfully yours,

給銀行職員們的一封公開信

親愛的銀行職員們，

您們是銀行工作的最前線人員。在迷你債卷事件上，證監會，銀監會和銀行不看這個產品的風險只是信了投資銀行的一面之詞，给香港市民推銷這麼個打著”跟7個著名公司信貸掛鈎“旗號的有毒產品。然後，政府和銀行管理層一是推卸責任，一是作為(“mis-selling”)不當銷售手段將責任全部推到了前線銷售人員的身上，或者是指責投資者的風險意識。

銀行堅稱銀行是給客戶介紹了產品的真實特徵和風險的，卻絕口不談到底甚麼是產品的真實特徵和風險，連產品究竟是“跟7個著名公司信貸掛鈎”呢還是“跟7＋100多個各種類別的公司信貸掛鈎”都不敢公開講一下，更不敢提抵押品的實質到底是怎麼回事。

現在，香港市民對於銀行的信任已經全部喪失，香港的諸多銀行信譽已經是等同跟“老千”掛鈎， 銀行職員的聲譽也一落千丈，等同跟 ”為錢財出賣良心” 掛鈎。

當夜深人靜的時候，眾多的各式迷你債卷受害人，夜不能寐，悔恨當初不應該相信銀行。
許多有良知的銀行職員們，恐怕也常常是夜不能眠，深受良心譴責，因為您們知道當初您們自己確實是不清楚迷你債卷的真實面目和風險。您們也以為這只是“跟7個著名公司信貸掛鈎”，既不知道甚麼是”First-To-Default“ 更不知道其含義是甚麼。 現在，銀行管理層堅持以謊圓謊，您們也為欺騙了客戶而內心深感不安。您們自己也有家人甚至是年邁的父母都買了迷你債卷或其它打著“跟7個著名公司信貸掛鈎”的旗號來騙人的信貸衍生產品。您們中的許多人的內疚是雙層的：既對不起曾經信任自己的客戶，更加愧對自己的父母或親朋好友。

您們心裡清楚地知道，關於迷你債卷或信貸掛鈎的產品，在過去幾年裡，銀行到底作過些甚麼樣的培訓和銷售指引，
您們心裡清楚地知道，關於迷你債卷或信貸掛鈎的產品，在過去幾年裡，銀行是怎樣曏您們介紹迷你債卷的實質的。
您們心裡清楚地知道，關於迷你債卷或信貸掛鈎的產品，在過去幾年裡，銀行有沒有曏您們提起過迷債抵押品。
您們心裡清楚地知道，在過去幾年裡，您們對於迷你債卷或各式以““跟7個著名公司信貸掛鈎”之名的信貸衍生產品迷債產品的真實面目和風險的瞭解到底是有多少，

迷你債卷的錯誤，主要應該由銀行管理者來承擔。不可以將好的業績歸功於管理層，錯誤歸於職員。讓職員來當替罪羊。
銀行管理者在迷你債卷的事件上一直在說謊，您們是心知肚明的。 您們也不得不跟著說謊或者保持沉默。
您們意識到，您們今天的沉默，實際上是幫助銀行管理者一起欺騙客戶市民。儘管您們的動機是在幫助您們自己保住這份工。
可是，您們的良心始終覺得不安，因為您們是有良知的，您们并不愿意出卖诚信。
孔子云：”人而无信，不知起可也”。

香港致力於成為金融中心。金融業的發展會極大地有力於您們的事業。 香港政府和證監會一直在致力發展的香港成為債卷中心，發展伊斯蘭債卷，而香港過去幾年大量零售的”債卷“就是：迷你債卷，精明債卷， 結構性零售債券（Constellation)等。
如果這次銀行管理層可以利用香港的法律漏洞和銀行的巨資來蒙混過關，逃避責任。
其結果就是造成人們心目中的“香港”和”債卷”的聯繫只是跟“迷你債卷，精明債卷， 結構性零售債券（Constellation)“等騙人產品掛鈎， 只是跟銀行依仗財勢欺壓普通市民的形象掛鈎。金融業靠信譽。失去了市民們對銀行的信任，銀行怎樣發展呢？您們的事業怎樣發展呢？
人們會不會永遠是疑問重重：此”債卷“非”彼債卷“？ 市民們還敢相信您們關於其它理財產品的介紹麼？
當數年後的下一次騙案再次發生的時候，銀行管理層就會更加無所顧忌了。到那時，您們和您們的家人還能安全躲過嗎？到那時，誰來幫助您呢？

銀行只有勇於承認錯誤，才能真正地改正錯誤，讓銀行再次成為香港人可以信任的銀行，而不要讓銀行的信譽一直跟“老千”掛鈎，不要讓銀行職員的信譽跟“老千銀行的職員”掛鈎。

各位有良心講誠信的銀行職員們：

看見銀行管理層見利忘義，為了一己之利，不惜損害公眾利益，來欺騙香港市民，欺騙您們和我們的父老鄉親們，您們是否可以考慮勇敢地站出來，曏社會講明真相？

如果您們可以為了社會公益而勇敢地站出來曏社會講明真相，您們不僅僅是幫助了迷你債卷的受害人，您們也是在幫助包括您們的親朋好友再內的全香港市民可以在將來避免遭遇類似的事件。
您們這樣做，是在幫助香港的諸多銀行恢復已經受損害的信譽，重新成為市民們可以信賴的銀行。
您們這樣做，是在幫助香港成為真正意義上的金融中心，而不是金融騙局中心。
您們這樣做，是有助於香港政府在香港發展債卷中心，發展伊斯蘭債卷的發展，
您們這樣做，是有助於幫助發展香港的金融業和您們的事業。
您們這樣做，是在幫助我們大家，讓香港有個美好的明天。

謝 謝

永亨银行迷你债卷受害人

Open Letter to Legco Lehman Incidence Investigation Committee and HKMA

Open Letter to Legco Lehman Incidence Investigation Committee and SFC

Dear Legco Member, Dear SFC Officer,

We are writing to you to express our questions and disagreements with the “SFC Lehman Brothers Minibonds Incident Report” (“the SFC Report”). We respectfully request that Legco Lehman Incidence Investigation Committee investigates questions below regarding Banks’ wrong-doing in conjunction with the sale of minibonds to retail investors, and moves towards proper compensation for minibond victims. We respectfully request that SFC addresses each question below to the Legco Committee and to the public.

The key issue with Minibond is not about if it declared “principal protected” or not. The key issue is about misrepresentation and omission of the true nature and risk of the so-called “Minibond”. Lehman bankruptcy only triggered an awakening call. It made the public and minibond holders realize that the true nature and risk of minibond was not being disclosed in the past few years.

It is not uncommon for banks to find all the possible loophole even lame excuse to hide the truth of minibond sales, in the name of the best interest of Hong Kong as Financial Center or in the name of the best interest of shareholders. The Government must try its best to protect the public's interest, especially when public does not have much legal way to challenge banks. A thorough investigation on the minibond sales will help to restore the tarnished trust in banks, and will be for the best interest of Hong Kong as a financial center in the long term.

Minibond
1. Minibond is “Secured collateral and Swap” per SFC summary.
- Most minibond collateral was AAA-rated securities. The AAA-rated securities waere mostly AAA-rated CDO/Synthetic CDO.
- Swap agreements included Credit Default Swap (CDS) with 5-7 well-known companies as reference entities.
- Most CDO collateral included CDS with 100-155 reference entities whose credit rating in the category of AAA to CCC. It was rated as AAA after enhancement and its average portfolio credit quality was usually at BBB/BBB. A CDO portfolio with 125 reference entities (Series #19 collateral), would lose 100% principal upon the 10th credit event in respect of reference entities.
Product Description and Disclosure
2. Definition of full disclosure by SFC:

(2.1) In the SFC Report Section “2.2. Regulatory Structure”, Section 2.2.1 stated “ …disclosure and suitability. The first of these is the responsibility of SFC - to ensure that, based on the information provided by the product issuer, sufficient information is disclosed in the product documentation by the issuer to enable a reasonable person to make an informed decision. “.
We assume that ‘a reasonable person’ here refers to persons who are not credit derivative product experts such as 黃元山，迷宗.
- As reported in news:“證監會行政總裁韋奕禮表示、證監會角色並非要監察投資產品價格是否穩定, 而是要確保所批核之投資產品, 有全面市場披露”.
(2.2) William Pearson of SFC said in 2005: “(…). We are seeing more complicated products come on to the scene, but I think as long as the disclosure is clear, accurate and not misleading, we will be happy to see that carry on”, in the Asian Structured Products Review 2005, (http://www.pacificprospect.com/downloads/asian_structured_products_review.pdf )
3. The SFC Report failed to point out that the prospectuses misled retail clients with the prominent “credit-linked to 7 reference entities”.
By choosing Synthetic CDO as minibond collateral, the prospectuses should have been fully aware that minibond’s value would be greatly decided by credit risk of its collateral’s portfolio holding. However, the prospectuses never clearly stated that minibond was in fact credit linked with “7 AND MANY Other” reference entities. The prospectuses failed to disclose where the risks truly lie.
Why did the SFC Report fail to find the prospectuses not meeting SFC’s “Clear, Accurate, No misleading” requirement?
4. The SFC Report Section 16.3.1 made biased observation on the prospectuses.
The SFC Report quoted the declaration of “not principal protected”. But the SFC Report failed to notice the following statements in the page 9 (of Series #27) of the Issue Prospectus:
"Are our Notes principal protected?
Our Notes are not principal protected: if a credit event happens to any one of the 7 reference entities before the maturity date, you will lose part, and possibly all, of your investment”.
Above statements effectively suggested that the “not principal protected” was conditioning on the credit event of 7 reference entities. Banks staff did not offer any other advise on such understanding.
What was the reason that the SFC Report did not identify above inaccurate and misleading statement?
Why were most (or all) banks staff having the similar misunderstanding on the condition of “not principal protected”?
5. The SFC Report Section 16.3.2 made biased observation on the prospectuses.
The SFC Report quoted “Our Notes are not suitable for everyone. (…). Before applying for any of our Notes, you should consider whether our Notes are suitable for you in light of your own financial circumstances and investment objectives. If you are in any doubt, get independent professional advice.” from the Prospectuses.
However, the SFC Report failed to notice the following statements in the page 10 of Issue Prospectus (Series #27):
“Who should buy our Notes? Are they suitable for everyone?
Our Notes are not suitable for everyone. (…).
Our Notes are only suitable for investors who are:
looking for fixed rate quarterly interest income (…),
confident that none of the 7 named reference entities will be affected by a credit event. (….)”.
Above statements in plain English clearly suggested (to retail clients) that, if you were confident on the 7 reference entities, the Notes was for you.
What was the reason that the SFC Report did not identify above misleading and inaccurate statements in the prospectuses?
6. A prospectus must disclose where the money would be invested into and where the interest and repayment of principal would be coming from. The SFC Report failed to identify that the Prospectuses never clearly disclosed such information. Why did the SFC Report consider the prospectuses disclosure as sufficient and acceptable?
The prospectuses only stated that “We use the money which you invest in our Notes to buy a package of assets.” (page 19, “What happens to my money? How can Pacific International Finance Limited pay me back?”).
The brand name of minibond and the term “credit linked to 7 reference entities” gave retail clients false illusion that the minibond money would be invested into debt/loans of 7 reference entities. The truth was that, the Minibond money was not invested into the 7 reference entities or any of the undisclosed 100+ reference entities that comprised of the minibond CDO collateral.
7. The SFC Report failed to identify that the prospectuses omitted CDO collateral related material information.
(7.1) Plenty of credit rating information on the 7 reference entities was disclosed. The prospectuses mentioned the AAA-rating on the CDO. But there was no mentioning on the credit rating information/or guideline on the reference entities that comprised of CDO collateral. The Prospectuses at least should be able to state clearly about credit linked to many other reference entities, and to disclose some guideline on the criteria for selection of the reference entities such as the expected number of reference entities and the expected percentage of reference entities below BBB/or BB /or B-/etc.
(7.2) The prospectuses at least should be able to disclose that a Synthetic CDO usually would experience 100% principal loss when 8% (or less) of the reference entities has default event. It does not need 10% or more of the reference entities to have default event for the 80%-100% principal loss.
The prospectuses did not provide “sufficient information” on minibond, and obviously were way off the “Clear, Accurate and non misleading, Disclosure (全面市場披露 )” requirements. We contend that the prospectuses consistently omitted material fact and gave misleading statement, so that a reasonable person would not be properly informed of the true nature and risk of minibond.
Why did the SFC Report consider the prospectuses disclosure as sufficient and meeting SFC requirements?
Code of Conduct at Point of Sale
The SFC Report Section 2.5 listed requirements on regulated body (banks) or HKMA/SFC registered staffs.
8. The SFC Report failed to identify that banks provided clients with incomplete material information.
The CDO collateral information held the most important material information on the Minibond. The diminished collateral value also proved the criticalness of such collateral information. The prospectuses were only part of minibond information. Detailed Information about the collateral, including evidence of the rating and the terms and conditions of the collateral, would have provided Minibond buyers with a 2nd chance to know what the Minibond was really comprised of.
Such collateral information was not available to minibond purchaser when they signed the purchase agreement. However, such collateral information usually would be made available prior to the issue date. Banks should have requested such information after offer closed. Banks should have sent such CDO collateral information documents /or notice of such documents’ availability to minibond purchasers. Banks are required to provide clients with relevant material information for derivative products, according to SFC’s Code of Conduct. But Banks failed to do so. Why was this not mentioned in the SFC Report?
9. The SFC Report failed to identify that Banks’ due diligence was insufficiently thorough over the past few years’ minibond sale. Evidence is as follows:
- Banks should have cautioned us that minibond was not invested into any debt / bonds issued by any of the 7 reference entities.
- Banks should have cautioned us that AAA-rated securities (or AAA-rated CDO), may not be the same as AAA-rated conventional bond, and should have cautioned us about the nature and risk related to CDO collateral. $10 million cash or cash equivalent is very different from $10 million worth of combined asset value of cash / stock /commercial real estate / residential real estate / machinery
- It was never mentioned to us what CDO was comprised of and what kind of risk CDO may have.
- It was never pointed out to us that the key asset of CDO collateral was CDS with many entities, and its value was decided by the credit risk or default event of its portfolio holding.
- It was never mentioned to us that a AAA-rated Synthetic CDO may have average portfolio credit quality at BBB/BBB-.
- We were never told to be aware that minibond was, in fact, not only credit linked with 7 reference entities, but also credit-linked with many other entities at various rating categories from AAA to CCC. A 8% (or less) default rate in the CDO collateral would result 100% principal loss.
- And, we were never explained about the First-To-Default with the 7 reference entities, nor the credit event redemption amount. Constellation is an example about how crucial to understand such terms prior to purchase.
We contend that, instead of exercising due diligence, Banks in fact collaborated, we would suggest fraudulently, with the minibond issuer, hiding the risk of the Synthetic CDO from the bank's retail clients, with the objective of increasing the sale of the minibonds. Banks such as Shanghai Commercial bank / Wing Hang Bank /etc, rated the minibond as “Medium Risk”, considerably downplaying the product’s risk level, is another proof of banks’ faulty due diligence.
Why did the SFC Report fail to identify this?
10. What was the SFC Report’s conclusion on the banks minibond sales related training and procedures?
- (10.1) What was the understanding of banks staffs regarding all the risks listed in the SFC Report Section “16.4”? Did banks staff explain all these risks to their clients at the point of sale, other than credit-linked to 7 reference entities and no liquidity / long lockup period?
- (10.2) The SFC Report Section 2.3.1 stated “2.3.1 ..... Intermediaries were still under an obligation pursuant to the Code of Conduct to explain the nature and risks of the product they were selling and ensure it was suitable". Does SFC consider that the mentioning of “credit-linked to 7 reference entities and no liquidity / long lockup period” was sufficient for fulfilling such requirements?
- (10.3) The SFC Report Section 2.5.2 stated “2.5.2. The Code of Conduct also imposes obligation on intermediaries to ensure their staff are properly trained and supervised”. To what extent, was this demonstrated by SFC’s investigation?
- (10.4) How would SFC define banks / banks staff’s Honesty and Fairess, Care to their Clients? Should it be defined as:
"For a complex credit derivative product like minibond, the responsibility of Bank's staff is limited to: passing the Issuer Prospectus to the client when being requested, and telling clients with minimum information, even if the minimum information could be misrepresenting and misleading on true nature and risk of the product”?

Respectfully yours,

恒生因唔 明 白CDO, 就 唔 做CDO, 避過次按災難

1. 標題: 恒生因「無知」避過次按災難 股價遠遠跑贏「阿媽」 (2007-12)

數 今 年 金 融 圈 最 大 鑊 新 聞 ， 莫 過 於 次 按 問 題 ， 咪 以 為 呢 單 係 美 國 ， 你 睇 獅 子 銀 行 股 價 就 知 。 尤 其 上 個 月 仲 宣 佈 ， 將 兩 家 SIV 公 司 上 身 ， 獅 子 銀 行 股 價 即 時 大 跌 。 華 華 當 然 好 留 意 控 （ 005 ） 旗 下 生 銀 行 （ 011 ） 有 冇 俾 次 按 拖 累 。

曾 遇 巨 大 壓 力

噚 日 同 生 副 董 事 長 兼 行 政 總 裁 柯 清 輝 傾 開 ， 華 華 問 ： 「 生 有 冇 受 次 按 影 響 ？ 」 柯 大 俠 並 唔 似 得 渣 打 銀 行 大 中 華 及 日 本 區 環 球 市 場 主 管 彭 智 樂 （ Patrick Gillot ） 咁 大 聲 話 ： 「 次 按 對 集 團 零 影 響 。 」 柯 大 俠 答 案 係 ─ ─ 「 影 響 一 定 有 ， 因 為 信 貸 市 場 缺 水 ， 都 會 影 響 生 住 票 據 價 值 。 不 過 ， 集 團 次 按 『 零 exposure 』 。 」 意 思 係 ， 生 冇 投 資 落 次 按 生 意 。

就 正 如 當 年 科 網 熱 咁 ， 見 到 其 他 公 司 係 咁 易 過 網 站 出 ， 話 涉 足 科 網 界 ， 股 價 都 聲 升 ， 你 做 上 市 公 司 主 席 拒 絕 搞 網 ， 睇 壓 力 幾 大 。 前 幾 年 ， 美 國 樓 市 大 旺 ， 明 知 做 次 按 風 險 高 ， 但 有 錢 賺 喎 ， 梗 做 啦 ， 當 個 個 都 做 ， 連 遠 到 祖 國 大 陸 中 國 銀 行 （ 3988 ） 都 投 資 次 按 資 產 ， 生 當 然 有 壓 力 。

柯 大 俠 話 ： 「 曾 經 有 段 時 候 壓 力 真 係 好 大 ， 當 時 我 特 登 額 外 撥 一 筆 備 用 資 金 畀 Treasury 部 門 。 」 華 華 以 為 ， 最 怕 上 頭 唔 批 錢 ， 點 知 Treasury 部 門 居 然 唔 知 點 算 ， 「 Treasury 部 門 阿 頭 當 時 搵 投 資 銀 行 ， 想 睇 CDO （ 債 務 抵 押 證 券 ） 下 面 資 產 係 乜 ， 但 解 唔 明 ， 咁 唔 明 白 最 後 就 唔 做 。 」

故 事 講 到 呢 度 ， 你 明 點 解 生 次 按 零 exposure ， 亦 因 為 咁 執 番 身 彩 。 市 場 一 向 認 為 生 保 守 ， 但 華 華 覺 得 「 保 守 」 其 實 係 「 穩 建 」 ， 值 得 學 習 ！蘋果日報 李華華


2. 睇唔明次按文件 恒生避一劫 (2007-12-6)

2007年最大的國際金融新聞恐怕非次按莫屬，香港最大銀行匯豐控股(0005)近月來股價一直疲不能興，正係因為受到次按拖累。作為匯豐附屬機構恒生銀行(0011)卻成功避開次揭衝擊，股價近日已遠遠跑贏「阿媽」。昨日收市時，更創下了歷來最高收市價，達到158.8元，比前日上升了9.2元或6.2％，恒生的總市值亦因而猛漲至2860億元，成績十分驕人。

知情者透露，恒生大班柯清輝加入恒生後，曾經買入了不少恒生股份，如今即使唔計期間的股息收入，帳面亦應有巨額利潤了。

昨日柯大俠宴請傳媒時透露，有一段時間由於全球利息低迷，該行也曾差被迫要投資於次按。佢話，當時由於利息低，該行的財資部(treasury)面對很大壓力去投資息口較高的次按，以期為銀行賺取更高的回報，因為當時差唔多所有大銀行都有投資呢工具，於是佢地高層壓力下曾經批准了財資部購買次按的上限。
恒生財資部收到order後，自然要照辦，包括向投資銀行了解次按的詳情，但點知財資業務部主管張泰強睇完之後，睇唔清楚究竟呢投資工具背後的資產係乜東東，於是向投資銀行查詢，但對方點講都講唔清楚，只知呢工具有好高的信貸評級。

就係因為「唔明白」，令恒生冇「落注」，逃過「一劫」，如今股價可以遠遠跑贏「阿媽」。明報

給立法會雷曼小組的意見書

金管局和證監會收到的衆多雷曼迷債投訴，主要針對銀行的不當銷售，有誤導性的，也有違規性的。
迷債 = 抵押品CDO + 掉期合約(包括跟7個公司破產事件挂鉤).
較少人提到的是，銀行無向客戶提供一些重要的資料，又無向客戶説明一些重要的產品特點和風險，特別是關抵押品CDO的性質和風險。

金管局, 証監會的謎債事件調查，都指出發行文件有寫“不保本”。可都沒有指出：從銀行銷售人員到迷債顧客都認為這個“不保本”隻是跟7個挂鉤公司有破產事件有關。 為甚麼會出現這種大規模的沒有瞭解產品真實本質，誤解風險的現象？銀行/銷售人員對於產品的特點，性質和風險到底有什么了解?“香港銀行業向來依據最高的專業守則經營”到底是什么？ 銀行是否像图书馆一样，如果客户要求了，就把资料給客户。卻沒有向客戶介紹產品相關的重要資料的責任和義務？

政府和政府部門應該是以保障大眾利益為第一位，而不能為了保障大企業的利益來跟銀行一起鑽法律漏洞. 殺雞取蛋的做法，會失去了大眾的信心和信任。會對香港的金融中心以及銀行股東的長遠利益造成長遠的危害。在一個金融業發達的城市，消費者權利之一，是保障他們在使用金融服務時權益不會受損。

希望委員會能對以下疑問，作出調查，並將結果公開。

証監會、金管局的產品審批

1. 証監會、金管局當初審批通過迷你債券時曾經跟那些部門人員咨詢過？

2. 金管局，証監會，和銀行的各相關部門審查過產品銷售章程(Prospectus)后，是否認為迷你債券 作為品牌來銷售沒有實質資產的所謂的「信貸掛鈎票據」，是一個合適且不會誤導一般小存户的品牌(brand name)？
這個抵押品風險發生的機會非常高的「假債券」不是高風險產品，而是超高風險。銀行爲什麽覺得「假債券」可以賣給保守型和平穩型的存户？

3. 儘管迷你債券／信貸掛鈎票據 是沒有實際資產，多數只有CDO(抵押債項債券)/ Synthetic CDO(合成抵押債項債券)作抵押品，有著長達4-7年鎖定期限、隱藏著復雜的掉期合約衍生產品及相關風險的種種陷阱。

金管局，証監會，和銀行的各相關部門是否認為：
普通银行职员能够完全的理解并向大眾解释清楚产品的真实本质和相关风险？
因此是適合於由銀行向普羅大眾、一般存户銷售的產品？

4. 金管局，証監會，和銀行的各相關機構和相關部門是否認為：向普羅大眾銷售時，是否應該於產品介紹中明確指出這個產品其實是沒有實際資產的，投資於「迷你債券」的資金不是直接投資到信貸掛鈎企業？

銀行是否認為沒有必要特地強調迷你債券沒有實際資產？因為有沒有實際資產對於迷你債券的真实本质和相关风险是不重要的？

5. “證監會行政總裁韋奕禮表示、證監會角色並非要監察投資產品價格是否穩定、而是要確保所批核之投資產品，有全面市場披露”。
證監會是否認為： 作為面向普羅大眾、一般存户的所有迷債系列的文件, 都達到了“全面披露”，“清晰，準確和無誤導”的要求？

6. 金管局，証監會，和銀行的各相關機構和相關部門是否認為：普羅大眾會自然的對「CDO/Synthetic CDO抵押品跟信貸掉期合約」有很好的理解，因而迷你債券/信貸掛鈎票據的的解釋和廣告只須大肆宣揚「跟某某著名機構信貸掛鈎」，「到期時無信貸事件發生，可以拿回全部本金」。而無須對「CDO/Synthetic CDO抵押品」做的解釋？也無須對「掉期合約」做解釋？
無須第一時間向小存户講明此產品是極高風險，一旦有事可能血本無歸？

7. 對於這個沒有投資於實質資產，多數只有 CDO/Synthetic CDO抵押品，而且CDS掉期對手對抵押品的權利大過票據持有者的權利的（迷債）票據 ,作為面向普羅大眾、一般存户銷售的產品.
証監會: 為了保障香港普通投資者的利益， 數年來有沒有考慮過要求迷債文件直接披露披露迷債抵押品跟諸多相關公司挂鉤的事實？ 即:直接披露迷債事實上是跟“7 + 諸多其它”相關公司信貸挂鉤.
迷債文件沒有直接明確披露：迷債除了跟6－7個AAA著名公司挂鉤以外，還跟其它一籃子（可能是100多個）公司信貸挂鉤，而后者的一籃子挂鉤公司的信貸可以是從AAA 到CCC不等。只是大肆宣講“跟6－7家著名公司信貸掛鈎” 是否既有 “誤導” (misleading)，又是“缺乏披露”（non-disclosure)？ 是否遠遠未達到証監會的“清晰，准確， 無誤導、全面披露風險”的要求？

8. 發行章程隻是提到抵押品為 AAA-Securities 或 AAA-CDO /Synthetic CDO 或 CDO +Credit。 沒有對CDO及Synthetic CDO的介紹和相關風險的披露，普羅大眾該如何了正確解這個票據的真实風險和實質資產呢？
這樣的迷債文件披露達到証監會的“清晰，准確， 無誤導、全面披露風險” 的要求了嗎？
9. 証監會：數年來有沒有要求迷債文件批露一些CDO/Synthetic CDO抵押品 的詳情？
這符合証監會的 “清晰”，“全面披露風險”的要求嗎？
文件至少應該說明的破產事件跟抵押品本金損失可以是不成比例的。比如，很有可能是 7％ （或更少）的挂鉤公司的破產事件 造成100％的本金損失.
文件至少應該披露Synthetic CDO其組成部分的信貸評級，占組合的百分比，等等。 而不是只以AAA評級的 Synthetic CDO帶過。
以系列２７為例，抵押品有跟155家公司相關的信貸破產掉期合約. AAA- rated Synthetic CDO發行 的 Portfolio Average Credit Quality 只是 BBB/BBB-.

10. 大多數迷債文件的“本公司債券是甚麼?”一節，有:
“誰應購買本公司債券?本公司債券是否適合所有人?
本公司債券並非適合所有人。閣下在決定是否投資前,必須確實了解本公司債券的運作方式,及投資本公司債券是否配合閣下的個人財政狀況及投資目標。
本公司債券僅適合以下投資者:
‧ 尋求美元或港元定息季度利息收入;
‧ 有信心所述的七間該等相關主體在本公司債券發行日至到期日前第二個營業日不會受到信貸事件(即「破產」、「未能償債」或「重組」,包括例如未能償還大額借貸、破產、進行不利的債券重組)影響等事件,且可以承擔當發生任何上述事件後可能損失投資的風險;
‧ 願意接受本公司可選擇延長A組及/或B組債券的到期日;及
‧ 就任何組別的本公司債券而言,願意接受本公司可選擇在二零零七年九月十五日或其後任何付息日提早償還本金額”.
這四點具體要求是最易讓零售客戶讀懂的。也是對迷你債卷潛在客戶的簡明要求。
証監會數年來是否一直認為這個描述是符合證監會的披露文件要“清晰，准確, 無誤導”的要求？

銀行的盡職審查, 產品的銷售指引, 職員培訓及職員對產品的認知程度

11. 要求傳召銀行相關管理,批核銷售部門及職員宣誓作証：

11.1 銀行對於銀行銷售的產品有沒有進行謹慎的盡職審查(reasonable duty of diligence)？ 盡職審查的結論是什麼？
不少銀行用「中風險投資」 評級 。銀行是否有意低估迷債的風險評估？

11.1 講清楚他們在決定銷售這個產品時，是否接受過發行商或相關公司的培訓等。
如果有，培訓的結果對他們對於相關產品的了解和銷售決定其了什麼樣的作用？

11.2 講清楚他們在決定銷售這個產品的前后，是否曾經閱讀過幾個系列的發行章程 Program Prospectus and Issue Prospectus ？
他們是否閱讀過任何CDO/SyntheticCDO 抵押品文件 (collateral information)?
他們當時對產品的實質和相關風險的理解是什麼？

11.3 相關管理,批核銷售部門是如何對職員進行培訓，向職員們介紹產品的實質和產品的相關風險？ 效果如何？

- 除了要求銀行職員把一本發行章程給了顧客，知道“跟7個公司挂鉤，破產事件”，“要准備鎖住幾年”，還要求銀行職員知道些什麼呢？
－ 有沒有要求銀行職員必須向客戶提到這些產品的真實面目和解釋所有必須披露的風險的？
- 或者是認為：職員無須認識產品的全部實質和全部風險。普羅大眾看過 Issue Prospectus) 就自然會理解到產品的實質和所有相關風險？

11.4 銀行銷售迷債數年。對於這個以CDO及Synthetic CDO為抵押品的迷債的的真實特徵和相關風險，為甚麼從來不曏客戶提醒？
－ 或許是：銀行自己也不明白呢？但是為了迷債的傭金，有意無視對迷債的無知、就不下工夫去瞭解迷債的真相了？
－ 或許是；銀行害怕迷債的真實“極高風險，隨時可以血本無歸，只有幾個百分比的利息”的真實面目會嚇跑了客戶，從而影響了迷債的銷售？

12. 要求傳召銀行相關銷售職員宣誓作証：
12.1 他/她們是否接受過關於迷債/信貸掛鈎票據/結構票據的合適和足夠的培訓？
12.2 金管局，証監會都在報告中列出了數條關於迷債的風險, 銀行絕大多數銀行職員對於這些風險的認知程度是什麼呢?
是否向客戶提到/解釋這些條件和風險?
12.3 他/她們當時對相關產品的本質和風險的理解是什麼？
他/她們當時的理解和現在的理解有沒有不同？
請他/她們詳述是如何向買迷債的小存户講述產品的實質和相關風險的。

迷債的某些系列, 也有銀行用「高風險投資」評級。
銀行職員有沒有向客戶強調這是（極）高風險的產品？
或者是: 除了提起是跟幾家著名公司掛鈎以外，根本就不向客戶提起風險評級？

銀行職員讓客戶簽的購買協約，有沒有跟介紹客戶一遍協約的每個條款？

12.4 產品其實是無實質資產，只有CDO/Synthetic CDO抵押品, 何謂CDO/Synthetic抵押品 , 無實質資產只有抵押品的相關風險是什麼。
銀行有沒有要求職員如實向客戶的實質和這些風險的存在?

12.5 銀行職員對何謂掉期合約, 何謂CDS, 何謂AAA-rated Securitis / AAA-rated CDO/AAA-rated Synthetic CDO抵押品的認知程度 ?

12.6 銀行職員對“跟7個公司挂鉤” 的理解是什麼？是否知道, 並向客戶解釋以下規則?
一旦第一個(不是第二/三個，是第一個)破產事件發生之后，就必須提早贖回，賣出抵押品，賠［100%本金-參考債項的市值］給掉期對手. (Constellation就是一個實例).

13. 許多迷你債卷的抵押品是SyntheticCDO(#20-#36,及一些更早期的) .
Synthetic CDO的最重要的資產是信貸破產掉期(CDS)，並不直接擁有其投資組合的債務的。Synthetic CDO (合成債務抵押債券？)的價值是由其投資組合的相關（挂鉤）公司的信貸風險來決定的。 銀行銷售迷你債卷數個系列數年。
13.1 銀行為什麼從未向客戶解釋：
- AAA-rated Securities 未必是指AAA-rated傳統bond. 正如一千萬資產，得講清楚是否全部是現金，還是有股票/住宅/廠房/機器設備等成分。
- AAA-rated CDO 或 AAA-rated Synthetic CDO跟 AAA-rated bond 是完全不一樣的 ?
為什麼從未向客戶解釋：
- CDO 到底是由什麼樣的（直接，間接）資產構成的 ?
- Synthetic CDO又是什麼呢？其直接/間接的資產構成和相關產品到底是什麼呢？

13.2 銀行為什麼從未給迷你債卷客戶關於 CDO 抵押品的文件? 沒有抵押品的信息，怎麼可以瞭解到迷債的真實面目呢？

13.3 银行知不知道相關抵押品的資料,包括抵押品評級的證明與條款及條件, 是迷你債卷 的重要披露文件之一？

13.4 銀行有沒有向發行商或相關機構要求 過關於Synthetic CDO 抵押品的文件資料,包括抵押品評級的證明與條款及條件？

13.5 銀行為什麼從未向客戶解釋：迷你債卷不僅僅是跟標榜的6－7家公司信貸相關，迷你債卷的抵押品其實也是由信貸破產掉期（CDS）組成，迷你債卷的抵押品的價值取決於其挂鉤公司的信貸評級和破產事件。 買入迷你債卷，不僅僅要考慮標榜的6－7家公司的信貸事件，還要考慮許多沒有告知我們的抵押品的挂鉤公司的信貸事件。AAA-rated Synthetic CDO can have portfolio’s average portfolio quality at BBB/BBB- .

13.6 銀行為什麼從未向客戶解釋：迷你債卷的抵押品Synthetic CDO 的破產事件跟 Synthetic CDO portfolio 本金損失可以是不成比例的。
比如，很有可能是 7％ （或許更少）的挂鉤公司的破產事件 造成100％的本金損失。 迷債文件沒有披露這些具體條款。可是銀行應該向客戶提醒和解釋這些可能的風險，以盡職和care of duty to clients.
13.7 銀行為什麼從未給迷你債卷客戶關於7家挂鉤公司的信貸事件CDS 文件資料？
7家挂鉤公司的信貸事件是按First-To-Default規則, 即：一旦第一个破产事件发生之后，就必須赔［100%本金-发生破产事件的挂鉤公司的參考債項的市值］给掉期对手. 就必須提早贖回，賣出抵押品. 最佳情形，如果抵押品市值是100％保值（或更多）的話，那么，迷債持有人大概最多只可以拿回相當於发生破产事件的挂鉤公司的參考債項的市值部分。
Constellation是的例子是: 迷債持有人拿回0。由於抵押品市值大減，而且发生破产事件的挂鉤公司的參考債項的市值大概是所剩無幾。

金管局 / 証監會 / 銀行的調查，和風險評估

14. 金管局處理的衆多投訴中，部分立案調查，部分轉交證監會。
14.1 金管局是根據什麽準則決定一個投訴要立案調查？
14.2 金管局是根據什麽準則決定一個投訴要轉交證監會？

15. 金管局如何監察銀行職員確切為客户做風險評估 :-

15.1 是否以時間為準則？ i.e. 每年一次

15.2 是否以每次購買新產品為準則？ i.e. 雷曼迷債每一只系列也做一份評估

15.3 是否以產品風險為準則？銀行或銀行職員自行決定售買的產品有否需要做風險評估

16. 在銀行自己進行的調查中，銀行以“年齡，教育程度／水准，投資經驗，投資目標，等等”來作為風險評估的標准之一。
16.1 如果銀行同意迷債是極復雜的信貸衍生產品的話。以上標准可以准確評估到一個人對迷債的特點，性質和風險的了解程度嗎？

請銀行將“可以正確了解類似迷債這樣極復雜的信貸衍生產品的客戶類別”的“年齡，教育程度／水准，投資經驗，投資目標，等等”的具體條件公布於眾？
比如：年齡范圍，具體的教育程度／水准條件，甚麼樣的投資經驗 ,如，股票／窩輪／等方面的投資經驗等等的具體定義。

可否請銀行解釋一下，是如何得來以上對迷債這樣的極復雜的信貸衍生產品的客戶風險評估模式的？有沒有研究來証明以上模式的准確率？

16.2 如果銀行的客戶評估模式是准確的話，那麼，銀行的迷債銷售職員一定是屬於符合風險評估模式的范圍之內了。銀行的迷債銷售職員還是金管局，証監會登記人員。那麼，銀行的迷債銷售職員應該是屬於“完美了解產品”的類別了？
16.3 對於迷債產品有完美理解的銀行的銷售職員關於迷債，對顧客，到底介紹了哪些迷債的特點，性質和風險呢？
16.4 為什麼會出現諸多的向長者／低文化人士／不合適人士的銷售？相關的投訴多數也被銀行私下和解了。銀行的銷售職員可是屬於對迷債產品有完美理解的類別啊。

在這個迷你債卷事件上，香港成事實上的國際金融迷你債劵中心。人們買入迷債，以為是投入跟7個相關公司的資產，卻不知所謂的資產其實只是跟眾多相關公司掛鈎的信貸破產掉期協約。而銀行職員對迷債的“特點，性質和風險”的講解跟迷債的真實“特點，性質和風險”的差距之大就象奶粉跟毒奶粉一樣，讲是奶粉，卻不知道所謂的奶質其實只是毒元素三聚氰胺。

要求銀行以原價向投資者回購迷債

種種跡象都顯示，几年以来，銀行根本有意或无意地沒有對迷債進行足夠的盡職審查。銀行沒有就迷債的真实風險，向银行销售人员做出合适的介绍和培训。导致于银行销售人员没有就迷債的真实特征和風險向客户作出准确的解释, 無向客戶提供關於迷債的全部重要資料. 銀行不應向客戶推介銀行人员本身都不了解的投資產品，加上銷售過程的不當，銀行有責任以原價向投資者回購迷債。

 美國的Auction-Rated Securities, 由於銷售銀行 misled clients about the dangers of the investments，銷售銀行百分百地向消費者回購。
 多家大煙商，多年前，一直試圖掩蓋尼古丁對人類身體的害處。終於在法庭上敗訴。煙商如果只是寫上“香煙裡含有尼古丁”來販賣香煙，是不會被同意的。煙商必須寫上“吸煙可以致癌”或”尼古丁可以致癌“等明確的警告才可以出售香煙。

Mninbond in the News (Sun Hung Kai Financial), 新鴻基金融是如何介紹迷你債卷的？

以下是 2006/2007 年新鴻基金融關於的新聞簡介。　
新鴻基金融作為（主要）分銷商的理解跟我們以前對迷債的理解是類似的。
那麼，銀行職員對迷債的理解是不是也是跟作為（主要）分銷商的新鴻基金融相似呢？

(1) 新鴻基金融 News Release on Minibond #28 in October 2006. http://www.strategic.com.hk/files.news/minibond%2028%20-%20press%20release%20_eng_final.pdf
Quote:
[ Mr. Francis Wong, Head of Structured Products Distribution of SHK Securities Limited, said, “Minibond Series 28 is the ideal choice for investors who desire to yield a stable income in view of the interest rate trends that may fluctuate. Being linked to a basket of shares of high-quality international financial institutions, this minibond series renders to investors potential total returns of as high as 51.50%, provided that no credit event arises during the period. Investors could secure assured positive returns in the subsequent years when the interest rates are predicted to be on the downturn”. ]

(2) Sun Hung Kai Financial News Release on Minibond #29 in November 2006.
http://www.strategic.com.hk/files.news/minibond%2029%20-%20press%20release%20_english.pdf
Quote:
[According to the SFC research titled "Retail Structured Notes Market in Hong Kong amid a Rate HikeCycle", credit-linked notes are among the most popular structures, taking up 42% of the market for structured products. A 100% year-on-year growth for credit-linked notes has been recorded for two consecutive years in the local market, especially with those that are linked to well-known entities. It also indicated that as investors now have better knowledge of the various structures and access to a wider spectrum of products. Branding is also a key consideration to be successful in retail structured product market.
(….)
Mr. Francis Wong, Head of Structured Products Distribution of Sun Hung Kai Financial, said, "The constantly growing investors' demand for a stable source of income explains the expanding appetite for credit-linked products. The simple yet flexible structures the various Minibond Series offered are well-liked over the years. Investors are entitled to rosy potential returns of 48.00% in Minibond Series 29, given that no credit event occurs. ]

(3)About Minibond and Credit Linked Notes (by Sun Hung Kai Financial) in Aug. 2007:
http://finance.thestandard.com.hk/chi/money_news_view.asp?aid=51085
Quote:
[ (……) (Zoe Leung, deputy head of structured products distribution at Sun Hung Kai Financial) Leung (…)
She (Zoe Leung) says the sale of their latest batch of credit-linked notes was not seen to be affected by the US subprime fallout.
"Our product is linked to high investment grade financial institutions like Merrill Lynch, Morgan Stanley and Goldman Sachs," she says."
The spread on bonds issued by these investment banks are seen to be volatile lately, but this has had no impact on their fundamentals, Leung points out.
(……..)
"The product appeals to those who like time deposits”, Leung says. ]