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HONG KONG: Hong Kong investors in minibonds backed by failed financial services firm Lehman Brothers have filed a class-action suit against HSBC and Bank of New York Mellon, in a bid to recover at least some of their losses, their spokesman said on Saturday.
The action filed in a New York court on Thursday has identified HSBC as the issuer, trustee and custodian of the minibonds and BNY Mellon as custodian of some of the assets, said Peter Chan, chairman of the Allied Victims of Lehman Products in Hong Kong.
Chan said investors were seeking an order to release 1.6 billion US dollars worth of collateral held by the banks to more than 30,000 Hong Kong investors, and that it should not to be treated as part of Lehman's bankrupt estate.
"We have to turn to the US legal system for justice because the Hong Kong system gives no room for class actions," Chan told AFP.
He said the case involved 28 series of Lehman-backed minibonds. "Without any exception, the trustee of all the minibonds in this case is HSBC USA."
A statement from Coughlin Stoia, the US law firm representing the investors, said that HSBC, as a trustee, had failed to "protect the collateral backing the minibonds... and also failed to give notice of negative information about the derivatives underlying the minibonds".
A spokesman for HSBC told the Financial Times in a report on Saturday that it was only the trustee but not the issuer of the minibonds.
"Any suggestion that we were involved with the design or selling of the minibonds is wrong," the spokesman told the newspaper.
More than 40,000 Hong Kong investors, including many retirees, put 15.7 billion Hong Kong dollars (2.01 billion US) into minibonds and other complex derivative instruments backed by Lehman Brothers.
The Wall Street banking giant filed for bankruptcy in September as it buckled under the weight of the collapse in US sub-prime, or high risk, mortgages.
The Hong Kong investors mounted protests against the banks, the city's government and financial regulators, demanding a full refund.
The city's securities watchdog, the Securities and Futures Commission, is currently investigating some alleged cases of mis-selling of Lehman minibonds.
- AFP/so
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