Since the collapse of Lehman Brothers, over 27,000 Hong Kong investors in minibonds (a credit linked, structured financial product arranged by Lehman Brothers) with an aggregate nominal value of up to HK$12.6 billion ($1.63 billion) have lodged formal complaints related to the product. The Hong Kong Government, the Legislative Council (LegCo), and the two regulators, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA), are reviewing the situation, focusing on regulatory architecture and additional regulations.
As a failed investment, the minibond is at the systemic tail-end of problems and outside the immediate domain of Hong Kong's regulators. But it is very different from international concerns about regulating systemic risk. Rather it raises questions such as: was the minibond suitable for the Hong Kong retail market; under what terms was the product approved for distribution as regards investor protection and disclosure; and, how...