Monetary Authority require distributing institutions of Leman Brothers minibond to handle this issue in a timely and proper manner

The Monetary Authority of Macao (AMCM) has implemented corresponding supervisory requirements on the selling of investment products since 2004. Such requirements cover due diligence of customers including understanding their financial status, investment experience and purpose, risk appetite and tolerance, etc.; sufficient description and disclosure of the corresponding products such as name, content, structure, special features, and the associated risks as well; establishment and implementation of internal control and risk management including policy, procedures, senior management oversight, control activities, compliance and audit etc.; ensurance of the qualification, experience and capability of the sales personnel. In the wake of the incident of Leman Brothers minibonds, the AMCM has taken immediate follow-ups and formed two internal working groups respectively responsible for receiving enquiries and complaints and for investigating the complaints received. As at 7:00 p.m. of 10th October, this Authority has received a total of 140 enquiries and 132 complaints. Of which, 52 cases filed in person while 80 in writing; 24 cases replied, 108 under verification, 18 in investigation, and 1 with superficial evidence. In addition to following up on individual enquiries and complaints, the AMCM has also exerted all-round efforts: requiring distributing institutions to provide full information about the affected situation and focus efforts to handle customer enquiries and complaints properly and timely; requiring distributing institutions to maintain close contact with the coordinating distributor and trustee in Hong Kong in order to have in hand the progress of the incident and provide updates to their customers in a timely manner; requiring distributing institutions to conduct self assessment on the selling procedures and internal controls on distribution of Lehman Brothers minibonds and submit self-assessment report to the AMCM; holding discussions with the coordinating distributor to understand the progress of the incident and solving plan under consideration and request them to provide information and assistance to the distributing institutions in Macao timely; maintaining close contact with the relevant supervisory authorities of Hong Kong and constructing point-to-point communication with them to understand the progress of the incident and solving plan concerned, requesting for assistance and arrangement where appropriate for the related parities of Macao to attend meetings to be held in Hong Kong in case of need and exchanging views about relevant supervisory issues; holding meetings with distributing institutions to follow up on the handling progress of their enquiries and complaints, their views on the solving plan proposed in Hong Kong and the progress of their self assessment; requiring all banks and financial intermediaries that are involved in the selling of investment products to conduct comprehensive review on the distribution and selling of investment products as an agent, to re-assess the risk level of investment products being distributed and the risk tolerance of related customers; establishing working groups and focusing resources to handle related enquiries and complaints; conducting onsite inspections and investigations at distributing institutions concerned; reviewing the existing supervisory regime on the distribution of investment products as an agent, the scope of which includes the policy for distribution such as whether such products should be distributed to general retail customers, distribution manner, i.e. active or passive selling, risk assessment and disclosure methodology, practices of advertisement or promotion, incentive scheme, and so on. It is noted that Hong Kong has taken the initiative of studying the arrangement for distributing institutions to buy back the concerned Lehman minibonds. An independent third party will be shortly mandated to assess the valuation of the relevant bonds and then use it as the base for the said buy-back. The excess of proceeds (if any) from disposal of the minibonds bought back by distributing institutions in the future will be returned to the relevant customers. The distributing institutions in Macao have stated that they would follow suit in this regard. The AMCM is investigating the complaints at all its strength and closely following up on the development of this issue, and requiring the distributing institutions to handle this issue in a timely and proper manner. Again, the AMCM reiterates that, if any misconduct of the distributing institution is found and proved in this respect, the AMCM will take disciplinary actions in accordance with the provisions of the prevailing laws and regulations.