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Hong Kong banks in Lehman paybacks

HONG Kong banks have agreed to return more than US$800 million to investors burned by Lehman Brothers-backed products, potentially ending a nearly year-long dispute that sparked street protests and exposed problems in the financial center's markets.

The 16 banks will return as much as 70 percent of the principal to thousands of investors, regulators said yesterday. That could total HK$6.3 billion (US$810 million).

Martin Wheatley, chief executive of the Securities and Futures Commission, called the deal a "watershed."

"This is a huge settlement," Wheatley told reporters. "It is unprecedented, certainly in Hong Kong and most other jurisdictions around the world."

Some investors expressed disappointment over the deal and said they wouldn't support it.

The agreement could effectively shut down any government investigations into claims the banks used deceptive marketing techniques, said Peter Chan, head of the Alliance of LB Victims, which represents about 8,000 investors.

Even those interested in accepting the offer may not be covered because of a provision excluding buyers of other structured and leveraged investment products, which aren't uncommon in Hong Kong, he said.

"It's not reasonable, and it's not fair. This is meant to trick us," said Chan, who plans to reject the deal.

He questioned why regulators would cut a deal that might exclude many investors. "Mr Wheatley is a man from Mars. He's a nice Englishman, but he doesn't understand Hong Kong."

Speaking on behalf of the banks, David Li, the chairman and chief executive of Hong Kong's Bank of East Asia, said the deal would "reinforce public confidence" in Hong Kong as an international center for finance.


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