Structured settlements

DBS Group Holdings Ltd., one of 14 banks in Hong Kong that have agreed to compensate investors in structured notes linked to Lehman Brothers Holdings Inc., has been accused in a lawsuit of failing to comply with securities laws while selling the products.

The complaint, filed in Hong Kong’s High Court by a retired couple now living in California, claims Southeast Asia’s biggest bank failed to comply with the code of conduct for financial institutions under the city’s Securities and Futures Ordinance, including “failing to make accurate and not misleading representations.”

The Hong Kong units of DBS, Bank of China Ltd. and Citigroup Inc. and 11 other banks have compensated more than 60 investors, after lobbying from the city’s Democratic Party, its chairman Albert Ho said. Lawsuits including a proposed class action in the U.S. and a Hong Kong legislature investigation into the banks and structured financial products may encourage more, the lawyer and lawmaker added.

“The threat of litigation is one of the most effective tools in forcing settlement,” Ho said. Some of the banks became more willing to settle in case litigation exposes them to “more embarrassment,” he said.

DBS, which said Oct. 22 it expected compensation to Singapore and Hong Kong customers to amount to as much as S$80 million ($54 million), said it could not comment on the Hong Kong lawsuit. “If there are cases where our standards are not met, DBS will not hesitate to make compensation,” it added. read more