Private Bank Hit in Mis-Selling Case

Hong Kong's High Court

Hong Kong's High Court

The High Court in Hong Kong has ruled against a private banking unit of Singapore’s OCBC in a case of a financially naive elderly couple. In his ruling the judge noted the couple had very little real understanding.

Financial news agency «Bloomberg» reports that the elderly couple, Chang Pui-yin and his wife, Theresa Linda Chang Chen, said they suffered substantial losses on investments made with ING’s private bank between 2004 and 2008, when the global financial crisis erupted.

ING’s Asian private-banking unit was bought by OCBC in 2009 and is now part of its Bank of Singapore unit.

Little Understanding About The Investments 

The failed investments included equity-linked notes, foreign-currency options and accumulative forwards, knock-out daily accumulators, high-yield bonds and equity options, the court ruling said. 

Chang Pui-yin, who is now in his 90s, had apparently lived a modest life until 1997, when he received a "huge windfall" of HK$120 million via his shareholding in a relative’s family business. Prior to that, he had worked as a janitor, an assistant cook, a sandwich maker, a factory foreman and in other jobs.

In his ruling the judge wrote «It was clear to me from the evidence I received that Mr and Mrs Chang had very little real understanding about the investments they had made through the Bank.» 

A Failure of Care

In a court judgment the court said Bank of Singapore and banker Yvetti Chau Kwan-siu had failed «to exercise reasonable care and skill» in assessing the couple’s investment objectives and risk appetite, in offering them unsuitable investments and in failing to warn them of the risks.

OCBC has enhanced controls and compliance linked to the ING assets following the purchase, Koh Ching Ching, OCBC’s head of group corporate communications, said in a statement, noting that none of the transactions were made following the acquisition.

The court ordered an assessment of the couple’s losses between 2004 and 2008. It also ordered the bank to pay the plaintiffs’ trial costs.

Numerous High Risk Products Sold

Among the more than $14 million high risk products sold to the elderly couple was a bond issued by Russian Standard Bank JSC, with a yield of 8.62 percent, the court document said. "It was clear from the high yield that this was a non-investment grade bond," according to the document.

In a transcript of a conversation about the Russian bond between Chang’s wife and Chau, as recorded in the court document, the relationship manager was asked: «Bonds don’t have risk then?»

With bonds «just sit still and collect the money,"»Chau replied, according to the document. «A bond by a very big bank in Russia, we had bought it before, it is good stuff.»



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