Hong Kong’s monetary authority and securities regulator have opted not to take enforcement action against the Royal Bank of Scotland NV after the bank agreed to buy back Lehman Brothers-backed equity-linked notes it had sold to professional investors in 2007 and 2008.
RBS, formerly known as ABN Amro NV, agreed to buy them back at 100% of the principal value for each eligible customer’s investment, mirroring July's repurchase programme for retail clients. It had sold equity-linked notes issued by Lehman to professional investors between July 2007 and May 2008.
According to the bank’s records, 12 professionals held outstanding Lehman-linked equity notes. Nine of those individuals would have been otherwise eligible for the repurchase offer under the July 18 retail scheme had they not been classified as professional investors.
The city’s Securities and Futures Commission (SFC) said it would “not impose disciplinary sanctions against it [RBS] and its current or former officers or employees in relation to the sale of Lehman-linked equity notes to professional investors, safe for any acts of dishonesty, fraud, deception or conduct that is criminal in nature”.
The Hong Kong Monetary Authority (HKMA) also informed the bank it would not take any enforcement action against the bank’s executives and relevant individuals in connection with the sale of these equity notes, save for dishonesty, fraud, deception or criminal conduct.
RBS plans to review complaints lodged by professional investors not eligible for the repurchase offer under its “enhanced complaint-handling procedures”.
The SFC and HKMA jointly made the announcement yesterday, but did not release the total value of the repurchase offer for professional investors.
The retail repurchase offer in July was around HK$513 million ($66 million), with the SFC estimating that around 540 customers were eligible.
RBS acquired ABN Amro’s retail and commercial business in October 2007.