Lawmakers blasted the Financial Supervisory Commission (FSC) yesterday for failing to take solid action to protect investors, who are likely to suffer massive losses from investments linked to bankrupt Wall Street giant Lehman Brothers.
Chinese Nationalist Party (KMT) Legislator Alex Tsai (?⊥迤?? cited comments by a European bank's Taipei branch, which said that domestic banks shouldn't have sold highly complex structured notes to immature domestic investors.
He accused banks of neglecting their clients and urged them to take full responsibility.
He also told the commission to show some teeth and punish banks that capitalize on such investments but fail to clearly explain the risks to buyers.
In response, FSC Chairman Gordon Chen (?單邦) said if banks failed to fulfill their responsibility as distributors, or were found to have misinformed investors, "the FSC would not rule out revoking these banks' wealth management operating licenses."
Commission statistics showed that Taiwanese invested NT$882.8 billion (US$27.64 billion) in structured notes, NT$40 billion of which are linked to Lehman Brothers and might soon turn sour.
To protect investors, Chen said yesterday that the commission would complete its draft of an investor protection bill before the end of the year and submit it for legislative approval in order to set up a mechanism for bond investors to file class action suits against bank issuers.
Democratic Progressive Party (DPP) legislators David Huang (暺???? and Yu Jan-daw (雿???? accused the commission of siding with the banks.
Huang told Chen that Chinatrust Commercial Bank (銝剖?靽∟????) still distributed Lehman Brothers-issued structured notes to investors late last month, with the settlement date set at Sept. 8 but then immediately froze the redemption of such notes.
Chen Yu-shu (?喟?璅?, a 37-year-old investor, accused Chinatrust of fraud yesterday.
He told the Taipei Times he was persuaded by one of the bank's fund managers to convert his NT$6 million deposits into structured notes, which the manager said were fully guaranteed and offered better interest rates.
Chen said he only found out recently that he was unlikely to recover any cash from his NT$1 million investment in structured notes linked to Lehman Brothers, while his other NT$5 million investments had suffered about a 20 percent loss.
A Chinatrust vice president, who declined to be named, said he believed that the bank's fund managers had been fully advised to inform investors of potential losses prior to investment purchases.
However, the bank will take full responsibility if some managers were found to be overly anxious in closing deals and failed to fulfill their role as financial consultants, the Chinatrust official said by telephone yesterday.
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