The agreement will see CPYI purchase minibonds, octave notes and constellation notes – all Lehman-backed structured products – from consumers at their original purchase value.
In a statement, the SFC said an investigation raised a number of concerns with CPYI’s internal systems and controls relating to the sale of the products. Specifically, the SFC’s concerns related to:
- the adequacy of product due diligence on Lehman Brothers-related structured products before they were sold to clients;
- the adequacy of training and guidance given to its sales staff to enable them to understand the investment return characteristics, structure and risk profile of Lehman Brothers-related structured products; and
- the establishment and implementation of proper guidelines and monitoring procedures on the sale and marketing of Lehman Brothers-related structured products to clients.
In addition to repurchasing the notes from all eligible customers, CPYI has also agreed to pay compensation to all eligible former customers in relation to their former holding in the Lehman-backed products.
Furthermore, CPYI has committed to immediately implement special “enhanced complaints handling procedures”, engage an independent reviewer to review its systems and processes relating to the sale of structured products and engage a third party to review and enhance its complaints handling procedure.
The SFC said the agreement resolves its concerns about CPYI’s sales practices in respect of Lehman Brothers-related structured products and is in the best interest of clients. It added that its “considers this to be an appropriate outcome in light of the nature and extent of the concerns with CPYI’s sales practices that SFC’s investigation raised”.
