A group of Indian investors in the UAE have said that they are prepared to go to court to settle a prolonged dispute with National Bank of Fujairah (NBF) on allegations of mis-selling structured products linked to failed US investment bank Lehman Brothers. Investors have established a Follow-up Committee based in Mumbai to collect all necessary documents in order to take joint steps and promote its cause in India and the world with regard to the blackmailing actions which NBF has taken against them since the bank mis-lead them to buy highly-risk financial products on behalf of Lehman Brothers, where they were promoted as “safe and capital guaranteed products”.
The Committee noted that a complaint against National Bank of Fujairah was filed by another group of investors from different nationalities with the Central Bank of the UAE, but the investors claim that the Central Bank has not acted seriously on the matter, forcing them to look for other legal remedies to recover their investments. The Central Bank conducted a comprehensive investigation with NBF, but did not reveal the findings of the process, neither took any concrete steps to sort out the issue. The committee is seeing this lack of action as a hindrance to find an equitable solution for their dispute with NBF.
The investors said that NBF failed to highlight the risk factors of the Lehman-link investment derivatives when the bank sold the products to them last year, as NBF even encouraged them by marketing the investments as "low-risk and Capital Guaranteed products”. The investors also claimed that the bank continued to market the investment products even at a time when Lehman Brothers had already issued a statement revealing that its revenues for the quarter ending May 2008 had plunged by 51.2 per cent.
With the structured investment products now nearly worthless after Lehman Brothers' collapse, investors have urged NBF to repurchase the products at a price equal to the principal amount. The bank, according to the investors, has been elusive and refuses to respond to the demand, while the Central Bank of the UAE has not made any concrete and tangible effort to settle the dispute despite repeated appeals.
The investors pointed out that the Central Bank's inaction is highly irregular considering that regulatory authorities in Singapore, Hong Kong and Europe have long resolved similar Lehman Brothers-linked disputes. They cited a decision as early as January 2009 by Hong Kong's Securities and Futures Commission (SFC) to reprimand Sun Hung Kai Investment Services Ltd (SHKI) after SFC conducted an investigation into SHKI's sale of the investment products. SHKI subsequently agreed to repurchase all outstanding Lehman Brothers minibonds subscribed from eligible clients, at a price equal to the principal amount.
The investors also directed the financial authorities in the UAE and NBF's attention to a recent landmark decision in Hong Kong wherein some 16 banks that served as Lehman Brothers intermediaries have agreed to repay a total of USD 800 million to thousands of investors who bought the now worthless investment products. The decision was made after the dispute triggered street protests and exposed problems and irregular practices in the financial market.
The Investors Committee said it aims to raise awareness about such malpractices and encourage other Indian investors who have similar cases in the UAE to take proactive steps by reviewing and checking for possible irregularities and loopholes in their investment portfolios. The newly formed committee is set to hold a press briefing in Mumbai to commemorate “12 months of suffering since the collapse of Lehman Brothers”. During the press briefing, the investors will explain to the national and international media the problems being faced by victimised Lehman Brothers investors and warn other Indian investors about the potential risks they might face against dishonest investment intermediaries, such as NBF.
The Follow-up Committee calls NBF to take pro-active steps to solve this issue which their so-called “Wealth Management Division” have created to investors, in line with similar solutions which other international banks who sold similar poisonous products have conducted; where most of these banks have returned the principal amounts of Lehman Brothers-linked financial products. NBF, on the other hand, is still refusing to take responsibility of his series of mistakes and wants the investors (majority of them are from India), to take responsibility of its own mistakes. The Committee also asked NBF to stop accusing and blackmailing investors with legal letters to pay the marginal loans which NBF encouraged the investors as well to buy and invest in the same financial products by luring them to “increase their return on investment”.
The Committee calls on NBF to repurchase these financial products from victimised investors in line with the responsible actions which other international banks in Europe, Singapore and Hong Kong.
"National Bank of Fujairah continues to be elusive and uncooperative with the victimised investors. This is unacceptable in a society that promotes justice and responsible business practices. NBF's attitude on this highly sensitive matter shows that it is not interested in protecting its own reputation as a responsible banking institution, which is highly unusual considering that other banks and financial organisations are focusing on damage control and cultivating a positive image in the public. The bank is making the investors pay for its own mistakes, which is very alarming as it will not only hurt the affected retail investors but on a greater scale damage the integrity of UAE's investment and financial sector," said Rahul Kumar, the Secretary-General of the newly established Indian Investors Follow-up Committee.
"The Central Bank of the UAE has not made any effort to resolve this issue even after receiving several appeals from investors. This is really such a sad development considering that similar disputes have been settled in favour of the aggrieved investors in other countries. For instance, Hong Kong's regulatory authority has recently disclosed that many banks were found to have engaged in misconduct in the sale of the said investment products, and these banks are now in the process of repaying investors. It is clear that intermediaries are accountable for their role in this investment fiasco. Unfortunately, that does not seem to be the case in the UAE," added Kumar.
The Committee plans to communicate with leading financial institutions in India and with the Indian business groups in the international markets in order to advise Indian investors to rationalise their investments and limit them to sound and safe financial products due to the vague financial situation and lack of transparency and accountability in many international markets.
Kumar added: “As NBF is still resisting to give us proper and transparent feedback in response to our queries, we are left with no other choice but to continue our escalating steps to get back our life-saving investments. Some of the employees at NBF leaked to us that Central Bank in the UAE did not take, over a period of 6 months, any serious steps to solve the issue. It limited its action to some general and soft correspondence with NBF to find a way to solve the problem in an amicable way. Under such circumstances, NBF is not finding itself under any real pressure to sort the issue”.
“With the absence of any responsible and independent body in the UAE to solve the issue in the way it was sorted in Europe, Singapore and Hong Kong, we have decided to appoint independent financial consultants to issue objective and reliable reports that can help us in preventing any possible mis-act in our cause. Our next steps could include general call to Indian investors to withdraw their savings from National Bank of Fujairah as an act of anger that could help us to sort out our problem”, concluded Kumar.
