The Securities and Futures Commission (SFC) and Karl Thomson Investment Consultants (Karl Thomson) have reached an agreement to resolve issues arising from the sale of Lehman Brothers Minibonds (Minibonds) by Karl Thomson.

Although Karl Thomson was not a distributor of Minibonds, the firm purchased Minibonds and sold them to 11 clients (totalling $2.57m in sales) between September 2005 and January 2006.

Karl Thomson had informed the SFC that it had made repurchase offers voluntarily to all 11 clients, and that all these clients had accepted the offers and entered into repurchase agreements with it.

Under the agreement reached with the SFC pursuant to section 201 of the Securities and Futures Ordinance, Karl Thomson agrees without admission of liability:

• To immediately implement special enhanced complaints handling procedures to resolve, in a fair and reasonable manner, all complaints in relation to the sale and distribution of structured products other than Minibonds;


• To engage an independent reviewer, to be approved by the SFC, to review its systems and processes relating to the sale of structured products and to report to the SFC, and to commit to the implementation of all recommendations by the independent reviewer;


• To engage a qualified third party, as approved by the SFC, to review and enhance its complaints handling procedures, and to commit to the implementation of all recommendations by such third party; and


• To set aside $38,453.93, being commission income earned by it from the sale of Minibonds, to be paid to the Hong Kong Securities Institute to meet the costs of a series of seminars and/or training programmes on the subject of compliance with the SFC's Code of Conduct regarding the sale of investment products to retail investors.

In a joint statement the SFC acknowledged that Karl Thomson had fully co-operated with the SFC's investigation and had taken remedial steps of its own volition to replicate the resolutions secured by the SFC with other Minibond distributors.