DBS accused of misrepresenting Lehman-related product

Andrea Tan

DBS Bank Ltd., a unit of Southeast Asia’s biggest lender, was sued by a client claiming fraudulent and negligent misrepresentations that a $1.5 million Lehman Brothers Holdings Inc.-related investment was “sound.”

Former DBS banker Desmond Lim Hong Nian had said principal invested in the structured product was safe, according to a Nov. 30 lawsuit filed with the Singapore High Court by Australian Mark Carpenter.

He’s seeking to recover the $1.17 million he lost when Lehman filed for bankruptcy protection in 2008, and claiming an additional $280,000 from DBS and Lim for losses incurred after the bank made five unauthorized transactions in currency-linked investments, according to court filings.

DBS in February had its ban on the sale of structured notes lifted by the Monetary Authority of Singapore after it improved the internal procedures of its advisory services across all investment products. The Singapore-based bank was one of 10 financial institutions banned from selling structured notes following claims by investors that they were misled on products tied to Lehman.

Jenny Lee, a Singapore-based spokeswoman at DBS, said the bank will defend the lawsuit. Lim is no longer employed by the bank, she added, declining to elaborate.

Carpenter’s lawyer N. Sreenivasan couldn’t be reached for comment at his office.

DBS denied in court filings telling Carpenter that his principal in the investments would be protected. Carpenter indicated he was prepared to take high risks and was an experienced investor who made his own decisions, the bank said.

Singapore, Hong Kong clients

Carpenter also failed to inform the bank within seven days of receiving his investment advice slips that there were erroneous transactions, DBS said.

Investors in Singapore bought S$508 million ($388 million) of structured products linked to Lehman which lost most or all of their value when the lender filed for the biggest bankruptcy in U.S. corporate history.

DBS last year reviewed 140 cases in Singapore where its customers lost money on S$103 million of Lehman-linked structured notes. The Singapore lender has also been sued by 204 investors who incurred S$17 million in losses on securities linked to Lehman.

DBS in July agreed to repay HK$651 million ($84 million) to Hong Kong clients it classified as having a low or medium investment risk profile and who bought Lehman-linked notes.

The case is Mark Carpenter vs DBS Bank Ltd. S444/2010 in the Singapore High Court.



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