By Selina Lum
A FAMILY from Taiwan is suing HSBC Private Bank for forcing three of its members to close a foreign exchange trade on their US$24 million (S$37 million) investment account, which resulted in them suffering losses and being deprived of potential profits.
Mr Huang Po Jen, 30, his mother Madam Chen Ling San, 57, and his grandmother, Madam Chen Cheng Su Yun, 83, are claiming about US$3 million.
The case opened in the High Court yesterday and is scheduled for 10 days.
The dispute revolves around a purported investment strategy that Mr Huang said was agreed on the phone between him and bank employees on Nov 8, 2004. He claims the strategy allowed him to hedge a forex transaction - by conducting an opposite trade - unless his collateral fell below a certain level.
Hedging is the practice of engaging in financial transactions which offset each other to reduce potential losses.
But Mr Huang claimed that about a month later, HSBC changed its mind and pulled the plug on the agreement.
Being unable to hedge and protect his investment resulted in losses, he said.
Mr Huang, who has lived in New Zealand for the past 15 years and is a naturalised citizen there, manages the family's assets. The two women live in Taiwan.
He opened an account with HSBC here in January 2004 which allowed him to trade in foreign exchange. He testified that Singapore was considered an ideal destination for the funds, given the country's reputation and integrity as a financial centre. They also used HSBC as it was well known worldwide, he said.
In October 2004, he bought US$22 million by selling ¥17.8 million (S$35 million), essentially betting that the euro would drop against the US dollar. However, the euro strengthened and he began to incur paper losses.
Mr Huang said that on Nov 8, 2004, he was told in a phone conversation with relationship manager Alex See and forex trader Joanne Lee that he could hedge this trade. So he began buying euros to manage his losses. But on Dec 2, he said, he was told that he could no longer use this strategy to make some profits, which would minimise his loss.
Yesterday, his lawyer, Mr Kannan Ramesh, argued that it was not reasonable for the bank to 'change the ground rules' and 'reset the parameters' that had earlier been agreed upon.
The bank denies there was such an agreement. Even if there was, there are contractual clauses which allow it to end such agreements and which exempt it from liability for doing so. It also says it is unreasonable for Mr Huang to link his losses to the bank's actions.
Mr Ramesh rebutted the bank's position, arguing that these 'omnipotent' provisions effectively give banks 'unfettered and complete discretion to change the ground rules as and when they please'.
Mr Huang will be calling an expert witness to support his case.
HSBC's witnesses include Mr See, Ms Lee, chief executive officer Jimmy Soh and an expert who will testify on a variety of issues.
A FAMILY from Taiwan is suing HSBC Private Bank for forcing three of its members to close a foreign exchange trade on their US$24 million (S$37 million) investment account, which resulted in them suffering losses and being deprived of potential profits.
Mr Huang Po Jen, 30, his mother Madam Chen Ling San, 57, and his grandmother, Madam Chen Cheng Su Yun, 83, are claiming about US$3 million.
The case opened in the High Court yesterday and is scheduled for 10 days.
The dispute revolves around a purported investment strategy that Mr Huang said was agreed on the phone between him and bank employees on Nov 8, 2004. He claims the strategy allowed him to hedge a forex transaction - by conducting an opposite trade - unless his collateral fell below a certain level.
Hedging is the practice of engaging in financial transactions which offset each other to reduce potential losses.
But Mr Huang claimed that about a month later, HSBC changed its mind and pulled the plug on the agreement.
Being unable to hedge and protect his investment resulted in losses, he said.
Mr Huang, who has lived in New Zealand for the past 15 years and is a naturalised citizen there, manages the family's assets. The two women live in Taiwan.
He opened an account with HSBC here in January 2004 which allowed him to trade in foreign exchange. He testified that Singapore was considered an ideal destination for the funds, given the country's reputation and integrity as a financial centre. They also used HSBC as it was well known worldwide, he said.
In October 2004, he bought US$22 million by selling ¥17.8 million (S$35 million), essentially betting that the euro would drop against the US dollar. However, the euro strengthened and he began to incur paper losses.
Mr Huang said that on Nov 8, 2004, he was told in a phone conversation with relationship manager Alex See and forex trader Joanne Lee that he could hedge this trade. So he began buying euros to manage his losses. But on Dec 2, he said, he was told that he could no longer use this strategy to make some profits, which would minimise his loss.
Yesterday, his lawyer, Mr Kannan Ramesh, argued that it was not reasonable for the bank to 'change the ground rules' and 'reset the parameters' that had earlier been agreed upon.
The bank denies there was such an agreement. Even if there was, there are contractual clauses which allow it to end such agreements and which exempt it from liability for doing so. It also says it is unreasonable for Mr Huang to link his losses to the bank's actions.
Mr Ramesh rebutted the bank's position, arguing that these 'omnipotent' provisions effectively give banks 'unfettered and complete discretion to change the ground rules as and when they please'.
Mr Huang will be calling an expert witness to support his case.
HSBC's witnesses include Mr See, Ms Lee, chief executive officer Jimmy Soh and an expert who will testify on a variety of issues.
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