Hong Kong - The Hong Kong Monetary Authority (HKMA) has told banks to implement seven new consumer protection measures related to the sale of investment products, after receiving thousands of complaints following the collapse of Lehman Brothers last year.

In a statement dated on Friday, the authority asked banks to formulate plans to separate banking and retail securities business before the end of March.

The seven measures include attaching health warnings to retail structured products; the separation of risk assessment and the sales process; the audio-recording of the sales process; and a mystery shopper programme to test the sales processes, according to a circular from the city's central bank.

'We expect the other recommendations in the letter to be implemented as soon as practicable, to improve the existing regulatory regime and better protect investors,' an HKMA spokesman said in a separate statement.

The government has vowed to review financial regulations to better protect investors, after more than 40,000 people ploughed nearly HK$2.5 billion (S$477 million) into failed structured products and Minibonds offered by collapsed United States bank Lehman Brothers.

The HKMA said it had received 19,893 complaints concerning Lehman-related products as at Jan 8. Many of those investors claimed they were duped into buying what they thought were low-risk products.

HKMA chief Joseph Yam said their losses did not result from faults in the regulatory system, adding that the city's regulatory structure is as good as anywhere else in the world.

The Lehman products were distributed by more than 20 local banks and financial institutions that are now being investigated by the securities watchdog, the Securities and Futures Commission (SFC).

In reports to the financial secretary on the Lehman Minibonds issue, partially published on Thursday, the HKMA and the SFC called for tighter monitoring of the sale of financial products and suggested that, in the longer term, the establishment of a financial services ombudsman should be considered.

They also called for a cooling-off period during which investors can cancel their investments.