Societe Generale (SocGen) is making a one-off payment as a goodwill gesture to investors who bought an investment product linked to Singapore Airlines, after some protested against what they saw as a lack of timely disclosure and unfair pricing.
The Singapore Exchange (SGX) is investigating the matter.
SocGen, which issued what are called 5x Short SIA daily leverage certificates (DLCs), will pay 30 cents a certificate to registered holders as of Monday.
SocGen said on Tuesday: "We emphasise that the goodwill payment amount is not intended to compensate investors for all losses, given the risks investors assumed in purchasing these structured products."
It added that the payment shows its "recognition of the ongoing importance of making prompt notifications to investors of adjustments and similar important events".
The payment is not linked to the pricing of SIA's mandatory convertible bond (MCB) issue, SocGen said.
Traders of the certificates complained last week after SocGen lowered the pricing of SIA securities more than they had expected. SocGen had adjusted the pricing by taking into account both SIA's rights issue and its MCB issue.
DLCs are high-risk products for sophisticated retail investors that offer the possibility of enhanced returns in a short period of time, but with the risk of substantial losses. They give a leveraged return based on the daily performance of an underlying asset - SIA shares, in this case.
That can mean outsize returns - or losses. DLCs can be "long" or "short", allowing bets on both rises and falls of an underlying asset. With this product, a 20 per cent increase in SIA's share price would produce a 100 per cent loss on the 5x Short SIA DLC.
SocGen's price adjustment was seen to have sped up the surge in SIA shares on May 6, triggering an "airbag mechanism" which suspended trading in the DLCs. Traders cried foul, saying they would have had more time to react if the higher price was used or if SocGen had made its position clear sooner.
SocGen said on Tuesday that it acted appropriately and reasonably in what are "complex and exceptional" circumstances.
The SGX said on Tuesday: "Our regulatory focus is centred on ensuring timely disclosure.
"We require that adjustments be announced once it is determined, but in no event later than the market day prior to the effective date.
"We have commenced investigations into the circumstances leading to the SocGen adjustment announcement."
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