In Hong Kong and Singapore, angry investors took to the streets after the September 2008 collapse of Lehman Brothers Holdings Inc. The investment bank, it turns out, was one of the biggest peddlers of so-called minibonds. These wildly popular derivatives were designed to attract not institutional investors but retail customers and were sold through bank branches in denominations as low as $5,000.

The bankruptcy hurt tens of thousands of investors in Hong Kong and Singapore, as well as in Taiwan. Investors lost more than $2 billion in the collapse, although banks in Hong Kong last year agreed to buy back the paper at 60 cents on the dollar. In Singapore last month, Lehman receivers completed a liquidation scheme that paid off investors anywhere from 21.5 cents to almost 71 cents on the dollar, depending on the particular bond and tranche. Some investors had previously settled with bank distributors.

Authorities continue to grapple with better regulating these derivatives, which are credit-linked notes, often with exposure to collateralized debt obligations, or CDOs. Minibonds themselves aren't rated, although they reference baskets of debt that are.

However, neither Singapore nor Hong Kong authorities have threatened to ban the products themselves. Instead, regulators are working out ways to tighten marketing, impose some kind of minimum-net-worth criteria and ensure more disclosure.

This remains the biggest structured finance-related issue for much of Asia.

"A lot of attention has been focused on this particular structured credit product," says Andrew Malcolm, a Linklaters LLP partner based in Hong Kong. "It has driven a lot of concern, a lot of discussion, a lot of proposals for reform." Adds Alan Ewins, a Hong Kong-based partner at Allen & Overy LLP: "There's continuing heavy pressure on regulators."

The Monetary Authority of Singapore banned bank and finance company dealers of the Lehman products from minibond dealing and advisory services for periods ranging from six months to two years. The regulator lifted some of those bans last month.

The two financial centers are crafting new regulations independently of each other, but because they are such fierce rivals in regional financial markets, "both markets are clearly keeping a careful eye on what the other is doing," Ewins says.

In Hong Kong, the Securities and Futures Commission, in consultation with the Hong Kong Monetary Authority, proposed heavier disclosure criteria through the offer document, some kind of investor education apparatus and dispute resolution. The commission requested comments from industry players, which responded in great numbers. That consultation period ended Dec. 31.

The commission says it is now examining comments and will respond, after which a timetable for legislation will be drawn up.

The Monetary Authority of Singapore is further along, first soliciting comment on its suggested reforms a year ago. The MAS initially responded to industry concerns in September, with a further response at the end of January. Consultation will end later this month, after which the proposed reforms must be approved by Parliament.

Some measures are clear. In Singapore, financial institutions will be expected to conduct greater due diligence than precrisis before being allowed to sell these instruments. Financial advisers must put into place policies on investor qualifications necessary to buy these instruments. Intermediaries must conduct customer account reviews and, if necessary, impose ceilings. Trustees must be appointed for certain instruments, although the degree of their liability is still being debated. In addition to requiring simpler-to-understand disclosure sheets, the MAS is proposing to restrict certain marketing terminology like "capital protected" and "principal protected."

According to Lian Chuan Yeoh, a Singapore-based consultant at Allen & Overy, Singaporean banks have already committed to implement certain measures proposed for the new regime.

Regulators aren't being heavy-handed and have engaged in "quite wide-ranging market consultations," says Malcolm.

What regulators in both jurisdictions haven't done is ban structured products themselves, but they have consulted on and have in practice already implemented "quite a significant ramping up of the checks and balances in offering those products," says Ewins.

"Structured products tend to be more widely distributed to retail customers in Asian markets than in Europe and America," says Ewins. "There's more of an appetite for these types of products over here. They are more recognized as a part of everyday retail life."

So saying, the structured products market in Asia didn't escape the kind of turmoil that rolled through Europe and the U.S. following the collapse of Lehman. Nobody has tried since then to issue minibonds in Singapore or Hong Kong. Says Yeoh: "When it comes to complex instruments such as minibonds, people have become much more sensitive to concerns and potential downside risks for the average retail investors."

Asia's structured finance markets "closed down completely," says Malcolm. "Only in the past few weeks have we seen some signs of life."