Orient Profit, a subsidiary of Fook Lee Holdings, is suing Morgan Stanley Asia for more than HK$39m (USD$5.16m) in compensation for entering into accumulator contracts on its behalf without authorisation, according to media reports.

In a High Court writ, Orient Profit said that it had suffered losses due to the negligence of the US investment bank. The firm, which had been a Morgan Stanley private wealth management customer since 2004, discovered in July 2008 that Morgan Stanley had made 11 deals involving accumulator structured products linked to Petro China and China Life.

While Morgan Stanley had the authority to act on instructions confirmed by two of Orient Profit's five directors, the bank negligently entered into these accumulator contracts on the order of a single director, according to the court papers. They also stated that when Orient Profit asked for recordings of the director's verbal instruction, Morgan Stanley said that they were no longer available.

The writ says that between April and June 2008, Orient Profit director Ng Wing-hong, on his own and without authorisation, told Morgan Stanley to enter into the accumulator contracts.

Orient Profit is wholly owned by Fook Lee Holdings, a family business run by Ho Sai-Chu, who is the honorary life chair of the Chinese General Chamber of Commerce. He is a former legislator and member of the government's labour advisory board.

Last year, structured accumulators made the news following a court battle between DBS and Beijing-based energy and petrol businesswoman, Hao Ting.

The Hong Kong Monetary Authority has been probing accumulator structured products since 2008 as part of its three-year Lehman mis-selling probe.

Chern Lu, head of market risk management for Asia at PricewaterhouseCoopers, recently warned that the decline in the Hong Kong stock market may prompt investors to buy "kill you later" accumulators, which involve investors selling put options and buying a certain amount of underlying stocks at set prices.

An accumulator is a term-limited contract that allows the investor to regularly buy shares or foreign currency at a fixed price below the market price when the contract begins.

Morgan Stanley declined to comment and Orient Profit could not be reached by press time.