Mexico shareholders urged to sue over derivatives

By Noel Randewich and Tomas Sarmiento

MEXICO CITY (Reuters) - Shareholders in Mexico should sue companies that suffered massive losses last year due to undisclosed and inappropriate derivatives bets, the head of the country's market regulator said on Wednesday.

Supermarket operator Comercial Mexicana (COMEUBC.MX) defaulted on debt payments in October and other companies in Mexico and Brazil revealed steep losses in currency derivatives after the world credit crisis threw emerging market currencies into a tailspin.

"In Brazil, executives lost their jobs and investors seriously sued the companies. Here we've seen none of that, and that is very concerning," said National Banking and Securities Commission head Guillermo Babatz, speaking at the Reuters Latin American Investment Summit in Mexico City.

The commission is investigating whether executives at as many as nine companies broke laws by not announcing the derivatives positions to investors. But the commission's investigations would not lead to damages being paid to shareholders.

"There are people who lost a big part of their savings. Why don't they sue? We find this very surprising," Babatz said. He speculated that Mexican shareholders might be reluctant to become embroiled in a long legal fight.

Banks selling their clients derivatives unsuitable to their core business could also face penalties if they did not adequately disclose risks involved.

Brazilian poultry producer Sadia (SDIA4.SA)(SDA.N) has been sued for losses caused by undisclosed derivatives bets made last year.

News of catastrophic derivatives losses by companies dried up liquidity in Mexico's commercial paper market in October as shocked investors feared more companies were getting caught in bad bets.