The MFSA said it was imposing an administrative penalty of €175,174 (£144,559, $222,752) on the Bank of Valletta for “regulatory breaches related to disclosure of information and suitability of financial instruments sold to the general public”.
The bank did not immediately reply to a request for comment* and it is not known whether it intends to appeal the decision, which it may do until the 26th of January.
In a statement on the MFSA’s website, the regulator noted that the penalty came in the wake of investigations that had been under way since 2009, in response to consumer complaints, which “in the main” had followed the collapse of Lehman Brothers in September 2008.
However, it noted, the scope of its review later widened to include preferred securities sold as well by Royal Bank of Scotland, HBOS and other providers.
As reported, earlier this year the MFSA fined the BoV and Valletta Fund Management €347,816 for regulatory breaches in connection with a Bank of Valletta property fund in which investors lost money. The amount was said to be the largest fine ever imposed by the MFSA in such a case.
The bank subsequently agreed to a deal to buy back shares in the fund for €0.75 a share, which a spokesman for Finco Treasury Management, a Malta-based financial services company that had 72 clients invested in the fund, said at the time was about €0.40 a share less than he regarded as adequate.
Finco, which has been highly critical of the BoV as a result of the collapse of the property fund, said in a statement last night that it noted “with satisfaction” the outcome of the MFSA’s latest investigation.
However, it added that it believed the regulator ought to have gone further and taken the matter to court, in an effort to seek compensation on behalf of those investors who had lost money in their BoV investments as a result of the way they had been sold.
Similar stories in Hong Kong, Singapore
In Hong Kong, where some 43,000 investors also lost money as a result of some $1.8bn worth of Lehman Brothers products bought before the New York based investment bank collapsed in 2008, local regulators have been seeking to force the banks that sold the now-worthless products to reimburse the buyers. Some investors have been holding out for the full amount of their investment rather than agreeing to settle for a percentage of it.
Investors also lost money in Lehman Brothers’ products in Singapore. As a result, the Monetary Authority of Singapore implemented new regulations which took effect on 1 January that make it more difficult for individuals lacking certain educational qualifications or relevant work experience to buy investment funds directly.
*Note: Bank of Valletta issued a statement to International Adviser in response to the MFSA fine on 11 Jan, 2012. It said: “Bank of Valletta p.l.c. confirms that it has been informed by the Malta Financial Services Authority (MFSA or the Authority) that the Authority has decided to impose an administrative penalty on the Bank in the amount of €175,174 in connection with the alleged infringements of a number of standard licence conditions relating to the provision of investment services in respect of certain perpetual and preferred securities.
“The Bank is in the course of studying the MFSA communication in detail, and will be giving careful consideration to its position in terms of Article 19 of the Investment Services Act, including the right to appeal thereunder.”
