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Bank of Valletta: Finco allegations are ‘unsubstantiated’
Bank say it will study judicial protest relating to Lehman and RBS perpetuals
Bank of Valletta has rebutted claims by some 40 investors being represented by Finco Treasury Management, in a judicial protest accusing the bank of having misled them into investing in risky Lehman bonds.
The bank said it rebutted the “unsubstantiated allegations” in a letter it sent to Finco and its layers Refalo & Zammit Pace on 6 September. The bank said it was willing to meet with the parties concerned to discuss and understand their particular complaints. “Efforts have since been made to find suitable dates for such appointments,” the bank said.
The bank said that although press reports appeared of the judicial protest today, it had not yet been served on BOV.
“The contents of the Judicial Letter will be carefully studied by BOV together with its legal advisors, and a response thereto will be filed in due course in the appropriate manner,” the bank said.
Specifically, the protestors say they were advised by the bank to place their savings in ‘junior subordinated bonds’ and perpetuals – whose debt usually is paid after other senior debts are paid should the company be closed, as happened in the Lehman crash in 2008 when housing prices crashed in the United States.
The protestors are claiming BOV failed to explain the risks of the perpetual securities, instead having described them in purchase contracts as “straight bonds”.
On the other hand, BOV is being accused of having assured its own shareholders that it had invested in “senior non-subordinated securities” of Lehman – the implication by Finco being that it applied more care in its own Lehman investment, while advising other investors to take up riskier products: “A standard of care falling far short of the bonus paterfamilias requirements of any person acting as fiduciary as indeed the respondent bank was in relation to the claimants.”
Finco says it was natural that BOV should have warned investors of the worsening credit risk of the Lehman Group when it suffered massive losses in the sub-prime market in 2007 and debts started accumulating at an alarming 30 times the level of shareholders’ equity; and when Lehman’s share price was falling dramatically.
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Well done to Finco for all its efforts to bring justice to investors who have lost their hard earned savings
Jon Sciberras •
Don't forget, the bond market was booming, people were multiplying their investments almost 15 times their initial premium investments. I remember shares were at an almighty high, and people kept buying. So people new to the stocks and share market, including bonds were lure by the amazing increase. But those experienced knew the profits had gone long ago, and the only way was down. So obviously there were plenty of commissions on a sale and everyone profited from the boom. Then came the crash, and like they say "we all knew the answer after we were told the question".
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Could it be the case that BOV were offered higher commissions by their international brokers to sell these quasi junk bonds ?
