MFSA investigating complaints against BOV

The Malta Financial Services Authority (MFSA) has announced it is investigating a number of complaints filed by investors who purchased perpetuals issued by Lehman Bros, and sold by Bank of Valletta.

Reacting a day after 40 investors filed a judicial protest against the bank, the MFSA said it will make a public statement on its findings once its investigation is concluded.

“The process relating to this particular ongoing investigation is now at an advanced stage. As has happened in other investigations, should the authority determine that a person who holds a licence, or any other person, has contravened any provision of law or of any regulations, it will impose appropriate administrative sanctions, and publish a statement to that effect,” the MFSA said.

This is the third investigation currently ongoing against Bank of Valletta. Two other investigations concern the La Valette multi-manager property fund, specifically as to whether the fund was sold to retail clients who were not experienced investors; and on the allegation that fund directors and Bank of Valletta staff divested their holdings when they saw that the fund was not performing well, having had information which was not in the public domain.

Yesterday, 40 investors represented by Finco Treasury Management, the stockbrokers’ firm that filed protests against the bank on the La Valette fund, said bank advised them to place their savings in ‘junior subordinated bonds’ and perpetuals – the debt of which is usually paid only after 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 said BOV described the perpetuals in purchase contracts as “straight bonds”.

On the other hand, the bank is being accused of having assured its own shareholders that it had invested in “senior non-subordinated securities” of Lehman – the implication being that it applied more care in its own Lehman investments, 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,” the protest reads.

Bank of Valletta said the claims are “unsubstantiated allegations” but that it was willing to meet with the parties concerned to discuss and understand their particular complaints.