MFSA directive against BOV: no public notice to investors

Bank of Valletta today defended its request for an appeal of the MFSA’s directive for a hearing within the Financial Services Tribunal to be held in camera.

Yesterday the MFSA said it issued a directive on 28 June 2011 after its was experiencing delays in reviewing complaints from investors, due to BOV’s “uncooperative attitude”. While this directive appears not to have been published on the MFSA’s website, nether was the appeal of the bank – reportedly made within 30 days as permitted by law – ever been public.

The directive obliged BOV to ensure that any acceptance of the 75c share compensatory offer to La Valette property fund investors was without prejudice to those who filed a complaint or were not legally speaking ‘experienced investors’.

BOV today said it was bound by certain banking secrecy rules which it is obliged to respect. “The bank’s appeal deals with matters concerning the use and abuse of powers by the MFSA which the bank believed should, in the first instance, be heard behind closed doors.  “The bank is entirely content to be guided by the decision of the FST on this matter, and was indeed surprised that the MFSA appears to be seeking to pre-empt the authority of the independent appeals Tribunal in this regard.”

The MFSA is opposing BOV’s requests to have the hearing behind closed doors.

BOV’s compensation offer to property fund investors who lost their investments was made in the form of a full and final settlement of any claim or dispute. By 30 June, 97% of shareholders had irrevocably transferred their shares in the fund.

BOV said that it was on the last day that MFSA issued its directive, even though it knew beforehand the full details of the offer’s terms and conditions.

“The intention behind the original directive of the MFSA was unclear, and the authority was requested by the bank to clarify the scope of the directive. MFSA subsequently confirmed it was not intended that the purported directive should change or modify any contractual relationship entered into between BOV and investors pursuant to the terms and conditions of the offer,” the bank said.

The bank later appealed the directive, which it had 30 days to do so. But news of either the directive or the appeal were never publicised by either side.

The MFSA will be making its findings public imminently on claims of access to sensitive commercial information by employees and directors of the La Valette property fund, which is one of two investigations into the fund, the other being the mis-selling of the fund to inexperienced investors.

BOV said it looked forwardto the conclusion of the MFSA’s redemptions and sales practices investigations. “Contrary to the suggestion contained in the MFSA media release, the bank believes that it has at all times cooperated with the MFSA during the course of its various investigation and enquiries, and does not accept that any delays in the completion of this work can now be attributed to the bank.

“The bank has had occasion to invite the authority to compare the response times of the Authority itself with those of the bank, before seeking to cast aspersions on or to find fault with the vank on this matter.”

The MFSA yesterday also welcomed a decision by the Data Protection Commissioner which has forced Bank of Valletta, the fund’s custodian, to allow investors to access their client fact finds. BOV was ordered to release documents that could prove it sold a complex property fund to inexperienced investors against financial regulations, according to some who invested in the failed fund. Investors who sought the information were told by the bank back in September that there was no point in releasing the information given that they had accepted its final settlement offer of 75c per share at the end of June.

“The Bank only received one communication from the Data Protection Commissioner,” BOV said.

“The Bank responded immediately, refuting allegations that it had failed to honour its statutory obligations under the Data Protection Act, and informed the Commissioner that it was in the process of providing the information requested in full compliance with the provisions of the Act. The Bank had therefore already acted in line with the requirements of the law without the need of any communication from the Commissioner.”