Bank of Valletta loses ‘media blackout’ appeal

The Financial Services Tribunal has rejected a request by Bank of Valletta to have the proceedings of an appeal against a directive by the MFSA held behind closed doors.

The tribunal, chaired by Dr Pierre Lofaro, rejected the request for secrecy, saying the Constitution provides that any court proceedings are to be held in public except for situations where a Court may decree otherwise on account of issues of security of the state, public order, public morality or to protect minors or the private lives of persons concerned in the proceedings.

The MFSA had issued a directive directing the bank to ensure that the acceptance of the its share compensation offer to La Valette multi-manager property fund investors, did not prejudice their right to file a complaint with the MFSA against the bank.

BOV filed an appeal four months later, requesting that the hearing is kept behind closed doors so as not to "place this matter in the attention of the media, once more, with disproportionate adverse effects."

BOV claimed the property fund saga had been the subject of "major media attention and sensationalise press coverage... with a significant, though misplaced, adverse impact on [its] reputation and integrity."

The MFSA replied in November, saying the MFSA was "not some secret society" but a public authority with a duty of accountability towards the public.

"There is nothing especially sensitive in an appeal dealing with the validity of a directive... a listed company owes the public much more transparency and openness than an ordinary private company."

In its second decree, the tribunal accepted a request by some 100 investors to intervene in the appeal proceedings, holding that the investors' juridical interest in the proceedings was "direct, personal, actual and legitimate" because the outcome of the appeal proceedings would affect the rights being claimed by investors.

The MFSA has defended its directive against BOV, saying it was necessary and reasonable. "The circumstances surrounding the LVMMPF represent an unprecedented, unpleasant situation in the history of Maltese financial services... It is a still ongoing, extraordinary financial trauma for our small country which considerably alarmed public opinion."

In January, the Malta Financial Services Authority imposed an administrative penalty of €175,174 on Bank of Valletta for regulatory breaches related to disclosure of information and suitability of financial instruments, including perpetuals and other preferred securities issued by Lehman Bros, Royal Bank of Scotland, HBOS and others.

In June 2011, the bank and its investment arm Valletta Fund Management were fined an administrative penalty of some €350,000 for breach of investment services rules over the administration of the La Valette multi-manager property fund, which lost €50 million in investors' savings.

The MFSA is still in the process of investigating two major complaints: one of misselling the property fund to clients who were not experienced investors as defined by the law; and allegations of access to price-sensitive information.