Barclays told to repay investors, as MFSA investigation into BOV fund enters sixth month

The British financial regulator has ordered Barclays Bank to compensate thousands of depositors £60 million for giving them poor advice into pouring their savings in two investment funds.

The bank has been fined £7.7m by the Financial Services Authority after one in seven of the 12,000 investors complained about the advice received from July 2006 to November 2008.

The investors’ complaints bear a remarkable similarity to those whose savings perished in the downturn of the La Valletta Sicav’s multi-manager property fund, which was sold by Bank of Valletta. An investigation by the Malta Financial Services Authority is still ongoing since August 2010.

Barclays sold Aviva’s Global Balanced Income Fund to 12,331 people with investments totalling £692 million. Many of these customers were retired or nearing retirement, and 1,730 of them complained about the advice they were given.

The BBC reports that many were exposed to more risk than they were comfortable with, and found they lost money when the economic crisis struck. One investor said she was looking for a "cautious-to-medium" risk investment and was advised by Barclays to put £50,000 into the Balanced Fund, believing it to be matched to her relative unwillingness to take big risks. However, within months, she had lost £17,000. She later received compensation for the full amount.

The Daily Mail said in its report on the decision that it started “campaigning for justice” in April 2009 because Barclays had not been taking the deluge of complaints seriously. The FSA said evidence uncovered by this newspaper had proved ‘very useful’ in its investigation.

READ the FSA’s decision

Maltese investors claim Bank of Valletta is responsible for the way its La Vallette multi-manager property fund, once valued in excess of €84 million, was depleted to €24 million.

Specifically, it was a €17 million investment in the Belgravia European Property Fund that lost in excess of 90% and is today estimated at €1.3m, while other investments originally valued at some €47 million have fallen to €18.5 million.

Over 200 investors have filed judicial protests against the bank. In one judicial protest, the investors claim BOV had not informed investors of an application on 17 March, 2008, to redeem part of the investment in the Belgravia European Property Fund, which was not accepted because the fund had already been suspended.

Instead investors were only advised that redemptions in the fund had been suspended on 7 August, 2008, and until that date investors kept depositing money in the fund “without any knowledge of the suspension.”

Finco, the stockbroker firm that filed the first protest, is claiming that the massive withdrawal of shares – amounting to some 16% of the €84 million fund – could not have been related to the global credit crisis. “By the 7 August, the 2008 global credit crisis had not yet entered the meltdown phase and had not yet caused general and global public panic, which meltdown effectively commenced only with Lehman filing for bankruptcy on 15 September 2008,” the firm said.

READ MORE on the people who lost their money in the BOV fund