The Malta Financial Services Authority has imposed an administrative penalty of €175,174 on Bank of Valletta plc for regulatory breaches related to disclosure of information and suitability of financial instruments sold to the general public. The penalty was the culmination of a lengthy investigation triggered off by a number of complaints on the manner in which certain securities had been sold to investors, including perpetuals and other preferred securities issued by Lehman Bros, Royal Bank of Scotland, HBOS and others.

Investigations have been on-going since 2009, when a number of investors lodged complaints with the Authority’s Consumer Complaints Manager requesting a review of the manner in which such preferred securities had been offered to them. In the main, the complaints had been  prompted following the collapse of Lehman Brothers in September 2008. However, during the course of its investigations, the Authority had also widened the scope of its review to other preferred securities which formed part of investment portfolios of a number of complainants.

On the basis of its findings, the Authority has recommended to the bank to compensate the aggrieved investors. In some cases, it appears that the bank accepted the Authority’s recommendations and reached a private settlement with the investor. In a number of other cases, the bank  disagreed with the Authority’s findings and recommendations.

In the case of a consumer complaint, the MFSA is only empowered to make recommendations. The bank and the complainant may choose not to accept the MFSA’s recommendation, in which case the
matter could be pursued through other legal means. All complainants are in the process of receiving a letter from the Authority regarding the outcome of their complaint in relation to this investigation.

A notice has been published on the website of the Malta Financial Services Authority (www.mfsa.mt) in terms of the Malta Financial Services Authority Act regarding the breaches made by the bank.

Bank of Valletta has a right to appeal from this decision up to the 26 January 2012.

In the meantime, the Authority shall continue investigating any current and new complaints against the bank in relation to these preferred securities along the same parameters the Authority has employed in determining the above cases. Each case will be treated on its own merits.