The way we don’t do things

A report by the UK Financial Services Authority (FSA) published in London last week revealed that this authority has penalised Barclays Bank for investment advice failings on two of its funds. Barclays has been fined £7.7 million by the financial regulator and will have to pay out up to £60m in compensation to customers.

It is the highest fine imposed by the FSA for retail failings, and Barclays received a 30 per cent reduction on the original £11m fine for agreeing to settle at an early stage of proceedings.

Paul MacNamara, managing director of insurance and investments at Barclays, told Sky News that the bank admitted it had given insufficient information to some investors: “We are saying sorry to those customers and we are being very clear about the steps we’ve taken to make sure this never happens again…

“We are also giving information to the customers who may have been affected on what will happen next in the review that we have underway, and for those customers who have been disadvantaged, how we will go about compensating them.”

Barclays sold Aviva’s Global Balanced Income Fund and Global Cautious Income Fund to 12,331 people between July 2006 and November 2008. Investments totalled £692m and most investors were retired or nearing retirement.

The FSA said more than 1,700 people complained about the advice they received to invest in the funds. It identified serious failings, including the way risks were explained to customers as well as staff, and in ensuring the funds matched investors’ objectives.

The investigation revealed that although the bank had identified problems as early as June 2008, it did not take “appropriate and timely action”.

Briefly, the administrative penalties imposed on Barclays regard: mis-selling; failure to explain risks adequately to investors; targeting of vulnerable and elderly customers seeking to boost their retirement income; selling risky funds to those who could not afford to lose money; employing staff who were not properly trained; failing to act when problems emerged.

Compare this with what happened in the case of Bank of Valletta’s (BoV) selling of its La Valette Sicav Plc Multi-Manager Property Fund, which the Malta Financial Services Authority (MFSA) has been investigating for over six months.

The mis-selling argument, in this case, is almost a photocopy, but BoV’s situation is even worse as in the La Valette Fund in question allegations include breach of the investment restrictions contained in the prospectus and also the unethical use of ‘inside information’.

This possibility is also indicated by the abnormal level of redemptions from the fund during the first seven months of 2008 that was eight times the level of redemptions over two years in the comparable HSBC Property Fund.

Unlike the Barclays case, “where loyal customers many of whom desperately needed income, lost half their savings”, in the La Valette case, the figure is closer to 80 per cent.

Comparisons are odious, but one can hardly refrain from making them in this instance. The Barclays Bank investigation covered a larger number of customers who were short-changed by the bank – much more than the number of Maltese investors who have made official complaints about BoV’s Multi-Manager Property Fund.

BoV and its subsidiaries are still trying to rebut the contentions alleged by investors in the fund, but they never in any way explained or gave any reasonable explanations in support of their rebuttals.

The MFSA gives the impression that it is dragging its feet to reach a conclusion and a decision. Its official statement that it is not bound by any timeframe to conclude an investigation is facetious, to say the least. No judge in our courts would dream of making such a statement, even though they are not obliged to deliver judgments within specific timeframes.

This is the way we don’t do things.

• Isn’t it thoughtful of the Prime Minister to carry in his pockets one of those small pipes used in angioplasty procedures?

One never knows when one has to resort to using it for other purposes than it was made for.

His predecessor, Eddie Fenech Adami, would never have been caught with one in his pocket, of course.

This is the sort of thing that confounds Nationalist supporters who have not yet become used to the new way of doing things and continually hanker after the party ‘they knew’.

The party ‘they knew’ is long dead and buried and a brave new world beckons them.

Take the police force, for example.

Is it not obvious that a councillor who is being investigating for allegedly using a local council’s laptop for private purposes should be ordered to strip naked just in case he has some mouse lurking where it shouldn’t?

Is it not right and proper that in this brave new world the administration refuses to interfere with the workings of the independent police, just as it does not interfere in the work of the MFSA, MRA and other regulators?

Those who believe manipulation has become the hallmark of this administration must be completely misreading the situation.

Or are they?

micfal@maltanet.net