Bank of Valletta may face another lawsuit over the way it sold complex financial products known as perpetual securities to inexperienced investors.
The issue is distinct from other legal battles
The issue is distinct from other legal battles the bank is facing over the collapse of the La Vallette Multi Manager Property fund, which so far cost the bank some €50 million in compensation payouts and a €347,000 fine.
In January, the Malta Financial Services Authority fined the bank €175,000 “for regulatory breaches” and recommended that it payout compensation.
However, the bank insisted the authority’s conclusions were not binding and rejected claims made by 17 investors, while settling some others privately.
Investors who spoke to The Sunday Times said they were now preparing to take the matter to court after attempts to reach a settlement since January appear to have reached a dead end.
When asked whether the bank’s decision to reject the claims was final, a BoV spokesman said the matter was confidential, adding that it would “not be prudent to comment at this stage”.
Nor would the bank confirm the extent of its overall exposure to the investors’ claims.
Finco stockbroker Paul Bonello, representing investors who have had their case validated by the MFSA, confirmed that a suit was being considered but would not comment further.
The case revolves around the sale of perpetual securities under the impression that these investments were lower in risk than was actually the case.
The bulk of the securities relate to investments in the former US investment giant Lehman Brothers which collapsed in 2008, precipitating a global financial crisis, but also in the Royal Bank of Scotland, Lloyds, Barclays and HBOS among others.
Among the investors who have lost money in this case are pensioners, one of whom is 97.
The MFSA had started investigations in 2009 following complaints by investors who felt they were wrongly sold these securities products.
The complaints had been prompted by the collapse of Lehman Brothers but the MFSA broadened its review during the course of the investigation to other securities that were sold to the complainants.
In January, the authority found against the bank and recommended that BoV compensate the aggrieved investors. It also pointed out in a statement issued when it made its conclusions public, that it only had the power to make recommendations to the bank.
However, investors have counter argued that the authority could take the bank to court under the Investment Services Act.