Stockbrokers were “stunned” to learn that Henley & Partners, the company running the cash-for-passports scheme, received a four per cent commission on government bond sales, this newspaper has been told.

Shadow justice minister Jason Azzopardi said on Wednesday Henley & Partners was being paid the commission despite not being a licensed stockbroker, in breach of the Investment Services Act.

Apart from paying €650,000 for their passport, applicants also have to buy €150,000 in government stocks and a property worth at least €350,000 or rent a property for a minimum of €15,000 a year.

Elaine Bonello, chairwoman of the College of Stockbrokers, said the four per cent commission was 10 times what licensed stock­brokers received.

She said stockbrokers and financial intermediaries had to follow strict regulations and pay licence fees to offer a service. She added she had no problem with strict regulations, as required in a serious industry that was a pillar of the Maltese economy.

This is an incentive to the concessionaire to bring investment

“It beggars belief that a company can just come along and conduct an activity it has no apparent licence for while receiving a commission well above industry rates to boot,” Ms Bonello said.

Another stockbroker, who preferred not to be named, said the four per cent commission given to Henley & Partners was “unorthodox”.

He was dismissive of Dr Azzopardi’s claims about the legality of the commission. “It is not so much a question of legality or otherwise. What the law disallows is the provision of an investment service by someone other than a licensed stockbroker, not the receipt of a commission,” the stockbroker noted.

The stockbroker said the main point was that commission on government bonds generally ranged from 0.25 per cent to 0.50 per cent.

The government giving a four per cent commission directly to a third party introducer was unorthodox, did not constitute best practice and was exaggeratedly high, he said, adding he could not see the motive behind such a payment.

Asked if there was any breach of the law in granting such a commission, a spokesman said the Malta Financial Services Authority had no evidence and was not in a position to confirm any such breach.

Henley & Partners does not appear on the MFSA’s financial services register.

Questions sent to Justice Minister Owen Bonnici on the legality or otherwise of such payments and the reasons behind such a high commission were not answered by the time of writing.

Defending the commission during a television programme on Wednesday, Dr Bonnici denied suggestions that the government was subsidising Henley & Partners.

He said the government wanted to attract investment and was willing to give €4 for every €100 brought over by the company. “This is an incentive to the concessionaire to bring investment,” Dr Bonnici said.

Henley & Partners also receives a four per cent commission for each successful applicant under the scheme. According to a report tabled in Parliament last week, the company made €5.8 million from the scheme over the past three years.

jacob.borg@timesofmalta.com

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