Finco Treasury Management Ltd this afternoon called on the Malta Financial Services Authority to take Bank of Valletta to court for breach of investment services rules and refusing to honour its recommendations.

In a news conference held to give an update on the current status on the dispute between the Bank of Valletta Group and investors of the Preferred Perpetual Securities and the La Valette Multi-Manager Property Fund, director Paul Bonello said this would spare the elderly and inexperienced public the trauma and expense involved in lengthy conventional court litigation.

He quoted extensively from a strongly worded letter Nationalist MEP Simon Busuttil sent to Prime Minister Lawrence Gonzi and Finance Minister Tonio Fenech, saying that he found it difficult to understand why the MFSA was reluctant to take BOV to court.

"The investors feel alone and I believe we have a duty to protect small investors," Dr Busuttil said.

Mr Bonello did not publish the letter, as Dr Busuttil had requested him not to circulate it.

He said Dr Busuttil was the only PN politician who stood up to be counted.

He also revealed that when BOV opened its Brussels branch, Dr Busuttil did not go as a sign of protest at the bank’s decision earlier this year to withdraw Mr Bonello and his wife’s credit facilities.

Mr Bonello also thanked the PL for the commitment they were giving.

Just before the press conference, the Labour Party issued a statement saying that MFSA rulings on perpetuals should be immediately honoured by BOV.

The PL said that a new Labour government would do its best to ensure that serious negotiations between the bank and the advisers appointed by the investors' were conducted for justice to be made with the victims of misselling and to meet financial consumers' legitimate expectations.

But in a reply, the government condemned "the irresponsible way" in which the Oppositon was destabilising the financial sector in Malta and endangering more than 1,500 jobs at Bank of Valletta through its comments.

The government was just a minority shareholder and could not prejudice  the position of all stakeholders, including the 18,000 shareholders of the bank.

The government's role was only to facilitate and bring the parties as close to each other as possible and not to impose, as the Opposition was giving the impression it wanted to do, it said.

Mr Bonello said:

“I appeal to the government to do its duty towards vulnerable people which should be the mission of a democratic Christian party."

He said that when the new chairman, Frederick Mifsud Bonnici, took over, there was communication and Mr Mifsud Bonnici told him he was sensitive to the suffering  the bank’s clients had to endure through no fault of their own.

He said there seemed to be a willingness to solve the problem once and for all but an adhoc committee was set up internally within the bank and this recommended that things stay as they are.

He received a letter from the bank’s legal office last week saying that things were going to remain as they are.

Mr Bonello said he would have expected Mr Mifsud Bonnici to show personality and not rely on the advice of the same people within the bank who were responsible for the failings, such as the current CEO.

BOV, he noted, continued to ignore MFSA recommendations to compensate investors and there had been no concrete step or proposal from Bank of Valletta to find a negotiated solution to the dispute on perpetual securities.

High risk perpetuals, he said, were sold to inexperienced investors.

This was in spite of the impression given by the bank chairman in an interview in The Sunday Times on September 30.

In a statement, Finco continued to insist that the MFSA directive of June 1 did not do justice with investors.

It noted, that it was was the MFSA itself that established and reported in detail that:

• Valletta Fund Management wrongly applied the investment restrictions in the prospectus, and of having failed to properly monitor its delegates including insight investment management.
• Bank of Valletta as custodian wrongly applied and wrongly monitored the application by others of investment restrictions in the prospectus and of having failed to make accurate reporting in the fund’s annual financial reports for many years in succession.
• Bank of Valetta as a sales intermediary agent committed gross misselling practices.

Finco said that, in such circumstances, the proper remedy was a total refund of capital invested (well over €1 per share) plus interest and not an arbitrary €1 per share.

Moreover, the distinction between experienced investors and non-experienced investors on the basis of whether an investor entered into $50,000 transactions or not was altogether artificial and did not address the substantive issues of who was an experienced investor or not.

It said that the exclusion of execution-only investors from the benefit of the directive was likewise mistaken because the MFSA did not make a substantive assessment of whether these execution-only sales were an abusive practice or not.

The government this evening said that its role was to facilitate matters and bring the parties as close to one another as possible and not to impose, as the opposition implied it would do.

It condemned the Opposition for "its irresponsible comments" with which it was destabilising the financial sector in Malta and endangering more than 1,500 jobs within Bank of Valletta.