Monday, 20 February 2012

Who gets MFSA fines?

MFSA Building

On 15th June 2011 MFSA levied a penalty of EUR 347815 on Bank of Valletta and its subsidiary Valletta Fund Management relating to irregularities connected with the La Valette Multi Manager property Fund.

On 5th January 2012 the MFSA again fined Bank of Valletta Euro 175,174 in connection with breaches of the Investment Services rules related to sales of  perpetuals and other preferred securities issued by Lehman Bros, Royal Bank of Scotland, HBOS and others.
The latter penalty, unlike the previous one, has been appealed against by Bank of Valletta.

I will not enter the merits of the case concerned but on the other hand there is something not right in the way this whole business is being conducted.

The penalties raised are taken as normal revenue by the MFSA and the private investors who suffered the loss are informed by the MFSA that whilst investigations found in their favour there is nothing else the MFSA can do on their behalf.  It is left up to complaining investors to pursue negotiations with the licensed institution ( in this case Bank of Valletta).   If such negotiations lead nowhere the investors will have to start legal proceedings against the institution concerned or forgo their rights.

This is not right.

a.  The penalties levied should be put into a fund for the benefit of the injured investors.

b. The MFSA should not wash its hands off the matter and simply pockets the fine.  Where it finds for the investors it should be legally empowered to co-ordinate class action against the institution on behalf of the investors.    This will serve as an incentive for the guilty institution to settle amicably with the investors.

The present situation gives an incentive to MFSA to be lax in its supervision, and then enforce grievances against licence holders to swell its revenues through penalties from which the injured investors benefit nothing.  In fact from such instances only the MFSA seems to be benefiting.

Something is not right.

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