BANK OF VALLETTA PLC

Issued by: Malta Financial Services Authority (MFSA)

On 28 December 2011, the MFSA imposed an administrative penalty of €175,174 on Bank of Valetta plc in terms of article 16A of the Investment Services Act. Bank of Valletta plc was found to be in breach of a number of provisions of the Investment Services Guidelines applicable for transactions effected prior to 1 November 2007 as well as the Investment Services Rules applicable for transactions effected after the 1 November 2007 as follows: [I] failure to act with the level of care and diligence required of licence holders in order to ensure that the investment advice or portfolio management service provided is appropriate and suitable given the customer’s particular circumstances; [II] failure to take all reasonable steps to ensure that a client or potential client has sufficient information which he is able to understand to enable him to take informed investment decisions; [III] failure to obtain and record the personal and financial information necessary to make appropriate recommendations or investment decisions; and [IV] failure to maintain sufficient records. The said breaches relate to transactions in respect of certain securities sold to investors, including perpetuals and other preferred securities issued by Lehman Bros, Royal Bank of Scotland, HBOS and others. This notice is being published in terms of the powers vested in the MFSA under the Malta Financial Services Authority Act. Bank of Valletta has a right to appeal from this decision up to the 26 January 2012.

Issued by: Malta Financial Services Authority (MFSA)

With effect from 1st June 2012, the Malta Financial Services Authority imposed an administrative penalty of €203,150 on Bank of Valletta, under the provisions of article 16A of the Investment Services Act. The Authority’s investigation, into Bank of Valletta’s sales practices in relation to the selling of units in the La Valette Multi-Manager Property Fund to investors, determined that in various instances Bank of Valletta had failed to act in the best interest of investors, as required in terms of the applicable regulatory framework. The following is a summary of the Authority’s findings and conclusions: Disclosure to Clients: There were various instances where investors interviewed by the Authority stated that Bank of Valletta’s officials had not provided them with adequate information or explanations about the La Valette Multi-Manager Property Fund. Nor were the implications of signing the experienced investor declaration form sufficiently well explained. Moreover, nearly all investors interviewed by the Authority as part of the investigation stated that they were not offered a copy of the prospectus of the La Valette Multi-Manager Property Fund. Suitability: The La Valette Multi-Manager Property Fund is an unsuitable product for unsophisticated retail investors or investors having a cautious risk profile. The Authority’s findings show that there were instances where the La Valette Multi-Manager Property Fund was sold to investors with a cautious risk profile. Several advisory clients had material over-exposure to the La Valette Multi-Manager Property Fund compared with Bank of Valletta’s internal guidance, but there was no record made of the rationale for this exposure. The Authority carried out an investigation to verify amongst other things the nature of the advisory investors. Bank of Valletta appears to have regarded many of these investors as experienced investors solely based on their self-declaration. In several cases, there was no evidence that Bank of Valletta made any effort to verify the validity of the self-declaration made by these investors. On this basis, the Authority has concluded that on a number of occasions Bank of Valletta’s advisors did not take reasonable steps to ensure that these advisory clients were indeed experienced investors before advising them to invest in the La Valette Multi-Manager Property Fund. Client Fact-Finds: The Authority has also found instances in which advisory investors’ client fact-finds were not updated or did not contain information which corroborated the experienced investor declaration. In some instances, advisory investors’ client fact-finds could not be found in Bank of Valletta’s records. Moreover, Bank of Valletta also failed in some cases to take reasonable steps to obtain sufficient financial and other information from each investor relevant to the services to be provided. Staff Training: Bank of Valletta did not provide the Authority with adequate documentation and explanations which demonstrate that its officials had been provided with proper training and guidance regarding the nature, characteristics and risks relating to the La Valette Multi-Manager Property Fund, taking into account its unique features and risks and the fact that this could only be sold to experienced investors. During the period when the La Valette Multi-Manager Property Fund was launched and the majority of the sales effected, Bank of Valletta did not have adequate written procedures in place on the manner in which the selling of financial products such as the fund had to take place. Record Keeping: Bank of Valletta was required to maintain sufficient records to be able to demonstrate compliance with the regulations and with the conditions of its investment services licence at all times. There were instances where Bank of Valletta failed to keep appropriate records in relation to transactions in the La Valette Multi-Manager Property Fund carried out on behalf of clients. File Review: In view of the findings set out above, the Authority has issued a Directive on the Bank to cooperate with a review of investor client files by an independent professional services firm, engaged by the Authority at the expense of the Bank. The objective of the review is to determine the validity of the experienced investor declaration held by the Bank. The Bank has been directed that, where shares in the La Valette Multi-Manager Property Fund were sold to advisory client investors who were not experienced investors under the applicable criteria, those investors should be entitled to compensation. This file review should be completed by 31st December 2012. This notice is being published in terms of the powers vested in the Authority in terms of the Malta Financial Services Authority Act.

Issued by: Malta Financial Services Authority (MFSA)

Bank of Valletta plc has submitted an appeal before the Financial Services Tribunal against the MFSA’s decision to impose this administrative penalty