IIP: Henley’s commission is 10 times what stockbrokers get on sale of government stocks

The concessionaire of Malta’s citizenship sale, Henley & Partners, is not a licensed stockbroker listed with the MFSA’s financial register, but the firm earns 4% on the mandatory of acquisition of government bonds by those who buy a Maltese passport.

The previously unknown commission was made public by the regulator of the Individual Investor Programme, who said in his annual report that Henley was not just making money from the standard 4% they are paid on the €650,000 that main applicants pay for a Maltese passport, but also another 4% every time applicants purchase the mandatory €150,000 in government stocks – the investment element of buying Maltese citizenship, together with a €350,000 property or annual €15,000 lease.

While Henley is not a regulated investment service provider, and does not pay a licence fee as other stockbrokers do, the standard commission paid to brokers on Malta government stocks at initial public offer stage is 0.3% – the commission is paid by the Treasury.

When stockbrokers deal on the stock exchange, the average charge is of 0.25%-0.3% although commissions there are liberalised.

In total since the launch of the IIP, over €26.7 million in stocks were acquired, which left approximately just over €1 million in Henley’s pockets. Henley has so far pocketed an additional €5.8 million in commissions on the passports sold since 2014.

Henley is also no longer in charge of carrying out due diligence services for the IIP, and these are now carried out by Identity Malta, which has paid out €624,000 in direct orders to international firms for due diligence vetting.

Asked whether the IIP was not in line with Labour’s purported ‘socialism’, when children born in Malta to non-Maltese nationals were being denied citizenship, Bonnici said: ‘Socialism requires that one must create wealth before redistributing it. IIP citizens have come with enormous resources and can create jobs’.

Minister denies ‘subsidising’ Henley

Nationalist MP Jason Azzopardi yesterday said during TVM’s Dissett that justice minister Owen Bonnici had been economical with the truth when he was grilled by MPs during a 2015 committee meeting discussing the Henley contract.

Bonnici had been specifically asked by Nationalist MP Mario de Marco whether Henley would be paid anything beyond their standard 4% marketing fee, but Bonnici had replied: “No… absolutely no, because at the end of the day there is the legal notice regulating them.”

Bonnici had also said that any other fees indicated in the contract were related with due diligence fees, “not profits for the concessionaires, but fees… if you are asking me if the concessionaires are going to be pocketing something else, my answer is no.”

When asked by Dissett presenter Reno Bugeja about the 4% fee on bond sales, Bonnici yesterday denied that the government was “subsidising” Henley.

“We’re saying that we want to attract investment to the country so we’re giving four euros to Henley for every hundred they bring to Malta,” Bonnici replied, dodging the issue of the 4% commission on bond sales.

When asked whether the IIP was not in line with Labour’s purported ‘socialism’, when children born in Malta to non-Maltese nationals were being denied citizenship, Bonnici deflected the question: “Socialism requires that one must create wealth before redistributing it. These 300 families [the IIP applicants and dependants] have come with enormous resources and can also create jobs.”

He also likened some of the IIP applicants to US President-elect Donald Trump. “The US has elected as president a person who is very successful in business. We are speaking about these type of people – people who are successful.”

IIP payments

To get a passport, an applicant must pay €650,000, acquire a property of not less than €350,000 or lease a €15,000 apartment for five years, and buy €150,000 in government stocks.

When a main applicant pays the €650,000 fee, Henley gets 4% (€26,000), Identity Malta – the government office processing the applications – gets 6% (€39,000), while the remaining amount is distributed in the ratio of 70% to the National Development and Social Fund (€409,500), and 30% to the government’s consolidated fund (€175,500).

The contributions collected initially go into a suspense account and it is only after the oath of allegiance is taken that the distribution of funds is carried out.

Between June 2015-June 2016, the contributions collected by Identity Malta amounted to €166,550,000. The total property purchases and rent, as well as investments and contributions, was €218 million. Between the launching of the IIP until 30 June 2016, the national development fund received almost €55 million, while the government took €23.5 million for its consolidated fund. Henley has so far collected €5.8 million.

Some €134 million are inside the suspense account, yet to be disbursed.