Being judged for our integrity

Is it correct behaviour for the chairman of Malta’s financial services regulator to involve himself with such offshore outfits?

MFSA chairman Prof. Joseph V. Bannister
MFSA chairman Prof. Joseph V. Bannister

Very often, in its quest to establish the truth the public questions divergent views expressed in Parliament.

These divergent statements, on several occasions, are exchanged between government members and the opposition, but at times also between members of the same party. In a democracy, all MPs are at liberty to state that which they feel is in the interest of the country. The public seeks to learn who is right. They demand facts, tangible evidence and proof to corroborate statements. Truth is God’s friend.

A few months before the 2013 general election and when the debacle of Valletta Fund Management’s La Valette property fund was a grave concern for hundreds of small savers who had lost money in this scheme, I spoke in Parliament saying that while this was unfolding, the chairman of the Malta Financial Services Authority (MFSA) seemed to be more occupied with his own directorships of multi-million hedge funds domiciled in the Cayman Islands.

Over the past two months the government has been assailed with criticism from the opposition in the light of what was revealed in the Panama Papers, as well as accusations as to how this will have a serious and adverse effect on Malta’s financial services sector.

A number of financial services practitioners expressed their concerns with me, this time not simply on what was being written in the local press, but more worryingly abroad. They presented me with links to UK newspapers and filings with the US Securities and Exchange Commission concerning the involvement of the MFSA’s chairman as a paid director of yet another gigantic hedge fund also domiciled in the Caymans, and other offshore jurisdictions.

The hedge fund Sloan Robinson has over $15 billion under management (four times the annual budget of Malta’s government). The filings list MFSA chairman Professor Joe Bannister as “a professor of bio-chemistry at the University of Malta since 1992, currently pro-rector, re-appointed chairman and president of Malta’s regulatory and inward investment body for the financial services sector…” – and together with other fund directors, is paid a fixed fee as a percentage of the assets under management and also receives a substantial fee tied with the performance of the funds.

The question immediately arises: was he appointed on these offshore funds because he holds the public offices stated in his CV as filed?

Why would he have involved himself in this fund when he very well knows that such a paid directorship is against IMF and European Central Bank directives concerning the avoidance of conflict of interest of financial supervisors?

And besides the undisputed conflict there are other concerns for Malta and the sector which Bannister is responsible to regulate. Sloane Robinson are known to be politically active through their large multi-million donations to the UK Conservative Party. It is not the first time that this involvement has brought them adverse and negative comments in the British press. It has also been reported that the firm was sanctioned by a UK Judge and made to repay millions to the UK Inland Revenue (HMRC) after an offshore scheme that they administered was judged to be a mechanism for those participating in it to avoid paying taxes.

Is it correct behaviour for the chairman of Malta’s financial services regulator to involve himself with such offshore outfits? If these funds go astray, it will be the collective responsibility of all members of the board. They will be held accountable to the public. What will be or indeed is the potential damage to Malta and the financial services sector?

It becomes even more worrying when against all documented evidence Bannister continues to deny and defy. Last year the government proposed the appointment of a highly qualified and respected professor in the area of financial services to serve as a governor on the board of MFSA. The chairman objected to this, saying that the person concerned had a conflict of interest as he was a director of a fund.

The government being prudent, it withdrew this nomination for this reason. The MFSA also imposes strict obligations on its 300 members of staff with regard to conflict of interest. So what is truly behind the queer attitude of the MFSA’s chairman? Also given the public discussion on the Panama Papers, why two weights and two measures? In all this there is an important question to be asked by all of us: should there not be some level of expectation that persons entrusted with public office ultimately are driven to ‘do the right thing’.

It is called integrity. It is what the public and ultimately the electorate expects and will judge us on.

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