Stockbroker says BOV offer ‘morally dishonest’ and calls for regulator’s involvement

Finco Treasury director Paul Bonello says bank's offer carries morally dishonest conditions that warrant the attention of the Malta Financial Services Authority.

27 May 2011, 12:00am
by Matthew Vella

3 min read

Bank of Valletta’s main accuser today hit out at the financial regulator, saying its lack of personality was leaving investors in the dark as to whether they should accept a 75c share offer from BOV for their botched investment in the La Vallette Sicav’s property fund.

In a harsh and clinical appraisal of the BOV offer, Bonello – who presented judicial protests against the bank in the name of some 400 investors – said all shareholders who accept the 75c share offer would have to give up any right to take legal action against the bank on any of the allegations that might be confirmed by the MFSA in two investigations into insider trading and mis-selling of investment products.

“How could the regulatory authorities permit such a morally dishonest and unjust move to be committed by the economically strong institution against the general public?” Bonello asked.

He described the financial regulator as a ‘state of the art’ authority in theory, but that it lacked any personality to stand up to the banks in practice.

The MFSA has conducted three investigations, one of which concerns the breach of investment restrictions by BOV’s investment arm Valletta Fund Management. This investigation has already been presented to BOV, but not yet publicised.

Bonello questioned whether Bank of Valletta had been given the blessing by the MFSA to “go ahead with this ruse” to offer the compensation before the MFSA issues the reports.

“While the MFSA findings and reports into the fund should be made available to all claimants and affected investors as a matter of right without delay and to allow all investors to make a fully informed decision on BOV’s conditional offer, BOV should be restoring all claimants to their original position by reimbursing all monies invested with legal interest in exchange for the affected shares in the La Vallette Multi Manager Property Fund.”

Bonello said the bank could negotiate to substitute the interest to the return achieved on the bell-weather European Property Price Index, which would give a return of 17% (2005-to date) – amounting to some €1.15-€1.35 per share.

BOV is making a conditional offer without prejudice and “without admission of liability of €0.75 per qualifying share in the La Valette Multi Manager Property Fund which BOV is stating will cost €45 million, including €14.5 million in compensation.

The bank says the offer was a “non-confrontational and expeditious closure” to the judicial protests by investors who held the bank responsible for the way the property fund, once valued in excess of €84 million, was depleted to some €24 million in 2009.

Bonello said the 75c offer was better than nothing and positive as a first step, but he said the bank was now presenting the property fund investors – many of them ageing and not cognisant of the difference between a bond and a share – with a “take it or leave it offer.”

“Why should these investors accept this offer and drop any claim against the bank irrespective of what emerges from the MFSA reports? This offer has no approval from the MFSA, so what sort of investment protection is this?” Bonello asked.

BOV is saying it will withdraw the offer – which is valid for just 30 days – in the event of acceptances below 70% of the outstanding shares.

But the bank also holds a significant institutional shareholding from the bank, which is how it carried the Sicav’s proposed resolutions in the last AGM when all 1,000 shareholders present voted against the resolutions.

“In view of the involvement of the BOV Group in the property fund, will the bank be exercising its votes on the settlement? And will MFSA as champion of good corporate governance and transparency in the financial services sector, be taking a position on this matter?”

Matthew Vella, a freelance journalist at MaltaToday, was formerly executive editor at Malt...

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Anthony Haidon •

So far we are being told more about what the MFSA will NOT be doing rather than what it will do. How's that for transparency ? We have come a long way since the BOV chairman told us to bear up, or something nasty to that effect, and yet we now have an admission of seventy-five percent guilt. I remember, as many others do, when we waited for years and years in order to by allowed to have a colour television because. we were told, the country could not afford the drain on its foreign currency to meet the importation bill. What can the financial authorities say about the huge loss of capital burnt to a cinder by the mess created in this fancy fund which consumes tons of paper sending letters to shareholders which say nothing? How about the Bank sending one more paper similar to the one showing the hardly legible graph it just sent but this time comparing trends with another fund administered by a LOCAL bank? And as for the Minister of Finance regarding this matter THE SILENCE IS DEAFENING.

owen sammut •

It is fundamental that at this stage the reports by MFSA should be published. We do not yet know the extent of wrong-doing by BOV. Investors now, do not have all the information at hand to take a decision as to whether or not to accept the offer. Investors have sent complaints to the MFSA and have not yet been communicated the outcome of the investigations on these complaints. What sort of Regulatory Authorities do we have in Malta. These Regulatory Authorities are partially or fully funded through our taxes. MFSA please note, pull up your socks, assume your responsibilities and discharge your obligations.

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Gino, I have no idea why you and Wise Owl are basing your opinions in defense of BOV that investments go up and down as if that is the only law that governs financial markets. While quite rightly your statement about the flatuiations of investment funds has merit, the worst crime an investor can commit is trade on insider information. And it is also a crime for investment fund managers to withold information because mistakes were made, that put the ordinary investor at a much higher risk. According to media reports that is exactly what happened on this fund. Insiders who had prior knowledge cashed in roughl;y 14.5 million euros and the BOV was negligent in it's responsibility as a manager of these assets. In any other country both the BOV and all those insiders would be persecuted. Therefore when the MFSA has completed it's own investigation to protedt the financial industry in Malta, it must publish it's conclusions and the law must be carried out.

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Ma nistghax nifhem kif issa ir-regolatur Malti - MFSA - qieghed jigi ikkritikat. Mela l-ewwel nghidu kemm ghandna fiducja fir-regulatur u kemm ghandna ligijiet tajbin u issa ghax qed jaghmel dmiru u jaghmel xogholu bir-reqqa kollha nikkritikawh u nheddu li ser naghmlulu kawza. Baqax ukoll. Mela forsi hadd ma ta kaz li din l-ewwel investigazzjoni tax-xorti taghha u l-affarijiet mhumiex semplici daqs kemm wiehed iqishom.

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Fehma - I m not sure what makes your comments wiser or more mature or what gives such apparent authority in financial matters. You and Tarcisio have already come to your own conclusions without there being one shred of evidence yet. For instance who says that investment in Belgravia did not meet the necessary ? I think wise owl is actually being very sensible in his assessment. The offer is not one th just throw out of the window. Just on a back of the envelope caculation it probably pays out more to investors, taking into account the meltdown in financial markets in 2008, than would actually be due. Tarcisio you are something else - God forbid you had to be in a position to pass judgement. you are simply making one assumption after the other without any basis to do so, and just because you keep on repeating the same assumptions over and over again -you forget that after all they are simply assumptions and are not facts. The result of course is nothing more nor less than a speculative one devoid of any credibility. There is no investment without risks - when investments do well everyone reaps the benefit, do you really expect that a bank should pay when those investments then go south - well if you do, then I just rest my case.

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Dak li jigri mweta l bank introduca is sistema ta sales culture. Hafna hard selling tatics biex l implegati jiehdu l bonus. Dinhija sitwazzjoni fil BOV hafna presure fuq il haddiema biex jilhqu targets ghax inkella addio zieda fil paga u promotions. Issa nisperaw li dawk responsabli f din il froga li se tiswa l bank miljuni ta euro jghaddu board ta dixxiplina bhal meta xi kaxxier fl ahhar tal gurnata ma jaqbilx. Ta minn isemmi li haddiema fi skala zghira jew imkeccija jew demoted ghal sitwazzjonijiet ferm inqas min din il qassata

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Tarcisio, part of the reason the MFSA is acting the way it is, is because its Head, Andre Camilleri, has been too busy imposing his intolerant views on Divorce and he has put the BOV affair in a state of preservation.

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Wise Owl the comments you are posting in this media are not so wise and lack maturity in financial matters. To rebutt your argument, the early investors in the MADOFF FUNDS also made money even though those funds were nothing but a Ponzi scheme. To be precise, there is a lawsuit against those that withdrew the money to return these profits so that the conned investors could recuperate some of their losses.

Mark Fenech •

Wise Owl. You have left out a very important issue in your contribution. Who has invested our money in the Belgravia Funds, when these funds did not meet the conditions set in the BOV Property Fund prospectus. Why should investors suffer, when it was the Bank's Officers and their agents which made all these errors. You should have asked why has nobody resigned from BOV for these ommissions? Why is the MFSA acting in such a way of holding information due to the investors and continue to deprive us from knowing the full story behind these errors where we have suffered huge losses on our savings. The offer covers less than 50% of the value of our investment. We bought these shares at €1.10 and have not received any return on these investments for several years, plus the legal charges we were involved in. the offer is totally unfair, and MFSA should wake up to its responsibilities and publish the reports of its investigations.

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Obviously BOV do not like what the MFSA has found in its first investigation and are expecting the worst from the other pending investigations. From a no discussion stance they have now come up with this offer, hoping they can get away with it cheaply. They are hoping investors will swallow the bait and accept this offer, saving them millions of Euro in the process and avoiding the bad publicity this case is causing them and will continue to cause them. Mr Chalmers, your decent way out of this is less talk and more action. Regain you credibility by making a fair offer even if the MFSA report is not yet public. Eventually you will have to come up with a decent offer and sooner is better and cheaper than later.

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How can we, the investors, ascertain our situation, when the report by the MFSA has not yet been made known to us ? We are being expected to take this leap into the dark and at the same time waiver our legal rights by accepting BOV's offer of 0.75c against our original € 1.00 per share. Aren't we being hustled by BOV ?

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I fully agree with warpath2010. Drop the “A” from the MFSA as it is clearly failing as an Authority to defend us investors. When the moment of truth has come for such an “Authority” to actually prove itself it fails miserably! Shame on the MFSA for not issuing the long awaited report. When will the investigation report on the Property Fund be made available? Why should we accept such a measly offer? It reminds me of being at some market place!

Monica Borg •

Investors that have invested in this fund since 2005, have enjoyed healthy returns and dividends for two and a half years ...no media hype then. International market crisis kicks in...all markets suffer...bonds, equities, properties...big banks disappear out of the scene....and way ho we see these battlecries by some investors to get their money back. BoV has placed on the table a solution that addressess the issue to the fund's so called gearing wherein this fund which is today worth around 50% of its original value (half of which is illiquid) is being settled for a cash offer of Euro 0.75. Well this is clearly a first for Malta where a financial services provider has come across to meet investors. This is going to cost the Bank 14.5 million euros.....not an easy decision but one which is aimed a settling this longstanding matter in the interest of all and sundry. If it were for me.....take the money and invest it wisely to start enjoying its returns. Otherwise...battle it in courts for years on end with no assurance that you might recover a higher value.

Anthony Haidon •

I would like to refer to 'mber's' comment. If things were different and the losses were caused by the prevailing forces at the time, and the fund was meticulously nursed by the fund managers, then of course he would have been justified. But if the allegations against the Bank are correct, even just one and they can't ALL be wrong, then the Bank should be liable. This is what's happening in decent European countries where authorities are authorities and will not stand for nonsense. I do not know what is going on here, all I know is that something is wrong, very sad and has left a hole in my pocket. The normal banking activities are well regulated and there is every reason to have full trust in the Bank, but when it comes to investment advice I couldn't find a word to describe it, if I did it would be unprintable.

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You should ask all those who have lost almost half of their life savings in the PATF funds hustled to a multitude of naive investors by Global Capital to really understand what a spineless, gormless institution the MFSA really is. More than 2 years since complaints were put forward and the MFSA is still 'investigating'. Investors have NO chance of redress at the MFSA...by comparison we are small fry!

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This offer seems to be very unfair. The investors who invested their funds must have known something of the risks involved. It is not fair that BOV customers, shareholders and other investors bear the brunt of their 'unfair compensation' indirectly. This is what is being proposed!!!Whoever comes up with ideas or solutions like this should definitely not be on a bank's board of directors or in a high position at a bank. These idiots should be forced to resign from such positions as they risk damaging the bank!

Anthony Haidon •

DROP THE 'A'FROM MFSA Is the MFSA an authority or not? Would somebody in authority correct this misnomer so that future Maltese investors will know where they stand, in other words, UNPROTECTED. And whatever became of the visitors from the EU who had found a number of faults with the MFSA. When will the investigation report on the Property Fund be made available? I will answer this last question, after the deadline for the offer has lapsed. Is it possible we can't do anything right. We are fast becoming the laughing stock of Europe.

Mark Fenech •

I immediately thought that there was something fishy in the offer. Why should the offer be made now, when MFSA should be publishing their reports on their investigations on the BOV Property Fund. Why should we accept €0.75 per share? Why were we offered €0.75 not €1 not €0.60? What is the basis of this offer? How did the auditors of the BOV did not qualify their Financial Statements when there were a number of claims against its operations? Who is going to resign on account of these ommissions (to be prudent).? Or do we give promotions to those who have defaulted? We want our money back in full plus interest due plus legal expenses we have been involved in. Only that settlement be a just one.