MFSA will not publish Bank of Valletta reports

“The MFSA is obliged to publish its decision, but not the report,” Malta Financial Services Authority chairman Joe Bannister said.

The inquiry has been ongoing for nine months now, and has led Bank of Valletta to offer investors in the fund – believed to have lost some €50 million in value – a compensation of 75c per share. BOV has indicated the first report, into a breach of investment restrictions, has been completed and delivered to the bank.

But the MFSA is still conducting two reports into misselling of the property fund to retail clients who were not “experienced investors”, and alleged insider trading.

BOV says it has disagreed with the MFSA’s conclusion on the breach of investment restrictions, which according to the fund’s prospectus, precluded the bank from investing monies in other real estate funds whose immovable property was backed up by too much debt and loans.

The total buyout – if investors accept – will cost the bank €45 million, of which €14.5m is due as compensation for the fund’s underperformance.

Paul Bonello, of Finco Treasury Management, has presented judicial protests against the bank in the name of some 400 investors. He 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.

“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.

Bonello said the 75c offer was 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.