First property fund investigation to be presented to BOV on 6 June

The Malta Financial Services Authority has decided to issue the first investigation into the La Valette Sicav's multi-manager property fund and be presented to BOV on 6 June. The MFSA's public statement follows criticism from stockbroker Paul Bonello, of Finco Treasury Management, who said the regulator lacked the personality to stand up to Bank of Valletta.

"The MFSA’s role with regards to the compliance issues relating to the fund is that of investigating the alleged wrongdoing by Valletta Fund Management and BOV in the general conduct of business of the fund. The MFSA is also reviewing a number of complaints filed by or on behalf of individual investors relating to the sale of units in the fund by BOV," the MFSA said.

"The MFSA is duty bound to carry out its investigations diligently and with prudence. The results of these investigations should ensure a just and fair decision, which reflects the gravity of the authority’s findings and conclusions, after having weighed the representations submitted by the parties concerned."

The regulator said that "undue pressure through the media to hasten or pre-empt the investigative process" was not helpful and confused investors, referring to statements made by Bonello and Labour MP Charles Mangion. "The MFSA will only be in a position to issue a statement on its findings and conclusions once the investigation has been completed. Hasty and incomplete public statements on regulated entities, especially where these are publicly listed and traded companies, could damage the integrity of Malta’s financial market to the detriment of investors."

The MFSA is not authorised at law to make a public statement on its on-going investigations before a fair and exhaustive regulatory process has been undertaken and brought to a proper conclusion with clear and specific findings. The current position is that final representations from VFM and BOV are expected by the 6th of June, following which a final decision will be arrived at by the Authority.

Bank of Valletta has reacted to a Labour Party statement issued on Monday calling on the financial regulator to publish its reports of its investigations in the La Vallette multi-manager property fund.

One of the three investigations, the breach of investment restrictions by the fund’s managers, has already been completed but the MFSA has not published the report.

“If investors are not aware of this investigation’s findings and recommendations, they cannot come to an informed decision on the offer the bank is making them,” Labour spokesperson Charles Mangion said. “This is one of the principles of investment.”

In its reaction, BOV said that the investigations being carried out by the MFSA are ongoing, and have not as yet been finalised. “Therefore no investigation has been concluded thus far, and the Bank continues to provide the Authority with every assistance and co-operation in this regard”, it added.

BOV said that despite how no part of the investigation has been yet concluded, BOV said that it “clearly explained in the documents issued last week that differing views appeared to be forming between the MFSA and the Bank around the proper interpretation and subsequent application of the gearing restriction contained in the prospectus.”

BOV said the bank and the MFSA may have to agree to differ on this matter. "Notwithstanding the fact that BOV and its advisors continued to hold firm views on the proper application of the restriction, it had elected to make the offer in a bona fide attempt to provide investors with an opportunity to secure an early settlement of matters on a fair and equitable basis, rather than facing prolonged contentious legal action.”

It said that the basis on which the offer of €0.75 per share is being made is explained in some detail in the explanatory letter to shareholders referred to above.  It is important to note that the point of reference for the compensatory element of the Offer is the performance of low geared funds, thus effectively addressing the issue being contested under the investment restriction.

BOV maintained that the offer of €0.75 per qualifying share “has been carefully constructed, and the BOV Board believes it to be both fair and equitable.”