Bank of Valletta chairman rejects insinuations on ‘insider information’

BOV chairman Roderick Chalmers was answering to allegations raised in judicial protests brought by the fund’s investors and Finco Treasury Management, which claim that €13.4 million in shares, or 16% of the fund, was withdrawn by investors aware of the worsening state of the property fund.

In a letter sent to all investors, Chalmers said the bank “firmly believes it has acted properly and in good faith at all times” after the bank made its own investigation into the fund’s performance, which lost some €50 million. The bank is currently offering investors a 75c share compensation.

Chalmers said the redemptions of the fund in 2008 were far from extraordinary. “Simply research showed that the proportion of redemptions was much in line with that experienced by other funds in Malta at the time.

“BOV wishes to see the redemptions investigation brought to a rapid conclusion,” Chalmers said of the investigation being carried out by the financial regulator. The MFSA is also conducted two other investigations: one on investment restrictions has been completed, the other dealing with mis-selling has yet to be completed.

“The bank will take the most serious view if any individual within the bank is shown to have acted in breach of trust concerning the use of confidential information,” Chalmers said.

Finco director Paul Bonello has called on investors to refuse BOV’s compensatory pay-out. He claims they should be paid the same amount they invested with legal interest.

“Certain parties who are now noisily objecting to BOV acting before final conclusions were forthcoming from the authority, have not themselves felt obliged to await these conclusions before time and again repeating in a grossly unprofessional and wholly improper manner, wild and unsubstantiated allegations concerning redemptions in the fund. It was only proper therefore that the bank should respond,” Chalmers said.

The MFSA gave BOV until 6 June to make further submissions on its investigation on the alleged breach of investment restrictions. According to the judicial protests, the bank poured the property fund’s money in other real estate funds which had too much debt to withstand a downturn in property prices. The bank says it has a different interpretation on the investment restriction laid down in the La Valette prospectus, which limited it to invest money in funds exposed to gearing levels of not higher than 100%.

The bank says its 75c share offer includes 24c.9 as a quantification of the fund’s underperformance arising from the dispute on the breach of investment restrictions even if the MFSA disagrees with BOV’s position.

Chalmers also said that BOV does not have control of 70% of the property fund. The bank is not only the custodian of the fund, but also the owner of the subsidiaries which control it, namely La Valette Sicav, Valletta Fund Service and Valletta Fund Management.

“It was always made absolutely clear that each and every investor is completely free to accept or reject the offer. If any investor decides to pursue a legal claim, they are free to do so – and this right will remain intact irrespective of the percentage of investors who choose to accept the offer. “If any investors feel they wish to pursue a ‘mis-selling’ complaint, they are also fully entitled not to accept the offer and pursue their complaint. Each complaint will be considered on its own merits on a case-by-case basis, in accordance with established procedures.”

Chalmers said investors’ right to pursue a complaint will not be affected, irrespective of the percentage of investors who choose to accept the offer. “I encourage investors to contact their BOV branch should further information be required and seek independent and competent legal or financial advice in respect of the offer.”