Stockbroker welcomes landmark decision, ‘MFSA must now publish BOV report’

Paul Bonello, the stockbroker who provided the financial evidence on the mismanagement of the La Valette property fund, has welcomed the landmark regulatory decision to fine BOV and investment arm Valletta Fund Management €350,000.

The MFSA yesterday published its decisions on the first of three investigations, namely on whether the property fund had breached its own investment restrictions when it invested money in underlying funds which had too much debt.

But Bonello said the MFSA should provide a full copy of the report it submitted to BOV. “It would otherwise be a denial of an inalienable right of the investors by none other than the regulator and their presumed protector.”

He also said BOV, which is appealing the MFSA decision, should stop pressuring investors to accept its compensatory share offer, which is due to expire at end June.

“The gearing restrictions in the prospectus are clear, objective and unequivocal. BOV ought not to have challenged Finco, the investors and the MFSA in such manifest circumstances of wrongdoing, causing unnecessary hardship to its clients, the Bank itself and Malta’s financial services industry,” Bonello said in a statement.

“Instead BOV has only attempted to defend that which is indefensible and engaging in derogatory language against the leaders and advisors of dissenting investors in an attitude not befitting a dignified and professional bank management.”

Bonello also said the fund had lost some €35 million out of €52 million in vested in the Belgravia European property and logistics funds, the London & Capital German real estate fund, and the Glanmore property euro fund.

He added that other losses comprised of €12 million in incorrect valuations of fund prices, and losses caused directly to many investors as a result of alleged mis-selling the Fund to non-experienced investors. This is also the subject of another MFSA investigation, as well allegations of improper use of price-sensitive information by insiders.

“The decision of the MFSA confirms the thesis of the investors in the property fund that they were not provided with the fund the prospectus purported to offer,” Bonello said.

“They would not have invested in the fund if they knew that the level of gearing could exceed the maximum of 100% of the respective net assets… for this reason, BOV and the Sicav directors failed in their legal duties towards investors. They are liable to pay redress, and this by way of refund of capital cost and interest.”

Bonello also said the MFSA must reply to the property fund investors’ legal advisor’s request to know whether the €0.75c share offer from Bank of Valletta, conditional on dropping all legal liability against the bank, was approved by the regulator.

“The MFSA should say if it considers BOV’s offer equitable or not,” Bonello said, who claims a fair value of compensation is the full capital invested plsu legal interest.

“The MFSA is obliged to express or publish an opinion on the fairness of the offer. If not, it is legally and morally obliged to use its powers to issue directives to BOV to have the offer withdrawn or suspended.”

Bonello also said the MFSA should take the initiative to use court action to force BOV into restoring investors to the position they were before the transaction was entered into. He said many “aged investors” did not have “the physical and financial stamina” to afford the expense and ordeal of court litigation.