Investors demand Sicav takes action against its owner, Bank of Valletta

The legal representatives of 452 investors in the La Valette multi-manager property fund and Finco Treasury Management have written to the Sicav’s chairman Prof. Salvino Busuttil, to take “immediate action” against Valletta Fund Management and Bank of Valletta to compensate the fund’s shareholders.

VFM and BOV are respectively the manager and custodian of the fund, which lost some €50 million in investors’ savings – investors say the money was invested in underlying property funds with too much debt.

But both the La Valette Sicav and VFM are directly owned by Bank of Valletta, which this week was fined a record €197,995 by the financial regulator for failing to monitor the application of investment restrictions in the fund’s prospectus by VFM, and for failing to make accurate reporting in the fund’s annual financial reports between 2006 and 2009.

VFM was fined €147,000 for wrongly applying the investment restrictions laid down in the prospectus and failing to monitor its delegates Valletta Fund Services – another BOV subsidiary – and Insight Investment Management.

“Our clients are calling upon you to take immediate action against VFM and BOV and against all or any other persons at fault to compensate our clients for all the losses and damages suffered as a result of the diminution in value of their investments together with interest,” the investors’ legal representatives said.

The investors warned they would take further action against the directors personally.

In another letter (READ FULL LETTER) to the Malta Financial Services Authority, the investors are calling on the regulator to furnish them with the report of its investigation into the wrong application of investment restrictions by the Sicav.

Investors say that as protestors in the property fund saga, they were made aware of the completion of the MFSA’s first investigation on 26 May 2011 when BOV announced a compensatory 75c share issue.

On 15 June the MFSA announced its sanctions against BOV and VFM – the bank has 30 days to appeal the decision, which it has already said it will.

“Having made its offer of 75c per share back on 26 May, BOV had every opportunity to consider the MFSA’s report of its investigation on the investment restrictions. Additionally, acceptance of the share offer binds investors to drop all legal liability against the bank and its functionaries, which might result from the further investigations of the authority,” legal advisor Prof Ian Refalo writes.

“Without this report, the regulator is denying the investors the right to consider the authority’s report before accepting the bank’s offer… the authority is discriminating in favour of BOV and neglecting its duties to protect investors.”

The MFSA is still in the process of investigating two major complaints: one of misselling the property fund to clients who were not experienced investors as defined by the law; and allegations of access to price-sensitive information.

Shadow finance minister Charles Mangion has called on BOV to repeal the offer and mediate with the investors. “Labour appeals to the MFSA to carry out its role in the remaining investigations.”

Bank of Valletta has rejected suggestions that bank employees and a property fund director had access to price-sensitive information on the La Valette multi-manager property fund before it was suspended by the bank. 

Allegations raised in judicial protests by the fund’s investors and Finco Treasury Management 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.

BOV has announced a compensatory 75c share offer to some 1,000 investors in the fund. But Paul Bonello, the stockbroker who kick-started the series of judicial protests against the bank, has called the offer “morally dishonest”.

Bonello said the 75c offer was positive as a first step, but that the bank was presenting the property fund investors with a “take it or leave it offer.”