More property fund investors eligible for compensation from Bank of Valletta

The financial regulator will be forwarding Bank of Valletta with an updated list of investors who are eligible for further compensation on the lost savings in the bank's La Valette Sicav's multi-manager property fund, after completing an independent review of investors.

The Malta Financial Services Authority said it Mazars had completed an independent file review it had started earlier in September, having obtained relevant information on the sale of units in the fund by BOV to investors.

Mazars had to substantiate whether all investors fell under the criteria of an "experienced investor", as defined in the terms of La Valette property fund's supplementary prospectus, and drew up a list of investors who did not qualify as experienced investors.

This final list shall include those investors whose complaint with the authority was upheld by the bank as eligible for additional compensation.

Bank of Valletta will be communicating with the investors on the final list, notifying them of its intention to make an additional compensatory payment to them.

The MFSA had fined BOV the maximum fine available at law of €203,150 for breaching license conditions when it sold units in the La Valetta fund to retail clients.

The file review was aimed at determining the validity of the experienced investor declaration held by the bank, which was signed by investors who purchased units in the La Valette fund.

The compensation to be paid will amount to €1 per unit, less any amounts previously received for each unit.

In June 2011, BOV offered investors a conditional compensation offer of 75c per share after the La Valette fund was found to have lost some €50 million in value, which prompted a series of judicial protests against the bank in the name of the property fund investors by Bonello's accusations were later confirmed in the investigation by the financial services authority that fined BOV and its investment arm Valletta Fund Management €350,000 over a breach of investment services rules.

VFM was found to have wrongly applied its own investment restriction which prohibited the fund from investing in other real estate funds whose debts were leveraged at more than 100% of net assets: meaning, having too much debt to survive a downturn in value.

Specifically, it was a €17 million investment in the Belgravia European Property Fund - that was geared at over 100% - that is suspected of having lost in excess of 90% and is today estimated at €1.3m, while other investments originally valued at some €47 million fell to €18.5 million.

Finco Treasury Management - which represented La Valette investors in their bid to recoup their investments - had claimed BOV's client fact find would show the market value of all investments held as at the date of the fact find, and pointed out that this would be different from the value of investment transactions carried out in the previous years.

"The correct manner for the validation of experienced investor status is to painstakingly examine the investments mentioned in the fact find," Finco said.