MFSA on BOV property fund fiasco: ‘not prudent to respond to specific questions’

The Malta Financial Services Authority is claiming it will not go into the specifics of how licence holders of the La Valette Multi-Manager Property Fund acted when a criminal investigation by the Jersey regulator into the Belgravia firm was seemingly not communicated to the fund’s investors.

Bank of Valletta are facing renewed claims of having overlooked serious shortcomings in a property fund once valued in excess of €84 million, and which today has been depleted by major losses to the €30 million – of which only half are liquid.

“As the issues raised by your questions are now the subject of a judicial protest, and in light of the fact that the regulator and its employees are required to treat any information acquired in the discharge of their duties as confidential, it is not prudent for MFSA to respond to questions on specific licence holders,” a spokesperson for MFSA chairman Joseph Bannister.

The MFSA has been notified of a second judicial protest filed by 170 investors, after a first protest was filed for some 72 investors by Finco Treasury Management.

Now the MFSA’s role as regulator and what it did to ensure Bank of Valletta, the custodian of the property fund, respected its investment restrictions, are under the microscope.

The MFSA is saying that should it identify breaches of any regulatory requirements, it will take the appropriate regulatory action. “Official complaints lodged with the Consumer Complaints Office of the MFSA are being and shall continue to be investigated.”

Bank of Valletta, the custodian of the fund, issued clean custodian certificates for three years in succession. The judicial protest states that two of the Belgravia funds have to date not published any audited accounts, which means BOV could not have had in their possession “clean audited accounts” of the funds in which they invested, “which is further evidence of the lack of due diligence on the part of the SICAV and VFM as well as Insight as sub-advisor of VFM.”

But the MFSA is arguing that as regulator, it does not involve itself into the actual investment management of the schemes. “Its role is that of monitoring adherence by the fund and its locally licensed service providers with their respective licence conditions."

MFSA said that whilst the Authority needs to be satisfied on an on-going basis, with the fitness and properness of any party appointed by the scheme, including its Manager which is to act in the best interests of the scheme and its investors, "the Authority does not and cannot involve itself in the actual investment management of licensed schemes or in the taking of specific investment decisions as these fall outside its regulatory remit set out in the Investment Services Act, 1994. The latter is the role of the licensed fund manager, including any duly appointed sub-manager."

The Multi-Manager Property Fund, which is managed by Valletta Fund Management, itself owned jointly by BOV and Insight, invested money in what should have been the best pick of real estate property funds from around the world.

The fund was portrayed as ‘a low-risk fund with low volatility’, giving good returns even when bonds or equities do badly. But the 170 investors say their investments have been reduced to less than 25% of their initial investment.

A €17 million investment in the Belgravia European Property Fund has lost in excess of 90% and is today estimated at €1.3m, while other investments originally valued at some €47 million have fallen to €18.5 million.