Bank of Valletta challenges Finco to take legal steps. Finco: 'as and when we see fit'

Bank of Valletta has ‘challenged’ financial services intermediary Finco Treasury Management to take proper legal action in court and bring forward its evidence against the bank, Valletta Fund Management and Valletta Fund Services.

The firm is representing close to 100 investors who poured their money into a property fund, once valued at €84 million, that has now gone down in value to some €30 million – of which only half are liquid.

"Finco will continue to act in the best interest of its clients and will exercise its legal remedies as and when it thinks fit, as it has already intimated it will do in the judicial protest it has already filed," Finco said. "Finco will not all anyone to dictate the nature and timing of any appropriate action it deems fit."

Bank of Valletta has reacted to questions sent by MaltaToday over a reply Finco lodged to a counter-reply the bank first posted to Finco’s judicial protest. But it has failed to give straight answers on Finco’s allegations, unless these are made in a court of justice. BOV said it would make no further media statements.

Finco Treasury Management is alleging negligence in the way the bank ran the Multi-Manager Property Fund which lost some €50 million in value.

“Finco ought to know better than that and act in a professional manner more becoming to a licensed intermediary,” a BOV spokesperson said, claiming the firm was attempting to “sensationalise” the issue by running a “trial by newspaper”.

“If Finco firmly believes it has a claim to make against the Bank… then it should proceed to take the proper action to bring forward that claim and adduce the evidence to substantiate it,” the bank said.

“If and when Finco considers it appropriate to articulate a proper case against the Bank, rather than simply make unfounded allegations and sensationalize public sentiment with misconceived accusations, the Bank as a serious institution will reply to claims when properly articulated and when evidence substantiating those claims would have to be proffered by Finco in front of a court of law.”

Yesterday Finco said a massive withdrawal of 14 million shares from the Multi-Manager Property Fund – run by Bank of Valletta and its subsidiaries Valletta Fund Services and Valletta Fund Management – was believed to have taken place some time between March and September 2008, when the fund was losing €50 million.

VFM invested some €17 million investment in the Belgravia European Property Fund which 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.

Finco is claiming that the massive withdrawal of shares – amounting to some 16% of the €84 million fund – could not have been related to the global credit crisis. “By the 7 August, the 2008 global credit crisis had not yet entered the meltdown phase and had not yet caused general and global public panic, which meltdown effectively commenced only with Lehman filing for bankruptcy on 15 September 2008,” the firm said.

Finco said it had “repeatedly” requested VFM for information as to the exact months in which this “abnormal level of redemptions” took place.

BOV today called the allegations “completely unfounded, misguided and misconceived.”

“This is a case where the loss in value of the fund was due to a number of reasons, not least of which market movements caused by a global economic crisis – but none of which can be imputed to the Bank, VFM or VFS.

“To suggest that market disruption only occurred after 15 September 2008 is, of course, complete nonsense… [BOV] have nothing to hide and shall of course reply to any further allegations as and when they are made by whosoever they are made – at the right time, in the proper manner and in the appropriate forum as and when the need arises.”