New judicial protest over breach of investment rules in BOV property fund

New judicial protest on Bank of Valletta’s property fund says Sicav breached gearing levels in nine underlying funds but no action was taken by MFSA.

8 October 2010, 12:00am

2 min read

Finco Treasury Management has filed a new judicial protest signed by 100 investors against the directors of Bank of Valletta’s La Vallette Sicav plc, claiming the fund management company continued breaching its own investment restrictions when it invested money in nine separate funds.

BOV is being held responsible by 240 investors for the way its La Vallette Sicav plc’s multi-manager property fund – once valued at some €84 million – was decimated to €24 million; and for not being informed by the bank that the Belgravia Group, which ran three specific funds, had been placed under criminal investigation.

The new judicial protest says that the Sicav’s updated supplementary prospectus, published on 18 August 2010, said it restricted itself not to invest in funds with debts and loans higher than 100% of net assets, but it did not state that at least nine investments in underlying funds were exposed to gearing levels higher than 100%.

The protest opens Bank of Valletta to the renewed claim that it omitted to tell investors of the risk the fund ran when it invested money in these underlying funds.

Finco’s claims also raise questions as to whether the Malta Financial Services Authority should have measures to suspend the issue of new shares in the fund, pending the finalisation of its investigations into the alleged breaches of its prospectus.

Inspectors from the Malta Financial Services Authority have been despatched to Bank of Valletta’s headquarters, as investigations by the regulator continue into complaints received over the way the bank managed a property fund.

Sources in the MFSA who spoke to MaltaToday said the regulator’s top officials were already alerted to complaints that a director of the Sicav’s property fund could have had access to ‘price-sensitive’ information when he withdrew his shareholding.

The judicial protest was failed the La Valette Sicav plc, Bank of Valletta, Valletta Fund Management and Insight Management, and invokes the personal liability of the Sicav’s chairman Prof Salvino Busuttil and the other directors, including Bank of Valletta’s CEO Tonio Depasquale.

BOV has been criticised for not being transparent with shareholders when it failed to disclose that the Belgravia fund’s directors were being criminally investigated for fraud by the Jersey police, and that its shares had been suspended by the Jersey Financial Services Commission.

One of the affected investments of the property fund is the Belgravia European Fund, which had a gearing ratio of 1286% according to its its latest published accounts in 2008.

The cost of this investment, estimated at over €17 million, was reduced to some €1 million as of the last accounts published by the La Valette Property Fund in March 2010, a loss of over 90% of cost.

Mark Fenech •

The more you hear and read of what actually happened, the more you convince yourself, that inspite of the little information that has reached investors from BOV, the latter were not prudent enough. May be they were taken for a ride by Insight, but we, investors know only BOV. Recently we became aware that Standard Charter have admitted some sort of liability when giving value of the Belgravia shares and talks are ongoing to see how much they would accept as their liability. It is only now that we are becoming aware of these issues. In all the extraordinary general meetings held this year - 3 or 4, BOV only tried to convince us that the downgrading of our shares was only due to market forces. Now they are admitting that it was not the case, for had that been the case, market forces would have already upgraded the shares to were they should have been or not much below. MFSA need to speak clearly and inform investors of their fundings. They are the Regulator on financial matters, or are they just there to put fines on companies who delay in sending their audited accounts only.