Over 500 investors in BOV’s La Valette fund await arbiter’s ‘imminent’ decision

The financial services arbiter looks set to deliver a decision regarding the case of the investors of a Bank of Valletta property fund who had lost millions in savings due to alleged misselling.

Finco Treasury Management director Paul Bonello, who is representing the 500 or so aggrieved investors and has been pursuing the case since 2011, told MaltaToday that Article 26(2) of the Arbiter Act prescribes that the Arbiter shall deliver his decision  not later than one year from the date of receipt of the complaint.

The complaints were submitted during the week leading to 6 July 2016 so a decision should be due by 6 July 2017 – although the parties have not yet been notified of when the decision will be given.

“We have been awaiting a decision from week to week, but now I really believe a decision is imminent as the law is prescriptive, although the law also says that decisions delivered after one year shall not be deemed invalid,” he said. “I suspect that the arbiter had delayed his decision until after the election, because otherwise whatever decision could have been perceived as distorted in the hot electoral climate.”

Finco managing director Paul Bonello (centre)

The complaint relates to the long-running dispute investors have had with BOV after they had lost their savings when they had purchased shares in the supposedly low-risk La Valette property fund for up to €1.1650 per share plus initial charge.

The Malta Financial Services Authority fined BOV six times between 2011 and 2012 for misselling the fund to inexperienced investors and for breaching its own investment restrictions – particularly when it invested €17 million in the now-defunct Belgravia European Property Fund.

Around 2,300 investors accepted the bank’s subsequent compensation of 75c per share on condition that that they waive legal action against the bank should the MFSA find it had breached property fund conditions. Others, represented by Finco, demanded that BOV repay them based on the value of the shares at the time of investment and were indeed eventually compensated in full. However, BOV ignored the MFSA’s subsequent demand to bring compensation up in full for the other 2,300 who had accepted its original offer.

In the run-up to the 2013 election, the then-Labour Opposition pledged that a PL government would use its power to elect BOV’s chairman to ensure that justice is done to the investors.

However, its choice of chairman, John Cassar White – who has since resigned – refused to budge from his predecessor’s stance, prompting Bonello to accuse him of changing his pre-electoral assessment of the case “faster than a chameleon changes his colours”.

Yet the investors’ claims found a fresh opening when the office of the financial services arbiter was set up last year with the power to mediate, investigate and adjudicate complaints by aggrieved investors.

Finco filed its complaints on behalf of some 500 of the 2,300 investors in July 2016 and finalized the submission of evidence in April.

Bonello told MaltaToday that most of the investors chose not to pursue the case further, because they didn’t have the courage or the interest to do so or because they weren’t convinced enough that the arbiter would rule in their favour. However, he said he is optimistic that justice will prevail and pledged to call a press conference when the decision is made, regardless of the outcome.

Financial services arbiter Reno Borg – a former PL candidate and BOV chairman and Labour’s long-standing representative on the Broadcasting Authority – refused to speak to MaltaToday about the case or give an indication as to when it will be finalised.