BOV, Sicav face wrath of over 500 investors at rowdy property fund AGM

Tempers flared during the annual general meeting of the La Vallette Sicav plc, where over 500 shareholders faced the directors of the Sicav and Bank of Valletta chief executive Tonio Depasquale with angry demands to know how their savings had been lost in the La Vallette multi-manager property fund.

The directors were met with loud rebuke when they first proposed that they deal with the multi-manager property fund, which is one of 13 funds the Sicav manages, in a separate, informal meeting at the Hilton at the end of February.

Irate investors exhorted each other not to approve the directors’ reappointment, while Paul Bonello – the stockbroker who filed the seminal judicial protest against the Sicav back in August 2010 – led the main call to investors not to approve the accounts and directors’ reappointment.

Bonello was also accompanied by legal advisor Profs. Ian Refalo.

At the end of a three-hour meeting where directors were faced with cat-calls from the audience, booing and hissing, the Sicav directors faced a mass show of hands voting against the resolution to reappoint them. But chairman Salvino Busuttil called for a formal ballot, which meant that institutional shareholders such as Bank of Valletta would carry the resolutions since they owned the majority of shares in the Sicav.

Earlier on in the meeting, Busuttil wanted to take on a proposal by Paul Bonello, as well as so many other shareholders, to postpone the AGM until they present the full report into the investigation carried out by the Malta Financial Services Authority into the La Vallette property fund. This proposal was eventually not taken on.

Earlier on, Bonello accused the Sicav and Valletta Fund Management (BOV’s investment arm) of having invested the money in property funds whose debts were too high to cover the value of their assets when the price of property drastically dipped during 2007 and 2008.

To regular intervals of rapturous applause from investors, Bonello fired a series of heavy charges against Bank of Valletta, whom he said was responsible for the fund as its custodian and parent company of VFM.

But, he charged, since the Sicav was owned by BOV through its subsidiary Valletta Fund Management, the bank could not offer independent guardianship of the fund as required by law.

He also accused Bank of Valletta of not having provided fair custodian reports for the past four years.

The Sicav directors’ report was scant in detail on the events that had led to the suspension of the property fund, whose assets were squandered by a Jersey-based financial services company that was also the subject of a criminal investigation.

Bonello said the manager of the property fund, Insight Management, had made the mistaken decision of investing almost half of the fund in Belgravia. Belgravia was later placed under criminal investigation by the Jersey police and an inquiry by the Jersey financial regulator.

He also accused Sicav chief executive Peter Perotti of misleading the investors. “This fund had nine breaches of investment restrictions, which bound the fund’s directors not to invest money in underlying funds that had a gearing of 100% of its net asset value.”

Bonello said this was a breach of the contract between the Sicav and the investors.

Bonello also said that investors had been refused information on who had made the early withdrawals of some €14 million from the fund (once valued at over €84m) just before 2008, when "circumstantial evidence" showed that BOV directors, employees and favoured clients could have benefited from insider information on the worsening state of the fund.

“How can it be possible that within 10 months, the level of redemptions from the fund was eight times the level of the redemptions from HSBC’s property fund? Or how a Sicav director here present had redeemed all his investment early in the day before the fund was suspended?

“Maybe there is nothing illegal happening here. But when we asked for details as to when these withdrawals took place, without revealing people’s names, and what percentage of these investors were bank or VFM employees, we were told there was no legal obligation for this data to be disclosed.”

He said that while the property fund was “no Ponzi scheme, the withdrawals were symptomatic of a Ponzi scheme.”

The Malta Financial Services Authority has completed an investigation into the property fund, which BOV has 30 days to make its observations to the MFSA.

Bonello said the Sicav directors should have presented the findings of the MFSA inquiry. “You could have elected to postpone this meeting to a date when you would give us the full picture of the inquiry, but instead you want investors to come to another meeting. But,” Bonello said turning to investors, “this is the statutory meeting of the Sicav and this is where its directors are asking us to place our faith in them and reappoint them.”

Bonello said the class meeting that would be held on 28 February, for shareholders to air grievances on the property fund, would have ‘no validity’, saying all representations related to the property fund had to be made during the Sicav’s AGM.

Bonello was vehement in his accusation that the Sicav was not being transparent with shareholders, by not revealing the findings of the MFSA report. “I asked you to present this report: the law, transparency and ethicality demands that you present it to us, even if you tell us that you don’t agree with its conclusions.”

An unbearable two hours of loud complaints from the audience, who did not shy away from telling directors of their predicament after losing their savings in the fund, was suddenly interrupted by Salvino Busuttil who said that the AGM should be postponed to a later date.

But Paul Bonello demanded that all investors’ grievances be heard out.

Foremost among the complaints by investors, who were in the main middle-aged and pensioners, was that they had not understood the risks of the financial product they were being sold. One investor explained that he poured a great part of his savings in financial product that was intended for professional investors.

This same criticism had already been mentioned in the MFSA’s annual report, which said such funds had been sold in banks’ retail branches.