Bank of Valletta contesting MFSA publication of property fund investigation

Bank of Valletta and Valletta Fund Management are contesting the right of the Malta Financial Services Authority to publish the reports of their investigations in the La Vallette multi-manager property fund, in a counter-protest the bank filed in court on 18 April.

The regulator’s investigations concern claims that the fund lost some €50 million of their savings, citing breach of prospectus, the issue of false custodian reports by Bank of Valletta, complaints of mis-selling and allegations of improper use of price-sensitive information by Bank of Valletta insiders and employees.

"MFSA are wrong... it does not have the legal power to publish investigation reports," BOV said in its protest. "Article 4 of Chapter 330 of the Laws of Malta does not give any power to the MFSA but just lists its functions."

BOV is claiming that while the regulator has wide powers of investigation, such reports cannot be made available for public consumption because such power is circumscribed by other dispositions in the law over who can be shown a copy of this report.

The bank is saying the MFSA can publish its decision, but not its report.

Last Sunday, the MFSA told MaltaToday that its position on the matter is being ‘refuted’. “We would like to be in a position to better inform the public about what is going on and what we are doing, but this may prove to be unwise seeing that we are contending with entities and parties who are contesting certain claims and refuting certain positions taken by the MFSA,” a spokesperson for MFSA chairman Joe Bannister said.

Over 200 investors filed judicial protests against the bank, holding it responsible for how the fund, once valued in excess of €84 million, was depleted to some €24 million in 2009. The investors claim the bank breached its own investment rules when it allowed La Vallette to invest their money in property funds whose liabilities were higher than their net asset value.

Asked to comment on Bank of Valletta’s stand, Paul Bonello of Finco Treasury Management – who filed the seminal judicial protest against the bank – said that the bank’s attitude constituted “further evidence of the lack of openness” with which the bank has conducted the property fund.

“In contesting the right of the MFSA to publish the reports and to try to obstruct the access of the general investing public to the report, this shows lack of transparency with which the BOV group has conducted the fund, besides being obviously indicative of the fear the bank has of the dissemination of the contents of the MFSA report to which contents Bank of Valletta is already obviously privy.”

It is unclear whether the MFSA will ask the bank to issue compensation to its shareholders, and impose an administrative fine on Bank of Valletta.

“The MFSA will continue exerting its best endeavours to achieve an equitable solution to problems and losses faced by investors as a result of the alleged deficiencies identified and examined in the on-going investigations, and to make sure that persons found responsible for breach of the rules will be held accountable for their acts or omissions,” the MFSA spokesperson said.

Since the finalisation of the MFSA’s investigation, the statutory 30-day period from completion has passed and the matter should have been considered sealed on 6 March.

Legal sources say the MFSA is authorised to publish the results of its investigations, administrative sanctions and statements into a licensed person’s conduct “in such medium and in such manner and for such duration as may be deemed warranted by the circumstances and the nature and seriousness of the breach or wrongdoing.”

The same sources say that as one of the main equities listed on the Malta Stock Exchange, BOV should issued a company announcement on the “price-sensitive facts which arise in the Issuer’s sphere of activity and which are not public knowledge” and to dispel price speculation in the securities of the company.