Finco plans legal action unless La Valette investors are reimbursed fully with interest

Legal action will be taken unless all La Valette multi-manager property fund investors are paid full compensation for their investment, Finco director Paul Bonello warned today.

The stockbroker has led a legal challenge against Bank of Valletta to force a compensation of all shares lost in the property fund after some €50 million were lost in underlying property funds.

Today he called for the resignation of MFSA director Andre Camilleri, saying he had "lost all confidence" in the financial regulator over the "bungled" manner in which it had dealt with the property fund saga since the very start.

On Tuesday, the MFSA said its directive to Bank of Valletta to top up an initial 75c-per-share, conditional compensation to investors up to €1 per share, had been extended to include more investors who were found to have been retail clients and not experienced investors as laid down in the property fund's prospectus.

BOV has informed investors that they would be credited with €1 per share if they were not yet compensated, while those who accepted its previous offer would be credited with the remaining amont.

But Bonello is insisting that all investors, including some 495 investors deemed to be "experience investors" should receive full compensation of their lost investment with interest.

According to an independent file review carried out by Mazars [DOWNLOAD PDF], who were appointed by the MFSA to review BOV client files, up to 22% of investors were "experienced investors" and did not qualify for compensation.

"Some investors deemed as 'experienced' investors are illiterate and were unaware they were agreeing to execution-only instructions. Mazars was instructed to deem as 'experienced' anybody who had an investment of $50,000 in the five years... the case is not closed. Far from it. We will not stop here, and we have various legal avenues to make sure all investors are compensated fully," Bonello said.

Bonello also produced evidence in a press conference held at Finco's offices today, showing that in 2011 the MFSA had recommended the full refund of the full capital invested with interest.

"The change in policy at MFSA followed pressure that came from high up in the BOV echelons... a person or a person who held a high position at the bank and still wielded influence despite no longer holding an official position at the bank," Bonello said.

The outspoken Finco director described the property fund saga as "an all-in-the-family affair" that went ignored by the government, despite being the majority shareholder in BOV.

Bonello said the links between BOV, PricewaterhouseCooppers auditors and the La Valette fund were evident in the fact that former BOV chairman Roderick Chalmers was a former PwC chairman; finance minister Tonio Fenech was an executive at PwC, which were also auditors of the La Valette property fund as well as firm to draw up BOV's conditional offer to investors; and that the government-appointed chairman of BOV, Frederick Mifsud Bonnici, was formerly part of PwC.

BOV and investment arm Valletta Fund Management have already been fined over €200,000, the maximum at law, for breaching licence conditions when selling the La Valette fund to retail clients. BOV was also instructed to co-operate with a client file review by Mazars, and pay all expenses for the review.

BOV has appealed the directive which orders them to co-operate with a client file review and pay compensation to advisory client investors who were not experienced investors when the investment was made. The appeal is currently being heard by the Financial Services Tribunal. BOV is still required to comply with the directive.