Investors knock on Labour’s door over La Valette property fund compensation

Investors in Bank of Valletta's La Valette multi-manager property fund have been told that the new government will be calling for the bank to give them full compensation for the money lost in the fund by Bank of Valletta's investment arm Valletta Fund Management.

Emails seen by MaltaToday from various investors who had contacted the Labour Party said that the party would pursue the government's responsibility in compensating millions of euros that were lost in underlying funds that the La Valette Sicav had invested in.

In one email sent to Prime Minister Joseph Muscat, a La Valette investor was told that as a major shareholder of BOV, the government would be "calling for the bank to give full compensation due to its negligence, lack of skill, care and diligence."

Investors' lost close to €50 million in investments which, they claimed, was down to a breach of investment restrictions that the La Valette Sicav did not heed. Its new chairman, Joseph Cassar White, was appointed by the new Labour government, being the bank's largest institutional shareholder, and is expected to preside over continued developments in the bank and its compensation of investors.

Paul Bonello of Finco Treasury Management, who later filed the complaints and judicial protests on behalf of the investors in 2010, later alleged that Bank of Valletta had issued false reports, as custodian of the fund, that did not give a real picture of the state of the property fund.

"I am actively pursuing the matter at the highest of government levels," Bonello - who also addressed a Labour mass meeting during the 2013 electoral campaign - told MaltaToday in a comment.

"Just as I had expressed my full trust in Labour's pre-electoral pledges, I have every reason to continue to be convinced that the government will deliver on its pledges related to the BOV property fund."

The bank was found to be in breach of regulations in six separate administrative sanctions and penalties issued by the Malta Financial and Services Regulations between 2011 and 2012.

The Bank of Valletta had offered investors a compensation of 75c per share, which Bonello claimed was grossly inadequate. Subsequently, the MFSA found BOV and subsidiary VFM in breach of investment rules, and confirmed allegations of misselling, and ordered the bank to pay an additional 25c per share to around 25% of the 2,300 investors of the fund.

Bonello has however claimed that full compensation should be as high as €1.17 per share, including a 4% initial commission charge. He also said that the MFSA had excluded the majority of investors from compensation, because they were not retail clients but "experienced investors" as they themselves declared to the bank.