Property fund investors still waiting for MFSA verdict

The Malta Financial Services Authority has told MaltaToday it will express its position further at an opportune time, after the conclusions of its investigation into the fund – the custodian of which was Bank of Valletta – was presented to the bank, and the bank’s representations made to the authority.

Since then, the statutory 30-day period from completion has passed and the matter should have been considered sealed on 6 March – almost a month ago.

“The position of the Authority remains largely the same as described in the long interview given by the chairman to the Times of 10 February. It has already been clarified that different reports may address the separate issues which are under current examination,” an MFSA spokesperson said.

“The proceedings have advanced since then and verifications are continuing. Parties involved have had and have the opportunity to state their positions on the various issues, and these which too require further detailed examination within the Authority’s structures.”

MFSA chairman Prof. Joseph Bannister had said that not just one investigation was taking place into the fund’s failure.“The findings of the first investigation are ready and have been incorporated into reports which have been sent to Bank of Valletta and Valletta Fund Management for their consideration.”

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 fund was managed by BOV’s investment arm Valletta Fund Management, which invested the cash in global real estate funds.

The investors claim the bank breached its own investment rules when it allowed La Vallette to invest their money in property funds whose whose liabilities were higher than their net asset value.

The claimants also demanded that BOV aput their minds at rest over the ‘abnormal’ withdrawal of 14 million shares, worth some €16 million, from the fund in 2008. Investors claimed that certain investors, including bank employees and directors, might have had access to ‘price-sensitive’ information when the Belgravia Group published its 2006 accounts on 30 January 2008. Then on 17 March, BOV moved to remove its investment in one the Belgravia funds, but by then the funds had been suspended.

The property fund’s massive losses are in part being blamed on the vicissitudes of the Jersey-based Belgravia group, which was placed under criminal investigation in 2008. A €17 million investment in the Belgravia European Property Fund lost in excess of 90% and is today estimated at €1.3m, while other investments originally valued at some €47 million have fallen to €18.5 million.

At this stage, once the report is published the MFSA can take all necessary action contemplated by the law: this could involve telling BOV to take remedial measures, or even fining the bank – which is set to a wrist-slapping maximum of €100,000.

The bank can also appeal against the findings in the courts – BOV has always denied the claims by investors, and stood by its position of having dealt with the matter transparently and in good faith.

If the MFSA orders the bank to award compensation to the investors this would be the first action of its kind in Malta’s financial history.

Last February, over 500 shareholders of the property fund voted against the reappointment of the directors of the La Valletta Sicav at its annual general meeting.

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.

The Sicav’s board was reappointed thanks to a formal ballot, which allowed institutional shareholders such as Bank of Valletta, which owns the majority of shares in the Sicav, to carry the AGM’s resolutions.