The la valette multi manager property fund dispute with bank of valletta and valletta fund management – status update

Board of Directors

Finco Treasury Management has the pleasure to advise that all cases handled by it of investors in the La Valette Property Fund who had not accepted the Conditional Offer of €0.75 per share of the Bank of May 2011, as well as the big number of complainants of misselling in the sale of perpetual securities such as Lehmans by Bank of Valletta, have all been settled in out-of-court settlement agreements with BOV in a most satisfactory manner.  Yet a just and equitable solution for the 2500 investors in the Property  Fund who were offered compensation of €0.75 per share continues to be elusive. 

Finco recalls that its claims relating to mis-management of the LVMMPF, including investment by Valletta Fund Management in underlying funds in breach of the Fund’s investment restrictions, the repeated issue of incorrect Custodian Reports by BOV, as well as misselling practices by the Bank,  have all been confirmed by three separate reports into the investigations of the MFSA on the matter which resulted in record administrative sanctions and penalties. These findings have not been appealed by VFM and BOV. 

In such circumstances, it is the norm for the responsible parties to reinstate investors in their previous financial position and reimburse all capital invested and interest.  The former MFSA Director General, Dr Andre Camilleri, exhibited in Court an MFSA letter to BOV signed by him specifying that investors “should be compensated in full for the losses incurred with regards to their investment”.  However, contrary to this statement, the regulator inexplicably acquiesced to BOV’s conditional offer to reimburse only part of the losses suffered, leaving investors out-of-pocket between €0.25 and €0.45 per share in the Property Fund, and this apart from loss of income.    Even the small number of investors who in January 2013 were determined by the MFSA to be ineligible investors in the Fund and were awarded an additional €0.25 per share, are still owed up to an additional €0.22 per share, considering that they had acquired their shares at prices well over €1.00, besides incurring up to 5% sales commission.

The position of BOV has been that investors, in accepting the Bank’s Conditional Offer, had agreed to a settlement that is final. The Bank has taken this stance despite it being aware that the acceptance of the Conditional Offer by investors in May 2011 was made at a time when retail investor were not provided with the necessary information to make a decision on an informed basis.  Suffice it to say that the MFSA report on the findings of its investigations was issued to investors by the MFSA only after investors had judicially called upon the MFSA to inform them of its findings, and this 25 days after the BOV Conditional Offer was issued and shortly before it lapsed. By this time many investors, being unaware of the MFSA’s findings, had already tendered their acceptance of the Bank’s Offer.

In recent weeks a solution to this impasse appeared to have been found after the Chairman of BOV, John Cassar White, had finally agreed to refer the matter to arbitration.  Subsequently, however, the Chairman reneged on this commitment and is now insisting once again that the Bank is not prepared to submit to a fair and equitable process to resolve the matter on the pretext that investors had accepted €0.75 cents per share in full and final settlement. It is regretted that the Chairman of the award-winning Consumer Bank of the Yearthe Bank that Caresand of the retail fund management company in Malta that is “positioned at the forefront of Malta’s  fund management industry” should change his stance as he did.

Not so long ago, but before becoming Chairman of the Bank, John Cassar White had criticised the former “BOV top brass as [being] very busy trying to ensure that the winds of change never ruffle their feathers, having become so insensitive to their customers’ rights that they must feel that they have the guaranteed support of regulators and political quarters”  [1]and had gone so far as to predict that “the winds of change will clear up the mess at BOV soon”  [2] and auguring that “din is-saga tal-Property Fund tintemm malajr ghax qed issir hafna hsara lill-fiducja tal-investituri fis-sistema finanzjarja”. [3]  Alas, that was in Summer 2012 when he was waiting in the wings to jump on the Chairman’s post.  How attitudes change for some people in such a short time.

Finco on its part remains resolute in its stance and will not consider this matter as closed until justice is done and the legitimate expectations of the retail investing consumer public are satisfied.

[1] 29th August 2012

[2] 29th August 2012

[3] 18th May 2012