170 investors say bank to blame for failed funds

A judicial protest has been filed against Bank of Valletta by a group of 170 investors, holding it responsible for damages after the value of their shares dropped dramatically in August 2008.

This is the second protest of its kind in two weeks.

The first was filed by Finco Treasury Management Ltd who accused the investment company La Valette Funds Sicav plc, of which BOV is custodian, of misleading the investors of the La Valette Multi-Manager Property Fund.

The 170 investors are shareholders in the same fund and yesterday claimed that the Valletta Fund Management VFM, which is the director and manager of Sicav plc, “significantly failed to exercise the skill and diligence required of it in the selection of the investments of the fund and in its subsequent monitoring”.

These failings were among the main reasons for the very substantial damages suffered by the investors, independently of any possible negative trend in the property market, they said in the protest. The affected investments included a number in the Belgravia Funds, made at a time when there were sufficient indications that it was inappropriate to entrust their investments with Belgravia, they claimed.

The Belgravia Financial Services Group Ltd was the subject of a criminal investigation in Britain as well as a regulatory investigation. Each of the funds, which had been suspended, were “currently without adequate or effective management or financial or accounting controls in place”.

Furthermore, “the true and correct value of the investments or other assets of the suspended funds cannot currently reasonably and reliably be ascertained by the Belgravia Fund Managers”.

The Sicav and VFM gave a misleading account of the situation and failed to communicate with investors in a comprehensive, clear and transparent manner to inform them of the developments in relation to Belgravia. This failure appeared to persist to date.

The investors said that in their large majority they were known as retail clients, with no experience in matters of finance or in business generally and in particular in this sector.

A considerable number of them were retirees, under voluntary early retirement schemes, others were pensioners, some widows with up to four children and some illiterate.

The amounts concerned represented in some cases their entire life savings or the entire capital fund received by them upon their early retirement.

They relied on information and advice provided by BOV and VFM employees and representatives that the fund would provide a good income and capital return with a low risk.

They signed all the forms presented to them by the bank which stated that they were experienced investors, but the bank didn’t even check or carry out tests to verify this information, the complained.