Firm raises issue of ‘abnormal number’ of redeemed shares

An investment company suing Bank of Valletta over what it says is mismanagement of two funds yesterday noted that, in the same year that a fund they invested in was suspended, an abnormal amount of shares were redeemed.

In a reply to the counter protest filed by La Valette Funds SICAV Plc and Multi Manager Property Fund, of which the bank is custodian, Finco Treasury Management Limited requested that the bank publish all necessary information.

The company said that in September 2007, 3,022,877 shares were redeemed and, in September 2008, 14,702,538 were redeemed. Up until August 2008, investors did not have any knowledge that the funds had been suspended, yet, they continued to invest in them.

The company noted that at this stage no improper behaviour was being alleged. However, in view of the substantial redemptions taking place during the year ended September 30, 2008 (and which must have necessarily taken place up to August 7, 2008, namely the date when SICAV and VFM suspended redemptions in the fund), SICAV and VFM should publish all necessary information to put everybody’s minds at rest that there were no investors who could have benefited unfairly from the information available to the SICAV and to VFM with regard to the suspension of redemptions in the Belgravia funds before this information was made available to the public by redeeming their investment in the fund to the detriment of the remaining body of investors.

In its reply to the bank, the company said BOV, in its counter protest, had not rebutted in any way the company’s original assertions but, rather, confirmed them in certain instances.

In the original protest, Finco had alleged that the two funds were mismanaged and there had been a serious failure to exercise the diligence required in the selection of investments for the fund and monitoring.

It also alleged investment restrictions had been breached in the offering document and failed to communicate with investors in a timely manner regarding the fund’s financial situation.

The bank denied it had a juridical relationship with them, however, this was also untrue, the company said.

It also denied the assertions made by the bank regarding the lack of due diligence.

Finco said that in the protest, the bank seemed to imply it did not have any obligations towards investors in the fund, including fiduciary obligations with a clear duty to act in the most honest, transparent and impartial manner.

The company rebutted the claims by the bank that investors had been kept informed of developments and events in a timely manner.

It said that, although the bank had sent several letters, none of them contained the information regarding the suspension of the funds which they had invested in.

Investors were also kept in the dark about important matters such as when redemption of the funds was suspended, the company claimed.

Lawyer Ian Refalo signed the reply.