Bank of Valletta’s financial offer to settle a dispute with investors of a property fund that went belly-up falls short of expectations and should be suspended, according to the financial adviser leading the charge against the bank.
“Last year, the bank told us to put up or shut up and now it is telling us to take it or leave it,” Paul Bonello, managing director at Finco Trust, said yesterday, 24 hours after BOV made public its offer to settle the issue by offering compensation and buying back the shares at 75c per share.
Mr Bonello is representing about 500 investors who, last year, filed a series of judicial protests against the bank after La Valette Multi Manager Property Fund registered heavy losses. He said investors could expect anything between €1.20 and €1.35 per share based on the reimbursement of all monies invested and legal interest.
Mr Bonello said the bank’s offer was “unfair and a ruse” because investors were being forced to make a decision by the end ofJune without having all the information at hand and on condition they drop all legal proceedings.
He called on the Malta Financial Services Authority to conclude all its investigations into the bank’s management of the fund and publish the findings. He also asked whether the MFSA approved the bank’s offer.
The Times tried contacting MFSA chairman Joe Bannister but calls to his office were not returned.
Mr Bonello said he expected the MFSA to live up to its obligations and defend the investors who were being bullied by the bank into accepting the offer.
The MFSA probe has dragged on for nine months and, to date, it has only concluded one of three investigations. Information on the investigation that was concluded was only partially released by BOV. The bank said it disagreed with the regulator’s interpretation of the investment restrictions outlined in the fund’s prospectus.
Investors are accusing the bank of breaching the conditions in the prospectus and taking on bigger risks than was allowed.
Mr Bonello said the bank’s calculation to establish the compensatory amount was based on a comparative study drawn up by PricewaterhouseCoopers, which are La Valette’s auditors.
“The exercise was vitiated because PWC have a conflict of interest. Furthermore, PWC are potentially liable given that they are obliged as auditors to flag any irregularities,” Mr Bonello said.
Presenting his own calculation based on the performance of a benchmark European property fund, Mr Bonello said investors could have expected anything between €1.20 and €1.35 per share.
He also described as “a gimmick” the bank’s condition that it could withdraw its offer if fewer than 70 per cent of investors accepted the compensation. This, Mr Bonello pointed out, was only an excuse to force shareholders into accepting the offer because, if it so wanted, the bank had enough shareholders of its own to surpass the 70 per cent mark.
“The bank made a positive step forward but I am asking it to respect investors. It should engage in meaningful discussions and not come up with a unilateral take-it-or-leave-it offer when investors still do not know what happened and what the MFSA was going to conclude,” Mr Bonello said.
Mr Bonello said he would not be taking decisions on behalf of his clients for whom a meeting will be held on Wednesday.
The regulator’s silence
The financial services regulator has not once uttered a word about its investigations into the complaints by hundreds of small-time investors after the property fund they put their money in performed badly.
The Malta Financial Services Authority is conducting three separate investigations, which were started in August last year.
The first investigation concerns the alleged breach by Bank of Valletta of the La Valette Multi Manager Property Fund prospectus when managers put money in high risk funds when this was not allowed.
Although this investigation seems to have been concluded, the MFSA has not published the report or its findings and investors are still in the dark.
Some details emerged on Thursday when BOV admitted that the MFSA was giving a different interpretation to the investment restrictions listed in the prospectus. Despite making the compensation offer, the bank insisted it was not admitting liability.
The second MFSA investigation concerns the selling techniques used when the fund was being marketed by BOV. Investors are claiming they were not made fully aware of the fund’s risks.
The third, more serious, investigation deals with allegations that some investors had privileged information that allowed them to redeem shares just before the fund was suspended in August 2008.
The MFSA has said nothing about the investigations.