The financial services regulator is to publish the conclusions of an inquiry into a property fund managed by Bank of Valletta that left investors reeling.
“The MFSA is obliged to publish its decision, but not the report,” Malta Financial Services Authority chairman Joe Bannister said when contacted yesterday.
He did not commit himself to a deadline but sources told The Sunday Times the decision would most likely be published before June 30, the deadline set by BoV for investors to take up a one-time cash settlement offer.
The MFSA has concluded the first of three inquiries into the bank’s management of the La Valette Multi-Manager Property Fund but no details have yet been published.
The inquiry, which has been going on for nine months, concerns an alleged breach by the bank of the investment restrictions in the fund’s prospectus when taking on bigger risks than permitted.
Prof. Bannister defended the authority’s silence to date, insisting that BoV had not yet made its submissions on the findings.
“The bank still has to give us its response and legally we cannot say anything yet about the investigation,” he said, adding that the MFSA held internal discussions on the matter last Friday and will be issuing a notice to the public tomorrow.
Investors only got wind of the regulator’s conclusion on Thursday when BoV said the MFSA was applying a different interpretation to the investment restrictions listed in the fund’s prospectus.
The bank said it disagreed with the MFSA’s conclusion but decided to settle the dispute by offering investors a take-it-or-leave-it cash settlement of 75c per share, which will have to be taken up by June 30.
The total buy-out is expected to cost the bank €45 million, of which €14.5m is due as compensation for the fund’s underperformance.
Investors have described the bank’s offer as a ruse, insisting they were being “forced” to accept it without having the MFSA’s inquiry in hand.
Prof. Bannister said the MFSA had nothing to do with the bank’s offer to investors although he admitted that BoV informed the regulator it was going to propose a cash settlement.
“We did not get involved in the offer. The authority cannot comment about it and could not have approved it because it is a matter that concerns the relationship between the bank and the investors,” he said when asked whether the regulator had approved the cash settlement proposal.
The regulator is conducting two other inquiries that have not yet been concluded. One 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.
Another, more serious inquiry deals with allegations that some investors had privileged information that allowed them to redeem shares just before the fund was suspended in August 2008.
Prof. Banister said the two inquiries were ongoing.
“The first (inquiry) was very complex and technical but the other two are lengthier because they also involve interviewing people,” he said.
Financial adviser Paul Bonello from Finco Trust, who is representing some 500 investors, on Friday said the bank’s settlement offer fell short of expectations and should be suspended.
“Last year, the bank told us to put up or shut up and now it is telling us to take it or leave it,” Mr Bonello said.
According to Mr Bonello investors could expect anything between €1.20 and €1.35 per share based on the reimbursement of all monies invested and legal interest rather than the 75c being offered by the bank.
He also called on the MFSA to conclude all its investigations into the bank’s management of the fund and publish the findings. 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.
ksansone@timesofmalta.com