Updated 4 p.m.

The MFSA has imposed an administrative penalty of €197,995 on Bank of Valletta and €149,821 on Valletta Fund Management Ltd in connection with failures in the administration of the La Valette Multi-Manager Property Fund.

In a statement, the Authority said the fine on BOV was being imposed as custodian of the La Valette Multi Manager Property Fund.

BOV was found to be in breach of Investment Services Guidelines and Investment Services Rules through a failure to act with the level of care and diligence required of licence holders with regards to the conduct of their business.

BOV was considered to have wrongly applied and wrongly monitored the application by others of investment restrictions laid down in the Supplementary Prospectus  which prohibits the Fund from investing in underlying funds that may be leveraged more than 100% of ‘net assets’ being ‘total assets less total liabilities’.

It was also found to have been in breach of  Investment Services Rules through its failure to properly monitor compliance with investment restrictions  described in the Supplementary Prospectus as limiting leverage risk of the underlying funds to 100% of ‘net assets’ being ‘total assets less total liabilities’ and (failure) to make accurate reporting in the Fund’s annual financial reports for the period ending 30th September 2006; and years ending 30th September 2007; 30th September 2008 and 30th September 2009.

The Bank was also found to have failed to maintain sufficient records. 

VFM was found to be in breach of  Investment Services Guidelines by its failure to act with the level of care and diligence required of licence holders with regards to the conduct of their business.

The MFSA said  VFM was considered as having wrongly applied investment restriction rules laid down in the Supplementary Prospectus which prohibits the Fund from investing in underlying funds that may be leveraged more than 100% of ‘net assets’ being ‘total assets less total liabilities’.

VFM was also found to be in breach of  Investment Services Rules for failure to properly monitor its delegates, Valletta Fund Services Ltd and Insight Investment Management (Global) Limited  with regards to the proper application of investment restriction, and Investment Services Guidelines of the Investment Services Rules regarding failure to maintain adequate records.

Earlier this  afternoon, Bank of Valletta (BOV), the parent company of La Valette Management, said it had received notification from the Malta Financial Services Authority (MFSA) of its findings concerning that part of its investigation relating to the gearing restriction contained in the Supplementary Prospectus of the La Valette Multi Manager Property Fund.  BOV is, together with its advisors, carefully examining the contents of the MFSA communication and will later comment on it.

The MFSA has been investigating three major allegations on the management of the fund.

The first concerned an alleged breach of investment restrictions, the second was over the selling techniques used by the bank and the third concerned allegations that some investors had access to privileged information and withdrew money from the fund before it was suspended in August 2008.

The public only got to know that the regulator had concluded the first investigation two weeks ago when BOV publicly admitted that it disagreed with the MFSA's interpretation of the investment restrictions.

During a press conference, BOV chairman Roderick Chalmers had announced that the bank was ready to settle the dispute with investors by buying back their shares and offering compensation to the tune of 75c per share.

However, investors were given until June 30 to take up the one-time offer.

The whole offer is estimated to cost the bank €45 million.

The offer was described as "a ruse" by the managing director of Finco Trust Paul Bonello, who has been leading the charges against BOV.

At a meeting for property fund shareholders, Mr Bonello urged them not to take up the bank's offer and wait for the MFSA to conclude and publish its investigation.

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