Bank of Valletta and its subsidiary Valletta Fund Management Ltd were yesterday fined a total of €347,816 by the Malta Financial Services Authority for regulatory breaches in relation to their La Valette Multi Manager Property Fund.
BoV yesterday confirmed it had received the MFSA’s communication and that it was carefully examining its contents with its advisors.
A penalty of €149,821 was imposed by the MFSA on Valletta Fund Management Ltd as managers of the La Valette Multi Manager Property Fund for failing “to act with the level of care and diligence required of licence holders with regards to the conduct of their business”.
VFM was found to have wrongly applied Investment Restriction (V), which prohibits the Fund from investing in underlying funds that may be leveraged more than 100 per cent of ‘net assets’ being ‘total assets less total liabilities’.
It also found VFM to have failed to properly monitor its subsidiary, Valletta Fund Services Ltd and Insight Investment Management (Global) Limited of London over the proper application of Investment Restriction (V). The regulator also identified failure to maintain adequate records.
Additionally, a separate penalty of €197,995 was imposed on Bank of Valetta plc as the Fund’s custodian. The bank was also found to have failed to act with the level of care and diligence required of licence holders with regards to the conduct of their business.
BoV was found to have wrongly applied and wrongly monitored the application by others of Investment Restriction (V) and to have failed to properly monitor compliance with this clause.
The regulator said BoV had failed to ensure accurate reporting in the Fund’s annual financial reports for the financial years 2006, 2007, 2008 and 2009 and to have failed to maintain sufficient records.
The MFSA had 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.
Late last month BoV chairman Roderick Chalmers 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 qualifying share in an exercise costing €45 million. Investors were given until June 30 to take up the limited offer.
At a meeting for property fund shareholders a few days later, Paul Bonello, managing director of Finco Trust, who has been leading the charges against BoV, urged them not to take up the bank’s offer and wait for the MFSA to conclude and publish its investigation.
Yesterday, the MFSA only produced its findings.