Bank of Valletta is expected to be ordered to refund “inexperienced” investors who sustained losses in its failed property fund, The Sunday Times has learnt.

Investors who filed protests with the Malta Financial Services Authority, claiming they were wrongly sold shares in the fund which was meant to be open only to experienced investors, were contacted by the authority during the past week and told the bank would be told to refund their losses.

The move comes after 94 per cent of investors in the La Valletta Multi-Manager Property Fund accepted a settlement offer of 75 cents per share by BoV which closed earlier in the week. By taking up the offer, the investors agreed to give up their right to sue the bank for damages.

However, MFSA officials have told the investors it has contacted that action against the bank, over what is known as mis-selling, would not be affected even though they had taken up the offer.

The argument being made is that the property fund was meant to be sold exclusively to experienced investors – those who have invested in similar funds in the past.

The bank defended itself by saying that whoever bought shares in the fund would have had to sign a declaration saying they were experienced.

However, the financial management company representing investors against BoV, Finco Treasury Management, counter-argued that the vast majority of those to whom BOV sold shares in this “very complex fund” are “financially illiterate” and some were even illiterate and therefore would not have been aware they had signed such a declaration.

The MFSA appears to have taken this line in assessing these cases. An authority spokesman would not confirm that officials had told investors about the reimbursement, citing confidentiality.

“It should be pointed out that whatever is communicated by the authority to licence holders and to consumers who file complaints, is confidential information,” he said.

However, sources have confirmed to The Sunday Times that a decision has been taken in respect to some cases and that it has been communicated to the bank unofficially.

“The authority has already stated that once these investigations are concluded it will take whatever action is appropriate,” the MFSA spokesman added. The move will not affect all investors as complaints will have to be assessed on a case by case basis. Moreover, there are several institutional investors or people who were represented by financial intermediaries, such as Finco’s own original 72 clients, and who therefore cannot claim inexperience.

No bank spokesman was available for comment yesterday. However, when asked about the charge of mis-selling some days before the bank’s offer closed, BoV chairman Robert Chalmers had said: “Investors with a bona fide complaint over how they acquired their holding in the fund were entitled to pursue their claim through the MFSA.”

The bank has faced three charges since Finco went public with its complaints last August. The first charge was sustained by the MFSA, which fined BOV €347,816 for investing money in high risk funds contrary to what the prospectus allowed – a decision the bank said it would appeal.

The second issue concerned the alleged mis-selling and the third, possibly the most serious, was that some investors had insider information that enabled them to redeem their shares just before the bank froze the fund in 2008. BOV said it investigated the latter claim internally and has consistently denied it.