BOV faces fresh battle over failed property fund

Investors in Bank of Valletta’s failed property fund are being denied access to documents which, they claim, would prove the bank sold the complex fund to inexperienced investors, against financial regulations.

The bank has been dodging requests for copies of Client Fact Finds – investor profiles drawn up on prospective clients – which investors believe would show that the bank knew certain clients were inexperienced when it sold them shares in the now defunct La Vallette Multi Manager Property Fund.

Clients have been receiving a more or less standard reply from the bank, telling them that there was no scope in releasing the information given that they had accepted the bank’s final settlement offer of 75 cents per share at the end of June.

When contacted, a spokesman for BOV gave a similar response to The Times: “The terms and conditions of the 26 May offer (on which all investors were advised to seek independent legal and/or financial advice) make it very clear that acceptance of the offer would result in the full and final settlement of all claims...”

However, in the days preceding the offer’s deadline, officials from the Malta Financial Services Authority called some investors who filed a complaint about mis-selling to tell them that the authority’s investigation into the matter would be supporting their complaint and that the bank would be ordered to give full compensation of the investment, irrespective of whether they had accepted the offer or not.

The information had been confirmed by a high level source in the authority and there was no official denial from the authority after the matter was reported in The Times.

However, when asked to react to BOV’s position – that it will not entertain claims from people who took up its offer ­– the MFSA gave no comment.

Moreover, a statement issued in the past weeks by the authority included a disclaimer which said that its recommendations are not binding on a financial entity or consumers and that consumers “may choose not to accept the MFSA’s recommendations”.

Almost three weeks after that statement, in which the MFSA said that its two pending investigations (into mis-selling and insider trading) were nearing completion, nothing has come out since and investors who feel wronged are in limbo.

Paul Bonello, the managing director of Finco Treasury, which has been representing the lion’s share of investors in the fund, said he flagged the issue concerning BOV to the authority in “tens of letters” but had never received a response.

In one such letter seen by The Times, Mr Bonello vents his frustration: “We continue to see no visible signs of investor protection from the Authority, not even at obtaining documentation, let alone at effective remedies for mis-selling. Meantime, in spite of similar complaints of lack of co-operation from your regulated institutions, we receive no reaction at all from you as if we are writing to an Authority of faceless bureaucrats.”

He has also written to BOV chairman Roderick Chalmers as the bank’s data protection controller demanding the information under the Data Protection Act.

“If this doesn’t work, after allowing due time, I plan to take the matter to the Data Protection Commissioner. This information belongs to these people and they should have unhindered access to it, for whatever, reason.”

BOV was asked about Finco’s pledge to get the documents released under the Data Protection Act but the bank said it had no further comment to make.

Experience was a requirement laid out in the prospectus of the fund, on account of the product’s complexity.

Many people came forward in the wake of the fund’s collapse, with stories of small-time investors putting their life savings in the fund without the real knowledge of what they were walking into.

The bank defended itself on the grounds that all investors entering into a contract to buy shares signed a declaration claiming they were experienced. However, many of the people who stepped forward claiming mis-selling, were clearly financially illiterate, Finco has insisted, pointing out that in some cases they were actually illiterate. Some claimed the bank’s representatives never indicated this requirement when they pitched the product to them.

One such pensioner, 70-year-old Alfred Falzon, had told The Times in June that the bank’s representative had told him the fund was the best option for him because it was “protected capital”.

“They told me to imagine the investment to be a prestigious apartment block and the profit was like collecting rent from tenants every six months and dividing it among the various owners... I believed them... I invested €18,000... I only received interest twice,” Mr Falzon had said.

On June 15, the MFSA fined Bank of Valletta and Valletta Fund Management Ltd a total of €347,816 for regulatory breaches in relation to the Fund.

The MFSA said the managers of the property fund and the bank, as the fund’s custodian, had failed “to act with the level of care and diligence required of licence holders with regards to the conduct of their ­business”.