Bank of Valletta was fined more than €200,000 yesterday after it sold high-risk property fund shares to inexperienced investors.

The fine was imposed by the financial services regulator that also ordered the bank to give inexperienced investors additional compensation.

This is the third and last investigation conducted by the Malta Financial Services Authority into the bank’s handling of the La Valette Multi Manager Property Fund.

In a statement released yesterday, BOV acknowledged for the first time there were “valuable lessons to be learned” from the property fund experience.

The fund went belly-up after it invested in high-risk sub funds that went bust. BOV suspended trading in the fund’s shares in August 2008, leaving investors high and dry.

Last year, the bank offered fund investors a one-off settlement and compensation amounting to 75c per share on condition they waived their legal rights. The compensation offer shaved off €15 million from the bank’s profits last year.

But the MFSA yesterday said it was appointing an independent company to review all the bank’s client files and determine how many inexperienced investors were sold the fund.

The bank will have to fork out the cost to engage the company, who will determine whether clients satisfied the regulatory condition of having invested $50,000 (€40,000) over the previous five years, when they signed a declaration claiming they were experienced investors.

The MFSA said the bank will have to compensate inexperienced investors with €1 per share. Inexperienced investors who took up the bank’s offer last year will receive an additional 25c per share to reach the €1 mark despite having waived their legal rights.

BOV said it will cooperate “fully” with the independent company.

“The bank, together with its advisors, is in the course of studying the MFSA communication in detail, and will be giving a careful consideration to its position,” the bank said.

It did not say whether it would appeal the decision.

The news was welcomed by Paul Bonello of Finco Treasury Management, who represented hundreds of property fund investors in their struggle with the bank. He said the investigation confirmed what Finco had been saying over the last two years.

Last year, the regulator fined the bank and subsidiary company Valletta Fund Management Ltd a total of €347,816 for regulatory breaches. An investigation revealed how the property fund made investments that were precluded by the prospectus.

A second investigation concluded earlier this year cleared bank staff and “persons connected to them” of using confidential information to redeem their holdings in the property fund before it was suspended.

However, the MFSA reprimanded John Ripard, as former director of La Valette Funds, for disposing of more than 72,000 shares while in possession of sensitive information that was not available to the public.

Mr Ripard resigned voluntarily but maintained his innocence.

In another investigation not connected to the property fund, BOV was fined some €175,000 last year after it breached regulations selling other financial products.

The bank said that in the wake of the property fund saga it had commissioned an international financial services company to carry out a review of its policies, procedures and sales processes.

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