More than a hundred investors in the failed Bank of Valletta property fund yesterday asked for compensation for the damages suffered as a result of bad management.
In a judicial letter the investors claimed they were forced to accept the bank’s compensation offer last year even though the financial services authority was still investigating BOV’s failures.
The 105 investors, who collectively held three million shares in the fund, said their consent to the bank’s offer was “vitiated” because it was obtained “fraudulently and illegally”.
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 bank gave shareholders a month to accept the conditional offer.
The investors are asking for the liquidation and payment of damages suffered, with interest and costs. The judicial protest was signed by Prof. Ian Refalo.
They noted that the third and last investigation by the Malta Financial Services Authority was concluded last month, 11 months after the expiry of the BOV compensation offer. Although the MFSA had requested BOV to extend the offer’s expiry date, it did not.
The investigations’ results, the investors said, gave a completely different picture to that painted by the bank.
The La Valette Multi Manager Property 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.
The authority fined BOV more than €200,000 last month because it had sold the high-risk property fund shares to inexperienced investors.
The regulator also ordered the bank to give inexperienced investors compensation amounting to an additional 25c per share despite having waived their legal rights.
The MFSA also 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.
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 that 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.
Last month 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.