The financial services regulator is querying the way in which intermediary companies sold securities issued by a failed Dutch bank and an Australian fund management firm.
It is within the Malta Financial Services Authority’s (MFSA) remit to ask individuals or companies who provide investment services for information and investigate the matter if the need arises.
A spokesman told The Times the MFSA was looking into the manner by which the securities issued by SNS Reaal Bank and LM Investment Management Limited were sold in Malta.
631– the number of Maltese investors who collectively placed more than €14 million in two Australian property-linked funds
The first case involves 183 Maltese investors who bought almost €3 million in high-interest bonds in SNS Reaal. The bank is the fourth largest in the Netherlands and was nationalised by the Dutch Government in February.
The State bailout cost Dutch coffers some €10 billion to prevent SNS Reaal’s collapse under the weight of property loan losses.
The second case concerns 631 Maltese investors who collectively placed more than €14 million in two Australian property-linked funds administered by LM Investment Management.
Questions have been raised about the manner in which these funds were sold in Malta and, although the names of two financial intermediary companies were mentioned in the media, the regulator insisted there may be others.
“The authority has not disclosed the name of any financial services intermediary in Malta... the names of some financial services intermediaries were mentioned in the media, but the authority does not exclude that other investment services providers may have sold these products,” the spokesman said.
One of the companies mentioned, the Msida-based MFSP, yesterday clarified that the two funds it sold belonging to LM Investment Management were not in liquidation.
Reacting to the news that Maltese investors may lose millions, MFSP said LM was placed in voluntary administration last month. An investor circular prepared by the administrators, FTI Consulting, was sent to all MFSP clients.
“It specified that the funds of LM were not in liquidation or administration, but rather, it was LM that was in voluntary liquidation,” MFSP said.
The administrators are conducting a review of the funds to determine the appropriate strategy for each fund, MFSP added, noting that the funds were closed to investors to ensure they are protected.
MFSP said it had no information that “it will not be easy for Maltese investors to recover the amounts invested in LM funds,” as was reported in the media.
A preliminary review prepared by FTI said full recovery of the initial investment by unit holders was expected in the case of the LM Australian Income Fund, which carried a moderate risk and had cash-based assets.
The situation may be more complex for the high-risk LM Managed Performance Fund that invested in property and secondary mortgages.
However, MFSP insisted that no comparison could be made between LM and SNS Reaal as the bank was nationalised, resulting in full loss of capital for subordinated bondholders.
“The two situations were very different and bundling the two into one feature was misleading,” MFSP said.
The MFSA last year suspended MFSP’s licence to deal in complex funds, an action the company is contesting.
Meanwhile, investors in Reaal have formed a foundation to fight for their rights after the bank’s nationalisation risks wiping out their investment.
Frans Faas, an activist investor, told The Times his foundation represented the interests of subordinated debt holders – whose securities had a total face value of about €1.8 billion.
It aims to challenge the decision to nationalise SNS Reaal.
“We currently represent approximately 200 bondholders who owned approximately €125 million in subordinated bonds,” he said, adding the foundation had international bond-holders from Greece, Germany, Italy, Spain, Belgium and the UK.
He said the foundation was prepared to act on behalf of Maltese victims and urged them to contact him via the website www.sos-ns.com.