La Valette fund investors demand return of entire investment

Investors in Bank of Valletta's La Valette multi-manager property fund have filed a new judicial protest against the bank, calling for the full liquidation of their investments over and above the compensation they received last year from the bank.

The protest calls on the bank to pay the rescission of all their investment in the property fund, which is believed to have lost close to €50 million in investments, plus legal interest.

Finco Treasury Management, which kick-started the compensation battle and complaints with the financial regulator against BOV, filed the protest in the name of the investors.

The claimants, which hold over 3 million shares in the La Valette fund, say they were "abusively forced" to accept Bank of Valletta's compensation offer for €0.75c per share, on condition that they waive legal action against the bank should the regulator find it had breached the property fund prospectus conditions.

In June, the Malta Financial and Services Authority fined the bank €203,150 for breaching license conditions when selling units in the fund to its clients, and ordered further compensation to the 75c share offer it already paid out in July 2011, bringing up the total compensation to €1 per unit. But Bank of Valletta is appealing the decision, claiming the MFSA's decision goes beyond its power and that there is no provision at law that endows the regulator with the power to "unilaterally" order the payment of the compensation, unless its gets a court order.

The claimants said the "unfair" contract terms of the conditional offer, issued back in 2011, were made notwithstanding that the MFSA was still in the course of conducting its investigations in the selling and the management of the property fund, "which delay in the investigations was also the result of the lack of co-operation by the bank."

In their protest, the claimants said they had suffered damages as a result of the advice and misspelling due to "aggressive sales practices and sales pressure" by BOV staff, including inducing and misleading a number of claimants to sign 'Execute Only' instructions and declarations that BOV had not provided any  advice, when in fact claimants were acting on the recommendations and advice of BOV.

The most recent investigations by the MFSA into the misselling of the fund resulted in a directive ordering Bank of Valletta to increase compensation from 75c per share, to €1 per share.
Prior to this decision, the MFSA had requested the bank to extend the 30-day expiry date of its conditional offer. MFSA investigations were completed and published in June 2011, January 2012 and more recently in June 2012 which, respectively, found the bank had breached prospectus conditions on gearing, issued a reprimand to a fund director over insider-trading, and found the bank had mis-sold the financial instrument to retail clients.

The claimants now say they were not in a position to accept the BOV offer on a fully-informed basis, and are arguing that their consent was "vitiated on account of such consent being procured and obtained fraudulently and illegally."

The protest goes on to say that BOV used its "undue influence to exploit a position of power" and apply pressure on the investors.

The bank has already paid over €40 million in compensation to the majority of investors in the La Valette property fund, which the bank valued at 75c per share. BOV said it will go ahead with a review of investors' files and a payment to investors who were not eligible to be in the fund, as ordered by the MFSA.