Questions too hot to handle

In early June 2012 I submitted a Parliamentary Question to the Minister of Finance relating to the Prospectus currently in force of the La Valette Property Fund. 

This prospectus carries a statement that it is approved by the MFSA when it is patently obvious that the Prospectus contradicts the result of the investigations of the MFSA of June 2011.

Until Parliament hurriedly adjourned on the 10 July 2012 to next 1 October, the PQ remained unanswered. In view of the fact that the matter raised by this PQ is of extreme importance because the Property Fund in the meantime is still open for subscriptions from the general public, the text of this PQ is being published.

I now wait for the MFSA's reaction and for their customary reply in terms of the Press Act to explain their standards of transparency and accountability as a public authority entrusted with investment protection.

These are the questions I raised in parliament and to which I have not been given any answer:

"Is the Hon. Minister for Finance aware that the La Valette Property Fund is still open for new subscriptions on the basis of the Prospectus of the Fund currently in force dated 10th August 2010?

"Is the Minister aware that in spite of the fact that the attention of the Chairman and of the Director General of the MFSA has been drawn on several occasions that the current version of the La Valette Property Fund breaches the Investment Services Act and the Regulations issued by the MFSA itself in terms of the same Act?

"Does the Minister appreciate that this is occurring to the detriment of consumers of financial products who may be considering whether to subscribe to a fund and who are entitled to rely on the veracity of a prospectus of a Fund, especially a prospectus that states that its provisions has been approved by the MFSA?

"Does the Minister appreciate that the natural consequences of the Administrative Sanctions, Penalties and Report of the MFSA of the 16th June and 25th June 2011 in relation to Valletta Fund Management and Bank of Valletta with regards to the La Valette Property Fund - in which Reports the MFSA confirmed that both entities, in their respective roles of Manager and Custodian of the Fund, had interpreted wrongly the provisions of the prospectus relating to the investment restrictions and that they had failed to exercise due diligence and their oversight and monitoring responsibilities, and which decisions were not appealed - necessarily means that the current prospectus is incorrect, false, inconsistent and misleading?

Is the Minister aware that the failure by the La Valette Funds Sicav plc to keep "the essential elements of the Prospectus up to date" in order "for investors to make informed judgement about the investment proposed to them", in particular about "the investment objectives, policies and restrictions of the scheme, together with the extent of use of leverage", in terms of the MFSA Regulations, continues to take place in the most brazen manner in full view of the MFSA?

Does not the Minister of Finance believe that the impotency of MFSA to enforce its own regulations demonstrates a regulatory authority lacking in personality and effectiveness in furthering the mission entrusted to it by law?

New BOV chairman

Last Wednesday government announced the appointment of Frederick Mifsud Bonnici as the new chairman of the Bank of Valletta after the Malta Financial Services Authority (MFSA) cleared his appointment.

Fredrick Mifsud Bonnici was the Price Waterhouse Cooper (PwC) partner in charge of the audit of the La Valette Funds Sicav plc and who in terms of Article 18 of the Investment Services Act was supposed to have alerted the MFSA during all the years between 2005 and 2010 with the 9 breaches of the investment restrictions of the Prospectus of the Property Fund.

When called upon at the Annual General Meeting to inform the shareholders present whether PwC did signal such breaches or not, PwC always gave a "no comment" reply.

So now that Frederick Mifsud Bonnici has been appointed chairman of BOV his choice not only raises questions about how appropriate it is but shows how MFSA betrays its mission as a regulator to ensure good governance in the financial sector while letting down again thousands of small investors that were lured into putting their hard-earned income into schemes not designed for them.

The BOV chairmanship, where government is the main shareholder, has been vacant since Roderick Chalmers resigned for personal reasons.

Since 12 May 2011 the BOV has been sanctioned by the MFSA at least six times and fined a total amount of €726,140 for letting down pensioners and small inexperienced investors by luring them into investing in schemes designed for professional investors.