The Bank of Valletta had been a joint owner of the La Valette fund, along with UK-based Insight Investment Management (Global).
In a statement on its website, the MFSA said it had decided to impose “the maximum fine available under the applicable legislation of €203,150 (£164,000, $253,830)” on the bank, “for breaching licence conditions when selling units in the fund to its clients”.
In essence, the MFSA statement goes on, individuals had been permitted to invest in the La Valette Multi Manager Property Fund who should not have been, because they did not qualify as “experienced investors”, as the term had been defined, and despite having signed declarations that they were.
“The authority has also issued a directive which requires the bank to cooperate with a review by an independent professional services firm, engaged by the authority at the expense of the bank”, the MFSA statement added.
It said that among the areas to be considered by the review would be information currently held in the client files of the bank, to determine the validity of the bank’s “experienced investor declaration”.
In its own statement, in response to the MFSA’s report, the Bank of Valletta admitted that there were "lessons to be learned" from its role in the property fund’s collapse, which occurred in August, 2008.
To this end, it noted, it last year commissioned an international financial services consulting firm to carry out "a comprehensive independent review of policies, procedures and processes, so that these could be benchmarked against best-in-class standards in other developed jurisdictions".
"The recommendations arising from this review are being implemented, and it is believed that this initiative has enabled the bank to learn not just from its own experience, but also from the collective wisdom and experience of many other institutions and regulators arising from the 2008/09 financial crisis," the bank said.
As for the MFSA’s most recent communication, which it noted was "the product of many months of investigation", the BoV said it and its advisers were in the course of studying it in detail, and would be giving "careful consideration" to its position.
It added: "The bank believes that it has at all times used its best efforts to cooperate with the MFSA during the course of its various investigations", and it is "continuing to address all relevant matters relating to the property fund, and [will] sustain all efforts to bring any outstanding regulatory matters relating to the…fund to a satisfactory and appropriate conclusion".
Previous penalties
As reported, the MFSA earlier this year imposed an "administrative penalty" of €175,174 on the BoV for “regulatory breaches related to disclosure of information and suitability of financial instruments sold to the general public”, also in connection with the La Valette fund. This came in the wake of an earlier €347,816 fine against the BoV and Valletta Fund Management, for regulatory breaches in connection, again, with the fund.
Last May, the BoV offered to pay investors who lost money in the stricken fund €0.75 a share, on the condition that they would no longer be able to sue the bank over their loss. The buyback eventually ended up costing the bank around €15m.
As a result of the latest ruling, these investors will now be eligible to receive an additional 25c a share, in spite of having waived their right to any further claims, according to the MFSA statement, which notes that the objective was "to finalise the review process and pay any further compensation by the end of December 2012" .
Finco: ‘satisfied’
Finco Treasury Management, one of the most vocal organisations involved in the efforts to obtain compensation for the La Valette fund investors, issued a statement expressing “satisfaction” at the findings of the MFSA, and the news that investors would receive compensation equal to €1 a share. This, it noted, was “an improvement of about 33% of the value of the conditional offer of May 2011…[and was being offered] in spite of the waiver of investors’ legal rights embodied in the conditional offer’s terms”.
