ANNOUNCEMENT: UK Adviser is now PA Adviser. Read more.

Maltese investment firm in row over 2008 collapse of Jerseys Belgravia fund group

The 2008 collapse of Jersey’s Belgravia funds group has sparked a row in Malta.

|

The row was touched off earlier this month when Finco Treasury Management Ltd filed what is called a judicial protest in Malta’s civil court, in which Finco spells out a range of grievances over the way it says its investment in La Valette Multi-Manager Property Fund, on behalf of its clients, was handled.

The fund was a sub-fund of La Valette Funds SICAV, of which Bank of Valletta was the custodian.
Under Maltese law, a judicial protest is a way of keeping alive the option of filing a legal action which otherwise would expire with time.

About two weeks after Finco’s protest was filed, a group of some 106 other Maltese investors in La Valette produced a judicial protest of their own.

Valletta Fund Management Ltd (VFM), one of the entities named by Finco, was set up in 1995 and is jointly owned by Bank of Valletta and UK-based Insight Investment Management (Global) Limited, according to its website.

Finco is understood to be seeking a return of its investment on behalf of its clients, plus interest and expenses, on grounds that it was misled by the fund’s managers as well as by the Bank of Valletta, as the fund’s custodian, about key details of the way the funds were managed, as well as the extent of the problems at Belgravia even after Deloitte & Touche had been appointed liquidators.

In particular Finco alleges that at least one of the Belgravia property funds had a gearing ratio in excess of the maximum stipulated in the Maltese fund’s offering document, and that this fact had not been brought to investors’ attention in custodial reports.

The Bank of Valletta has responded that Finco’s allegations “are completely unfounded, misguided and misconceived”, and has urged the company to proceed with a court case if it has grievances.

Referring to a series of recent articles in the Maltese press, the bank, in a statement  posted Wednesday on its website, says that it will not participate in a “trial by newspaper” and that it will issue “no further statements…on [the] matter”.

The response is headed "BOV tells Finco to either put up or shut up".

The bank does not address all of Finco’s claims, noting that had not been formally notified of them, but states: “not only have each of the Bank, VFM and VFS [Valletta Fund Services Ltd] acted in line with their respective obligations at law and in contract but they have also acted in line with best market practice [and]…have nothing to hide.”

According to Finco’s initial judicial protest on 4 August, investments in funds managed by Jersey-based Belgravia Financial Services Group had been among the La Valette fund’s “most significant investments” at the time in 2008 when Belgravia froze redemptions and subsequently went out of business.

The row over Belgravia in Malta has coincided with a formal dressing-down by the Jersey Financial Services Commission of  two arms of Standard Bank’s Jersey operation for their handling of property funds managed by Belgravia.

As reported yesterday by International Adviser, the JFSC said Standard Bank Jersey Ltd and Standard Bank Fund Administration Jersey Ltd had fallen short of regulatory guidelines in a number of areas, including corporate governance, internal controls, record-keeping and in the resources and the calibre of staff it had assigned to the task.

Standard Bank responded in a statement that the nature of the funds involved had been “intricate and complex”, and that it has taken steps to address the issues raised.

Belgravia has been in liquidation since October 2008 after collapsing following the death five months earlier of its 40-year-old founder and chairman, Duncan Hickman. After its collapse, the company  became the subject of a criminal investigation by Jersey’s Joint Financial Crimes Unit, which is  ongoing.

At one point Belgravia’s assets under management were said to have approached £1bn. In 2006 the company briefly made headlines in the UK after it made a reported £130m to £150m bid for the Newcastle United football club. 

Latest Stories