MFSA selects Mazars for property fund analysis, FINCO reacts
The Malta Financial Services Authority (MFSA) has appointed international accountants and business advisors Mazars for the investor file analysis process of Bank of Valletta’s La Valette multi-manager property fund.
The aim of the Mazars review is to determine the validity of the experienced investor declaration as stated by the bank, and will put under the microscope all application forms relating to the property fund where details are incomplete or documentation was completed incorrectly or is downright missing.
The review process, which includes the physical assessment of all investor files, should start in the coming week with BOV making client files available to the international auditors in order for the review process and any due payments to be issued in time for this long outstanding debacle to be concluded by the end of 2012.
In June last year the bank offered investors a compensation offer of 75c per share after a series of judicial protests filed by FINCO Managing Director Paul Bonello in the name of the property fund investors. The MFSA fined Valletta Fund Management, the investment arm of BOV, €350,000.
Following the review, Mazars will issue a list of ineligible investors to whom BOV must offer further compensation, over the 75c per share the bank offered in June 2011.The regulator may add to the list the names of particular investors whose claims qualifies for further consideration. The compensation to be paid will amount to €1 per unit. The investors who had reached an agreement with the bank regarding compensation will be paid the difference.
The MFSA has previously delivered a fine of €203,150 to BOV, as the maximum applicable fine for breaching license conditions when selling the fund to its clients.
Finco Treasury Management Ltd (Finco) said that the methodology adopted by Mazars in validating the meaning of ‘Experienced Investor’ in the La Valette Property Fund, is vague and incorrect.
Finco said that BOV’s Client Fact Finds simply show the market value of all investments held as at the date of the Fact Find and do not reveal the presence of qualifying investment instruments in excess of US$50,000 which have been transacted during the five years prior to the investment in the Fund.
Finco managing director, Paul Bonello, explained that value of investments as of the date of the Client Fact Find is different from the value of investment transactions carried out in the previous five years.
“The correct manner for the validation of experienced investor status is to painstakingly examine the investments mentioned in the Fact Find and enquire whether they are in the name of the applicant or applicants involved only and strictly in line with the Experienced Investor definition in the Prospectus and also determine and ensure that such investments were made within five years prior to the Property Fund acquisition date and convert the purchase cost to US$ at the Central Bank of Malta rate of exchange as at that particular date.”
Mr Bonello added that the list of investments often include securities purchased more than five years before the Property Fund investment, such as equity investments bought at the stage when these securities were first listed on the Malta Stock Exchange, which should not be treated as investment transactions.
Finco’s Managing Director expressed concern that if the “broad terms of the process” specified by the MFSA is utilised, many investors who do not effectively satisfy the Experienced Investor criteria will still be denied the compensation owed.