Bank of Valletta plc - MFSA fines BOV and VFM

On 16 June, Bank of Valletta plc (BOV) announced that it was informed by the Malta Financial Services Authority (MFSA) that the Authority imposed an administrative penalty on BOV and Valletta Fund Management Ltd (VFM), amounting to €197,995 and €149,821 respectively, on the basis of failures in the administration of the La Valette Multi-Manager Property Fund.

The Authority concluded that BOV, as custodian of the fund, failed to act with the level of care and diligence required of Licence Holders with regards to the conduct of their business, wrongly applied and monitored the application by others of investment restriction (v) which prohibits the Fund from investing in underlying funds that may be leveraged more than 100% of ‘net assets’ being ‘total assets less total liabilities’, failed to properly monitor compliance with investments restriction (v) and make accurate reporting in the Fund’s annual financial reports for the period ended 30 September 2006 and the years ended 30 September 2007, 2008 and 2009 and also failed to maintain sufficient records.

In respect of VFM, the MFSA concluded that VFM failed to act with the level of care and diligence required of Licence Holders with regards to the conduct of their business, wrongly applied the investment restriction (v) which prohibits the Fund from investing in underlying funds that may be leveraged more than 100% of ‘net assets’ being ‘total assets less total liabilities’, failed to properly monitor its delegates, namely Valletta Fund Services Ltd and Insight Investment Management (Global) Ltd, with regards to the proper application of investments restriction (v) and also failed to maintain adequate records.

The Bank stated that MFSA’s conclusions are based on the Authority having taken a different view from that taken by BOV, VFM and Insight Investment Management (Global) Limited, the sub-investment manager responsible for the discretionary investment management of the Fund, on the proper interpretation and application of the gearing restriction (Investment Restriction (v)) contained in the Fund’s Supplementary Prospectus.

The Bank however stated that both itself and VFM remain of the view that the conclusions of the MFSA are wrong in fact and at law, and, in particular, that neither BOV nor VFM failed to act with the required level of care and diligence. Accordingly both BOV and VFM will be filing an appeal on the MFSA decisions pursuant to the provisions of section 19 of the Investment Services Act.