On 4th June 2012 the Malta Financial Services Authority (‘the Authority’) announced that it had concluded its third investigation concerning the La Valette Multi Manager Property Fund (‘the Fund’). In addition to fining Bank of Valetta (‘the Bank’) the maximum fine available under the applicable legislation, the announcement gave details of its Directive requiring the Bank to cooperate with a review of all investor files by an independent professional services firm, engaged by the Authority at the expense of the Bank.

The Authority developed a list of project requirements for the file review process and then invited firms to tender proposals to carry out the work on the Authority’s behalf. Once the proposals had been received, the Authority carried out a selection process comparing and reviewing the separate proposals. It was important to ensure that the firm selected was completely independent, had the necessary expertise and would complete the review on time and at reasonable cost. More detailed discussions ensued with the preferred bidder in order to ensure that the selected firm could deliver a credible result.

On conclusion of this selection process, the Authority selected Mazars, an international firm of accounts and business advisors. Mazars has a presence in 69 countries and draws on the expertise of 13,000 professionals. They have recently done work for the Serious Fraud Office in the UK, they are currently reporting to the European Commission regarding Lloyd’s Banking Group and have previously done investigations for the United Nations.

As already announced, the file review is aimed at determining the validity of the experienced investor declaration held by the Bank. In broad terms the process to be followed will be:

• An examination of all application forms relating to the La Valette Multi Manager Property Fund, together with the required fact find, where applicable.
• Those applications with fact finds indicating the presence of qualifying investment instruments in excess of $50,000 which have been transacted during the five years prior to the investment in La Valette Multi Manager Property Fund, shall be treated as prima facie meeting the experienced investor criteria.
• Where the fact finds are incomplete or missing, the independent professional services firm shall be entitled to refer to transaction histories and/or other information available in Bank of Valletta client files, in order to confirm or otherwise determine qualification under the experienced investor criteria.
• This review process will also be applied to execution only transactions, where the documentation has not been correctly completed and signed off in all respects.
• The file review will result in a list of ineligible investors to whom the Bank should offer the further compensation, to which the Authority may add individuals whose position the Authority believes merit further consideration.
• The Bank will communicate with investors on the final list notifying those investors of its intention to make a compensatory payment to them. The further compensation shall also be offered to the investors who had filed a complaint with the Authority with respect to whom an agreement to compensate was reached between the Authority and the Bank.
• The compensation to be paid will amount to €1 per unit, less any amounts previously received for each unit.

The Authority has had a number of discussions with Mazars regarding the file review process and required the Bank to make the client files available to Mazars. There have been some operational issues to iron out before the file review process could start, but Mazars will be starting the physical process of reviewing these files within the next week. The objective is still to finalise the review process and pay any further compensation due by the end of December 2012.