The offer that Bank of Valletta made to shareholders of the La Valette Multi-Manager Property Fund was bound to create more controversy rather than calm the ire of investors who practically saw their investment fizzle out as the financial markets collapsed and property funds around the world practically lost their value.

The fund was launched in September 2005, a time when the markets were in full swing and investments in property funds were rife, and suspended trading in August 2008. Judicial protests and regulatory enquiries started in 2010 and the fund was split into a Main Pool containing assets that were redeemable and a Side Pocket for assets with perceived liquidity problems.

To a certain extent, the fact that Bank of Valletta took the decision to make an offer of €0.75 cents for every asset held in the fund can be interpreted in various ways depending on the point of view of who is considering the offer. As expected, shareholders that had filed judicial protests were not exactly impressed with the offer and the workings of PricewaterhouseCoopers which served as a basis for the offer to be formulated. Nevertheless, the conditional offer is on the table until the end of June and many shareholders are bound to sell out from the fund, and part of their investment in the process, and close this chapter completely.

In the meantime, however, there is the regulator that is investing the fund and its modus operandi throughout the time that it was traded. Before the end of last year, the Malta Financial Services Authority informed Bank of Valletta that it had upped its scrutiny from an inquiry into an investigation. The focus of this investigation is based on the interpretation and subsequent application of the investment restriction contained in the fund’s prospectus called Investment Restriction (v). On this issue, Bank of Valletta and the MFSA have differing views on the interpretation of this restriction with the regulator insisting on the literal interpretation of the term ‘net assets’ while the bank opted for the context of a European property fund.

Irrespective of the legal wrangling, that is bound to continue for many years on the interpretation of the ‘net assets’ and ‘net asset value’ and which forms the basis of contention for the regulator, shareholders have been presented with a scenario of either accepting the compromise tabled by Bank of Valletta and refrain from any further action against the bank or else decline the offer and take the bank to task over the performance of the fund.

The option is neither simple nor straightforward and investors should seek advice to make an informed decision. On the one hand, the bank is offering a way out of the fund through a cash payment for full and final settlement. On the other hand, investors could convert their judicial protests to initiate court action with the possibility of winning higher compensation, possibly in the distant future judging from the legal wrangling that will ensue on the interpretation of the restriction in the prospectus.