A Constitutional Court has ruled that a directive to hold back a company’s liquidation before it settled all its dues with clients did not violate a director’s human rights.
Mr Justice Anthony Ellul threw out a complaint filed by Wallace Falzon, a director of bankrupt investment firm All Invest, that a Malta Financial Services Authority decision to delay his company’s liquidation was not allowing him to seek redress in court.
All Invest is facing claims from customers who say they lost thousands of euros worth of investments.
In June last year, the MFSA suspended the company’s investment services licence after “identifying a series of regulatory breaches”. The regulator said it had “investigated the manner in which All Invest had sold complex investment products to retail investors” and “that, in a number of instances, All Invest failed to act in the best interest of investors as required of all firms which provide investment services”.
All Invest failed to act in the best interest of investors
Mr Falzon went to the Constitutional Court over a directive through which the MFSA ordered All Invest to delay the winding up of its business “until the transfer of clients’ holdings is completed in an orderly manner; until any pending complaints or court proceedings against it are determined by the courts and until the authority is satisfied that arrangements are in place for a proper safeguard of the company”.
He insists the directive was limiting his right to access to a court of law as protected by the European Convention of Human Rights.
However, the Constitutional Court found no such breach because Mr Falzon had appealed the MFSA decision before the Financial Services Tribunal. An appeal about the MFSA’s report on its preliminary investigation had also been filed.
The court said that, by ordering All Invest to delay the winding up of its business, the regulator was not acting beyond its powers and, thus, the company could not complain that the directive stopped it from starting bankruptcy proceedings in court.
Moreover, the Constitutional Court said that bankruptcy proceedings before another court were still pending and the directive issued by the MFSA did not stall such proceedings or force All Invest to withdraw them. This showed that the company’s requests were being considered by the law courts, despite the directive.
The court referred to conditions in the licence granted to All Invest which precluded it from ceasing operations before obtaining the written consent of the MFSA. There was also a condition stipulating that the MFSA could delay a company’s investment services business or the winding up of such business “to comply with conditions imposed by the MFSA in order to protect the interests of the customers”.
Mr Justice Ellul therefore rejected the company’s complaint.
Sources said the company has appealed the decision.