Clients of a financial services company facing fraud allegations over the loss of €4 million yesterday claimed the Malta Financial Services Authority acted negligently and was responsible for the money they lost.
Forty-two investors in Maltese Cross Financial Services, which is at the centre of a misappropriation case, filed a judicial protest claiming the authority failed to carry out the necessary checks and site visits over the past seven years.
“The claimants consider MFSA as having been grossly negligent, particularly in the period prior to August 2014 when the supervision by the MFSA of its licensee appears to have been virtually non-existent,” the investors said in the judicial letter that was also filed against the Investor Compensation Scheme and the Registrar of Companies.
They challenged the authority to renounce to the statutory immunity which it enjoys in terms of the MFSA Act and judicially defend the accusations on the basis of merit and substance.
Before August 2014 the supervision by the MFSA of its licensee appears to have been virtually non-existent
In any case, they warned, the immunity was not applicable in cases were gross negligence was proven.
The former director of Maltese Cross Financial Services Ltd, Jean Claude Bugeja, is in court for misappropriation and defrauding two of his former colleagues and directors, Robert Cutajar and Stephen Spiteri, and about 220 clients of some €4 million.
In a previous sitting, Police Inspector Ian Abdilla said Mr Bugeja had recounted in a statement how a wrong decision in 2008 spiralled out of control.
In the judicial protest the investors noted it emerged the problems started in 2008.
The MFSA, which has 230 employees, had last carried out an inspection in 2008 and had failed to check out the situation since 2009. In fact, the authority was notified about the alleged misappropriation when the two directors filed a report this year, the investors said.
They also noted that, on August 12 this year, the authority issued a notice saying that Mr Bugeja was no longer authorised to act as the director, compliance officer, money laundering reporting officer and to give financial advice.
This meant that the authority had, in the past, acted irresponsibly by allowing Mr Bugeja to take on all those roles that did not allow for internal checks and controls.
In the protest they also asked to be given access to various documents including the annual returns signed by the directors and auditors since 2008.
They also asked that the law regulating compensation be amended in order to ensure less room for interpretation.
“Those claimants whose value of investments and bank balances under the control of Maltese Cross do not exceed €20,000 are unaware whether their holdings have been misappropriated, in part or in full, or if indeed their assets are still unimpaired…
“Therefore there is a real question as to whether, when a claimant makes an application to the Investor Compensation Scheme, he would be subrogating the Investor Compensation Scheme with all his rights, or else whether this subrogation can be limited to the amount of actual compensation paid,” they noted.
Lawyers Adrian Delia and Kris Scicluna signed the protest.