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Investment products sold to inexperienced investors top complaints list

Office of the Financial Arbiter received 175 complaints

Arbiter for financial services Reno Borg.Arbiter for financial services Reno Borg.

Claims of complex investment products being sold to inexperienced investors accounted for almost two-thirds of complaints filed last year with the Office of the Financial Arbiter.

The office received 175 complaints last year, including 112 against investment providers. While 86 cases concerned bad advice, 18 complaints were categorised as being related to a particular collective investment scheme.

Details of the operations of the financial arbiter, which was set up in May 2016, were given in the annual report tabled in Parliament by Finance Minister Edward Scicluna.

By law, the arbiter is empowered to mediate, adjudicate and resolve disputes and, where appropriate, award up to €250,000, together with any additional sum for interest, to claimants.

During 2017, the office closed 114 cases, of which 64 went all the way, meaning a decision was handed down by the arbiter following submissions by the two parties.

A closer analysis reveals that 31 complaints related to investment services and five involving insurance companies were upheld in full. There were seven partially upheld complaints and 21 cases were rejected.

It seemed Malta is still haunted by a litigious habit

In the remaining cases, the complaints were either resolved amicably, through mediation, or did not fall within the office’s competence.

The arbiter handled 851 enquiries and minor cases in the period under review. A total of 396 were related to insurance, 171 to investments and 256 dealt with banking.

Apart from these cases, the office also had to deal with the La Valette Multi-Manager Property Fund saga, which involved 400 complainants. In this respect, it was pointed out that the large volume of documentation involved and the complex nature of the case absorbed a large share of the resources.

Eventually, last February, the arbiter awarded €3.4 million plus interest to the plaintiff but Bank of Valletta, which administered the fund, challenged the decision before the Court of Appeal.

The case dates back to 2012, when the arbiter had not yet been established.

At the time, the complaints were filed with the Malta Financial Services Authority and were subsequently handed over to the office. Launched in 2005, the Property Fund had performed badly to the point that it was suspended in 2008 and wound up in 2012.

In his report, the arbiter for financial services, Reno Borg, expressed his disappointment that mediation was the exception rather than the rule. It seemed Malta was still haunted by what he described as a “litigious habit”, he said.

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