A judge ruled that the financial arbiter was correct in awarding compensation to an illiterate elderly housewife who was sold a complex financial product by an investments company.

Mr Justice Anthony Ellul ruled it was obvious the product sold to the woman was not a suitable one, notwithstanding representations made by former Crystal Finance owner and former Central Bank deputy governor Alfred Mifsud and investment adviser Michelle Stanmore.

Ownership of the company has since changed hands.

The financial arbiter awarded Rita Sciberras €3,700 in damages in December 2017. Crystal Finance appealed the decision, arguing the arbiter had no jurisdiction over the dispute and the conclusions reached were not based on fact.

The arbiter had been told that Ms Sciberras entered into what she thought would be a two-year investment in 2015. She said her adviser at Crystal Finance had asked her to sign the investment documents without first explaining or reading them out to her, the judge was told. A year later, Crystal Finance informed her she would not be able to access her capital until 2026.

The adviser should have known the product in question was not suitable

The arbiter found the client had not received proper advice from Crystal Finance as the complex product she was sold did not match her customer profile. The bond in question was found to be a high-risk one of a speculative grade.

According to the arbiter, Ms Sciberras put all her trust in the financial advice given to her by Crystal Finance. The adviser should have known the product in question was not suitable for his client, the arbiter commented.

The court agreed, saying it was clear Crystal Finance had not carried out an adequate suitability test.

In examining the company’s claim that the arbiter had no jurisdiction over the complaint, Mr Justice Ellul noted that past case law involving the firm had already ruled on that point. 

The court noted that Crystal Finance had even informed Ms Sciberras she could take her complaint to the arbiter when the dispute between the two parties arose.

In January, the arbiter awarded five investors €31,000 in compensation after losing money they invested with Crystal Finance.