Four months after it was ordered to compensate 55 former Continental Wealth Management (CWM) clients, Momentum Pensions Malta has lost appeals against two of the cases.
Separately, but during the same week, STM Malta Trust Company also failed to overturn a ruling in favour of a CWM client.
International Adviser understands that further decisions are in the pipeline and expected in the middle of December and into January 2022.
Who’s to blame?
Legal decisions are not known for their brevity and the Maltese courts are no exception. The Momentum cases run to 81 and 83 pages, respectively; with the STM document a more manageable 50 pages.
They can be found via this link, under Court of Appeal (Civil, Inferior).
While the bulk of the documents are in English, the more recent rulings are in Maltese – adding even greater complexity to interpreting the outcome.
The three cases in question have their own idiosyncrasies, but effectively centre on the same question: who is responsible for the losses incurred by the clients?
In a nutshell
The end clients each appointed CWM as their investment adviser – but the company was not appropriately licensed.
CWM instructed STM and Momentum to make investments on behalf of its clients.
Those investments heavily featured structured notes, resulting in considerable losses.
The clients argued that, as trustees, STM and Momentum should have acted to protect them.
The companies counter that there was no regulatory requirement to verify the status of appointed investment advisers until 2019.
Given that CWM collapsed in 2017, the companies say that they did not breach or fail to adhere to any rules in force at the time.
They say they acted on an execution-only basis under the instruction of a company appointed by the end clients.
End of the road
But the Malta appeals court ultimately agreed with the previous rulings that STM and Momentum had a greater responsibility to act in the best interests of their respective members – not least monitoring portfolio construction to ensure that it was appropriate.
They have been ordered to compensate the end clients to the tune of 70% of their realised losses.
International Adviser has reached out to both companies to request a comment on the latest rulings.
Momentum Pensions Malta said the firm “maintains the highest standards in delivering its responsibilities as a trustee and retirement scheme administrator and we are dedicated to supporting our members”.
“We did not provide investment advice and have worked to support customers affected by the collapse of Continental Wealth Management in 2017 as much as possible. We naturally respect the outcome of the full judicial process.”
