Investment firms must protect older clients, MFSA demands following review

The Malta Financial Services Authority (MFSA) has issued a directive to investment firms urging them to prioritise the needs of older clients, particularly those over 60, when selling bonds.

Following a supervisory review of a third of the local sector, the MFSA found that some firms failed to properly assess the impact of their processes on vulnerable clients, including how automated services affect those seeking more personalised support.

The MFSA's review highlighted shortcomings, such as insufficient consideration of clients’ financial situations and the improper sale of products to those outside the target market. Firms are expected to ensure that investment products are suitable by assessing criteria like clients’ experience, risk tolerance, and ability to bear losses.

The regulator also noted issues with mass marketing, recommending firms adopt more targeted advertising strategies.

Chief Officer Supervision Christopher Buttigieg explained: “Adequate selling practices and robust Product Oversight and Governance arrangements are two crucial elements which contribute to ensuring that during all stages of the investment products’ life cycle, investment firms act fairly and professionally in their clients’ best interest, making sure that products are not mis-sold.”

Meanwhile, Head of Conduct Supervision Sarah Pulis said “all licensed entities understand the needs of vulnerable clients by enhancing their process and adopt more cautious practices with respect to such clients.”

Compliance officers are urged to conduct random checks to ensure these standards are met.

The findings from the review are available on the MFSA's website for firms to implement best practices.