Tribunal criticises MFSA’s ‘manifestly unfair’ treatment of Satabank shareholders

The Financial Services Tribunal has dismissed a preliminary plea made by the MFSA in an appeal lodged by Signia Holding Ltd and Satabank, saying the authority had failed to provide full details of a directive against them.

The bank’s assets had been frozen by the MFSA in October 2018 due to anti-money laundering concerns. 

The dispute before the Tribunal stemmed from a directive aimed at increasing the powers of the so-called “Competent Person” – a legally established position that acts as a sort of caretaker appointed by the MFSA to safeguard creditors and investors when such companies are in financial difficulty. In 2018, Auditors Ernst & Young were appointed as the Competent Person to ensure good governance and control of Satabank as well as being able to implement the necessary measures for the beleaguered bank to be brought back into line with the MFSA requirements.

The MFSA-appointed team from Ernst & Young was to monitor the bank in the proper conduct of its business, but less than a week after being installed, it told Satabank to cease from taking new deposits or affecting withdrawals, thus freezing the bank’s operations.

Signia and Satabank had argued that a directive appointing auditors Ernst & Young as Competent Person and fixing remuneration for that person at €689 per hour, as well as directing the bank to cease and desist from accepting new business or allowing any withdrawals from the bank’s assets, was unjustified.

On its part, the MFSA had argued that an amendment to the appeal was filed late, after the lapse of a 30-day period allowed for its submission. The authority argued that this period started to run from the date when its decision was notified to the bank.

Both parties agreed that an aggrieved person may lodge an appeal to the Tribunal from a decision taken by the Authority under the Banking Act and that in this case the shareholder is an “aggrieved person” under the law. But the argument that the authority’s preliminary plea should be rejected on the ground that the Authority did not object to their request to amend their demands was ruled as unfounded. It was not objecting to the request but was also not relinquishing its right to defend itself in such a manner as it would deem fit, said the Tribunal.

However, the Tribunal also said that the Authority was “manifestly unfair” with the shareholder, who had begged the Authority to provide it with a copy of the full text of the directive. Despite knowing the shareholder to be an aggrieved person with a right to lodge an appeal, the authority had failed to deliver the required document to the shareholder when asked for it. “As a result of this manifestly unfair treatment, the Authority cannot now complain that the appellants’ request to amend their original demands was filed after the 30-day period had elapsed.”

It dismissed the MFSA’s preliminary plea with costs.