Couple who lost investment accuse MFSP of abusing of their position

A couple who say they were financially inexperienced have accused Micallef Falzon Stellini Pace Financial of abusing their lack of knowledge, after they lost their investment with the financial services firm.

MFSP are facing yet renewed accusations of negligence with clients' savings after Joseph Gialanze and his wife filed a judicial protest claiming the investors sold them services that were unsuitable for retail clients like themselves.

The Gialanzes are claiming that MFSP director Lorraine Falzon approached them to sell them financial services aimed at professional and experienced investors. Pensioner Joseph Gialanze, who worked in the construction industry, explained that neither himself nor his wife, a housewife, could read or write in English, which put them at the mercy of their investors.

In their judicial protest the couple held that MFSP invested their money in high-risk investments when the company knew that the Gialanzes only qualified as retail clients. The couple alleged that MFSP and Lorraine Falzon abused their lack of financial experience and made them sign documents, which the plaintiffs did not understand.

Joseph and Carmen Gialanze also said that the Malta Financial Services Authority had failed to regulate the operations of MFSP and in doing so became an accomplice in the losses and damages the couple suffered.

The judicial protest was signed by lawyer Paul Lia.

The financial regulator is already investigating breaches of the investment services rule by MFSP Financial, after 800 Maltese investors who risk losing €17 million after the failure of the Dutch bank SNS and two Australian funds.

631 investors placed over €14 million in the two Australian funds administered by LM Investment Management, but MFSP claims that it is 'not privy to information' that it will not be easy for the investors to recoup their monies. MFSP has rejected comparisons of the LMIM fund with the case of Dutch bank SNS Reaal, which was nationalised in February 2013, leading to a full loss of capital for subordinated bondholders. "The two situations are very different."

183 investors placed €3 million in high-interest bonds of Dutch bank SNS Reaal, the fourth largest bank in the Netherlands. The state bailout cost €10 billion to prevent the bank's collapse from defaulting property loans.

Maltese investors bought bank bonds with an interest rate of 6.25 per cent through financial inter­mediary company All Invest.

MFSP Financial Management was fined €12,000 by the MFSA in October 2012 and had its licence to sell complex products restricted for three years, after an investigation into sales practices determined that in a number of instances MFSP had failed to act in the best interest of investors.

The decision has been appealed by MFSP.