All Invest loses appeal to start liquidation proceedings

The director of a bankrupt investment firm has lost an appeal on a Constitutional Court decision that threw out his complaint that a Malta Financial Services Authority directive to delay the liquidation of his company before it settled all its dues with clients, was in breach of his fundamental human rights.

Wallace Falzon, a director of All Invest, is facing claims from several of its customers, which the MFSA quantifies in its counter-claim “could run into the millions”.

The MFSA’s directive instructed All Invest to delay liquidation “until the transfer of clients’ holdings is completed in an orderly manner” and until any pending complaints or court proceedings are determined, and until the MFSA was satisfied that arrangements were in place for a proper safeguard of the company.

Falzon claimed the director limited his access to a court of law as guaranteed under the European Convention of Human Rights.

Originally the Constitutional Court had found no breach because Falzon was already appealing the directive before the Financial Services Tribunal.

Judge Anthony Ellul had said that the MFSA was not acting beyond its power in delaying liquidation, and that bankruptcy proceedings before another court were still pending so the MFSA directive had not stalled those proceedings.

The MFSA had originally stated that it could not allow the bankruptcy process to interfere with the investigative and regulatory proceedings concerning All Invest.

Former MFSA director-general Andre Camilleri had told the court that as company director, Falzon had to answer for the company’s actions. This mean that liquidation had to be delayed so as to safeguard clients’ claims against All Invest.

Camilleri had in fact testified in court saying that Falzon was trying to park his assets in a trust held by his wife and children, to divest himself of the assets he accumulated through the company and then start court proceedings to declare the company insolvent.

The MFSA suspended All Invest’s investment services licence over regulatory breaches in June 2013, following an investigation into the sale of complex investment products to retail investors

The MFSA has accused All Invest of “failing to act in the best interest of investors as required of all firms which provide investment services”.

The authority added that the company also did not maintain sufficient records to demonstrate compliance with regulations and conditions of its investment services licence. All Invest has appealed the MFSA directive.

All Invest also faces a civil claim from its former clients, who alleged they were misled investing their life savings in high-risk financial instruments in RBS, Barclays, Lloyds and SNS Bank, resulting in their complete loss.

The Mallia family of Attard accused All Invest of selling them high-risk products unsuitable for retail clients, and that the company advised them to cede, at a loss, an insurance policy they themselves had sold, in order to reinvest the sum recovered using the instruments in question.

The plaintiffs also told the court that Wallace Falzon was attempting to divest of his assets to then liquidate his firm, and filed their claim against his wife and children, as well as Patrick Massa, Rosewall Investments Ltd, and FZD Trustees and Fiduciary Services.