The Malta Financial Services Authority (MFSA) has filed an appeal in Court against a decision of the Financial Services Tribunal, that ruled the executive committee took enforcement decisions and issued fines in violation of the law.
According to the MFSA, the decision taken by the tribunal was completely wrong, yet it has failed to bring any new arguments to the table.
Last week, The Shift revealed that the Financial Services Tribunal struck down a decision by the MFSA in which a €160,000 fine was imposed in 2021 on MC Trustees Ltd – a retirement scheme administrator – for a claimed breach of financial service regulations.
After MC Trustees challenged the decision, the tribunal declared that the committee’s decision was illegal. This set a precedent for all decisions made similarly since 2019.
As a result, all decisions made in the past four years may be declared void, and the MFSA could be held accountable for repaying all the fines paid during this period, amounting to millions of euro.
In 2019, the law was changed, and the MFSA had to appoint an independent Enforcement Decisions Committee (EDC) to decide on and execute decisions. This was meant to ensure a distinction between those filing charges (the executive committee) and those deciding on the outcome. Yet the MFSA never appointed the committee, allowing decisions and execution to be made by the same unit.
The Shift contacted the MFSA for comment on the ruling, and a spokesperson said the Authority would contest the tribunal’s decision through an appeal.
Submitting the same arguments already dealt with at the tribunal stage, the MFSA said its enforcement role is primarily vested in the executive committee.
“As a sub-committee, the EDC is a subordinate committee to the executive committee and subject to the Board of Governors appointing its members, the EDC acts and decides by the remit and rules of procedure established by the executive committee.”
“The MFSA did not ignore the law,” the spokesperson said, while not addressing the point that the EDC does not even exist at this stage.
Asked to state why the MFSA has never implemented the law and set up the EDC since 2019, the spokesperson said it was discussed on several occasions by the executive committee and the board of governors: “Several practical, methodological and procedural challenges have been considered”.
“The matter has been recently further complicated by legal and constitutional considerations which put into question the effectiveness of the EDC in its current form as an enforcement decision maker.”
The spokesperson did not address the question of what would happen and who would be held responsible if the MFSA loses the appeal.
Separate from the tribunal’s conclusions, the MFSA’s enforcement procedure is already being subjected to constitutional challenges by different parties.
Executive committee members are paid high salaries, reaching €150,000 each, due to the sensitivity of their role.