Financial regulator carries out just 19 compliance visits in 2013

The number of on-site compliance visits carried out by the financial regulator remain abysmally low, new statistics presented in parliament have confirmed.

With the number of investment services licence holders, collective investment schemes and registered fund administrators reaching 390 in 2013, only 19 on-site compliance visits were carried out by the Malta Financial Services Authority.

That was a fair increase over just five on-site visits carried out in 2012 amongst 344 registered firms that year.

The regulator has previously argued that a physical on-site visit is not always necessary when the MFSA can analyse the complete financial reports of financial services firms.

But the news will be of little surprise to investors who have complained in judicial protests against the MFSA’s lack of rigorous compliance visits: clients who lost some €6.2 million in savings invested with Maltese Cross Financial Services, accused the MFSA of not performing its fiduciary duties by never conducting annual inspections at Maltese Cross.

On its part, the MFSA said that it was PricewaterhouseCoopers that positively confirmed Maltese Cross’s reports and financial returns without any reserve, and that PWC never identified any internal control issues in the annual management letter. “The fact that on-site visits to the Maltese Cross offices were not carried out does not mean that it did not carry out its supervisory duties… off-site oversight and monitoring was done on the basis of the documentation from Maltese Cross and its external auditors.”

Investors have demanded from the MFSA a complete set of financial statements of Maltese Cross for the financial years 2007-2013. “During this seven-year period, it appears that no MFSA site visits or inspections at Maltese Cross, whether on a scheduled basis or surprise visits, took place, especially between 2009 and 2014.”

In comments to MaltaToday, the Malta Financial Services Authority had claimed that despite its supervisory efforts, the chances that licensed entities fail “cannot be eliminated”.

“Notwithstanding the Authority’s supervisory effort, the chance that a licensed entity may fail cannot be eliminated. No supervisory system is waterproof and it is therefore unreasonable to expect supervisors to prevent all failures, particularly when we are dealing with humans whose behaviour might change during the years, together with their circumstances,” chairman Joseph V. Bannister had said.