Financial Adviser’s position may be a material fact in a financial services complaint

The fact that an investor is also an investment adviser, has bearing on the fact that he took decisions that he was well aware of the risks that were being taken. This was held in a Court of Appeal judgement delivered on 15 September 2021 by Mr Justice Lawrence Mintoff in Matthew Henman and Sally Henman -v- Momentum Pensions Malta Limited.

This is an appeal from a decision delivered by the Arbiter for Financial Services on 28 July 2020. This case started when the Appellants, Matthew and Sally Henman applied to be members of a pension scheme run by Momentum Malta Retirement Trust, following advice from Continental Wealth Management. The scheme was licenced by the Malta Financial Services Authority. The Appellants filed a complaint in February 2018 asking for compensation after their investment fell through. Momentum contested the claim stating that Continental Wealth Management (CWM), registered in Spain should have been sued, since it was this company gave the advice. The company denied fraud or negligence, but the loss was due to the Appellants adviser.

The Arbiter held that Appellant was a financial adviser. Momentum was subject to Maltese law, including the Retirement Pensions Act, 2011 came into force in 2015. This law succeeded the Special Funds (Regulation) Act, 2002. The latter legislation continued to be in force until authorised by the MFSA.

Momentum was set up to provide retirement benefits in the form of a pension to those who reside in and outside Malta. The members were allowed to appoint their own investment adviser.

The Appellants assets were invested in the European Executive Investment Bond. CWM was appointed as the advisers of the Appellants. The Appellant worked with CWM and in fact he was his own financial adviser. The Appellant explained that he worked with CWM but in the capacity of selling QROPS and as such he was knowledgeable on UK pensions. He was never involved investments CWM. Momentum pointed out that in fact he was Senior Partner at CWM.

The Arbiter held that in view of his experience in the financial services world and his knowledge on the implications of these investments, the complaint was not upheld.

The Appellants in their appeal asked the Court to revoke the Arbiter’s decision and overturn it by accepting the complaint and liquidate compensation.

The Appellants in their appeal pointed out that reference to the term Senior Partner in an email only made reference to his title at CWM, as an employee. He also presented his employment contract, which listed limitations to the title of Partner.

He confirmed that he worked in the field of QROPS and not investments there was no correlation between the two. They criticised the Arbiter to deciding their complain on scanty and insufficient evidence. They also argued that if Matthew Herman is an expert, his wife Sally is not.

The Court of Appeal in its judgement pointed out that this case is different from other complained lodged against Momentum, and this is due to the fact that the Appellant was an investment adviser at CWM. This fact had a material bearing upon the complaint. The Court agreed with the reasoning of the Arbiter. As to the fact that Sally Herman was not a expert, the Court pointed out there were documents where both Appellants signed, others were signed separately but signed in a short time. It is unlikely that Sally Henman did not reply on her husband’s advice and the fact that they complaint was a joint one, strengthen the Court’s belief.

The Court then moved to dismiss the appeal and confirm the Arbiter’s decision.