Investor Protection

By Mark Hollingsworth in Money Magazine

There is no doubt that the internet has opened the floodgates for potential investment scams. So called boiler room cold calling is common place and unlicensed financial consultants recommend investment products that offer no protection of capital. Sadly, many individuals, often those that can not take financial risks are taken in by these practices with serious financial consequences.
Before making any investment decisions, certain steps should be taken to quantify the advice and recommendations being received. Certain questions should be asked and backed up in writing before parting with your life savings. A legitimate investment recommendation must be supported by facts and you must be aware of the complaints procedure in the event that things unfortunately go wrong. You must be fully armed and prepared for all eventualities. The following list is aimed at helping you make the right investment decisions and from the right source :
Licensed and regulated advisors : If a firm claims to be offering you investment advice but is not authorised to do so then this should be an obvious reason not to proceed. A list of license holders can be found on the MFSA's website, www.mfsa.com.mt. There are approximately 75 license holders whose services include banking, insurance and investments. The category of the license holder is also very important as this can determine amongst other things whether the firm can handle client's money or can act with a delegated authority.
Investor protection : Are you aware of your rights if the advice that you have received turns out to be inappropriate or deemed bad advice ? Can you make a claim against the firm and do they have adequate Professional indemnity insurance to settle any potential claims ? We are very fortunate to have a specialist complaints unit within the MFSA whose role is to handle any consumer complaints. The unit also provides an education platform to assist both existing and potential investors. During 2009, the unit received 324 written complaints, 90 of which related to investments. In addition there were 39 verbal complaints and 147 consumer queries relating to investments. The role of the MFSA as arbitrator cannot be underestimated with a freephone helpline and dedicated consumer website www.mymoneybox.mfsa.com.mt as examples of the regulators commitment to helping investors.
Bank Protection scheme : Bank account holders in Malta are protected in the event that their bank fails up to €100,000. The need to spread your cash deposits across more than one bank is therefore advisable if your cash wealth exceeds this limit. The collapse of certain Icelandic banks in 2008 is still very fresh and severe lessons have been learned by savers who have deposited their savings with banks who offer headline grabbing rates of interest.
Experience of the individual providing advice : How long as the advisor been in the industry and what are his industry qualifications ? He should be able to provide you with their professional qualifications and adequate experience cannot be ignored. Unfortunately, salesman often from the US or Asia regularly contact potential investors to buy into stocks with great enthusiasm. Such unsolicited actions often result in individuals entering into contracts that are worthless, buying more and more shares as the share price supposedly rockets. When attempting to recover your gains, the salesman has disappeared along with your savings. If you wish to speculate on the stockmarket then obtain professional advice and support and never act on the basis of a hot tip from a stranger.
In summary, you invest with the expectation of making a profit over time. By seeking professional advice from licensed institutions, you are taking the right first steps. If things go wrong then you have the peace of mind that Malta has a very strong regulatory framework which is committed to supporting aggrieved investors. All license holders are required to have Professional Indemnity Insurance to cover any claims and investors can be reassured that investing through a Maltese firm offers strong levels of protection.

Mark Hollingsworth, Director, Hollingsworth International Financial Services Ltd
Tel: +356 21316298
e-mail: info@hollingsworth-int.com
Website: www.hollingsworth.eu.com
Authorised by the Malta Financial Services Authority to provide investment services, license IS/32457