The decision of the  Court of Appeal in Malta confirmed what we all had known for years, that being the role of Trustees in the many offshore Tax Havens, but in particular, most egregious Guernsey, Jersey, Malta Cyprus, Isle of Man and many more, was to strip Pensioners and unsophisticated Retirees of their life savings by enticing them to cash in their safe retirement Pension plans which were subject to Taxation and transfer these funds into Trusts set up in Tax Havens.

This was done through massive advertising and holding Promotional Events by Financial Advisors who had sprung up along with hundreds of fraudulent Funds worldwide after the GFC when Insurers saw the opportunity of selling these more often than not fraudulent or insolvent Funds. IFA’s who were once directly employed by Insurers were terminated and assisted to be set up as Independent Financial Advisors not responsible to Insurers as in their previous role of Agents now in receipt of Commissions for recommending Funds on their Investment Platforms.

The IFA’s recommended numerous Funds which had approached them in return for kickbacks from the Funds to their investor Clients who had cashed in their  Pension savings, advising them that these Funds were safe investments providing far better returns. Trusts were set up in the various Isles and Hong Kong to manage these cashed in Pension savings and the Trustees who were then solely in charge of these funds on behalf of the Pensioners and aged retirees invested the monies in the  Funds recommended to their clients or on their own initiative without taking due care as to the suitability of these Funds stated in the promotional documentation “as suitable for professional investors only”, many of which were demonstrably insolvent or outright fraudulent. The Trustees went even further to protect themselves from liability by having their Client Beneficiaries sign documentation protecting them from responsibility and shifting any liability for loss or failure onto the Independent Advisors. It has always been evident that the Trustees carried the responsibility a Fiduciary owes to a Beneficiary in a Trust as the Arbiter and Court of Appeal found.

The real fraud consisted of the Financial Advisors taking kickbacks received from the Funds(unknown to their Clients) who approached them as well as receipt of Commissions of 7% or more from the Insurance Companies depending upon the length of the investment in some cases up to 10% or more. The Funds had to be purchased from the Platforms of Insurers who set up so-called Insurance-related Bonds ( to avoid Financial Regulations ) and charged management fees for the length of the investment, the question being how the Funds were approved by the Insurers as appropriate for unsophisticated  Investors in the first place. It has now been disclosed that the Insurers knew of kickbacks to the IFA’s who recommended the Funds be purchased from their Platforms. An additional question has now arisen as to whether the Insurers themselves received incentives from the Funds whom the IFA’ recommended adding that they professed no financial obligation to vet or otherwise undertake due diligence as to the Funds before admitting them onto their Platforms.

The Funds themselves clearly stated that they were suitable only for Professional or Experienced Investors which was ignored by the IFA’s, the Trustees and the Bond Provider Insurers. It gets worse Once the IFA had recommended the Fund and the Bond set up by the Insurer in the Investor / Pensioner’s name the Insurer proceeded to purchase the Fund in its name thereby depriving the Investor of any rights to the Fund whatsoever. When the Fund failed as so many did either through insolvency or outright theft as in the case of Axiom where the promoters are before the UK Criminal Courts or in the cases of Premier Rare Earth and another Australian based  Fund LM MPF where the Promoters simply stole the monies from the Funds. All Trustees should now take notice that they are liable at Law for negligence in their role as Trustees and can and should be sued in the event of financial loss to their Beneficiary Clients resulting in their failure to exercise the duties owed to their Beneficiaries. These cases are at long last about to see the light of day after years of obfuscation delay and denial whilst many of the pensioners have been reduced to poverty and in many instances suicide.

Fund administrators and trustees of pensions funds must carry administer the investments in a diligent manner and not depend solely on what third party advisers recommend

Fund administrators and trustees of pensions funds must carry administer the investments in a diligent manner and not depend solely on what third party advisers recommend. This was held in a Court of Appeal judgement delivered on 26 November 2021 in Jane Coleman -v- STM Malta Trust Company Management Limited. The Court of Appeal was presided by Mr Justice Lawrence Mintoff.

The defendant company, STM Malta Trust Company Management Limited (STM) appealed a decision delivered by the Financial Services Arbiter following a complaint lodged by Jane Coleman. The Arbiter upheld the complaint and described it as being fair, equitable and reasonable. The responsibility was shared with other players in the case. The Arbiter was ordered to reimburse the losses of investments Coleman incurred.

STM appealed this decision on the ground that the Arbiter should have allowed the investment adviser should have been called into the suit. The appellant argued that the investment portfolio was not according to law and it also contested the quantum of the damages ordered to pay.

The case concerned a complaint against STM which was the trustee of a pension fund. The complainant was of the opinion that STM acted irresponsibly and therefore she suffered damages. STM defended itself by saying that it acted on the advice of the investment adviser, Continental Wealth Management. Furthermore, Coleman left signed forms in the blank for the adviser to make use of.

As to whether Continental Wealth Management and General Worldwide Insurance Company Limited should have been called into suit and the Arbiter refused the request, the Appellant held it was the complainant that had indicated both companies as being negligent with regard to advising her on her investments. This is allowed in Article 2 of the Arbiter for Financial Services Act.

The complainant argued that her complaint was directed at STM and therefore, the Court of Appeal agreed with Arbiter that the other two companies should not have been included in the complain proceedings. Furthermore Article 19 of the Arbiter for Financial Services Act allows complaints for financial services providers. The two companies are not such providers.

The Court of Appeal agreed with the Arbiter because the Arbiter had objected to the request to include the two companies took place at a late stage, when the complainant had finalised her evidence and therefore, it was not correct for two new replies to be included when Coleman’s evidence was closed. Furthermore, the complaint was directed to STM as the Trustee and administrator of the pension fund. Other reasons included were that the two companies do not offer services in Malta and therefore, not licenced in Malta.

As to the second ground of appeal that STM was not to be held responsible for Coleman’s losses, STM held that it was Continental Wealth Management (CWM) that gave her the investment advice and STM acted on that advice. All instructions received were signed by the complainant.  This was rebutted by Coleman. Who held that she is not a professional investor and she expected that STM uses more diligence when investing her money, as outlined in the Trusts and Trustees Act and the guidelines issued by the Malta Financial Services Authority? The Arbiter held that there are investments reserved only for professional investors and this was one of them.

The Court also agreed with the Arbiter in this aspect. The Arbiter did correctly analyse the complainant’s application to join the fund. STM was licenced in Malta to administer the pension fund. The Arbiter did also analyse the investments made in collective investment schemes, then described in detail STM’s obligations, functions and responsibilities as administrator of the pension fund and as a trustee, which are also regulated by the Retirement Pensions Act. The Arbiter held that STM had a legal obligation to supervise and protect the investments and make use of the principles of diversifications and prudence. The main scope of the fund was to “provide for pension benefits for its members and beneficiaries”.  The Appellant company did not provide advice to the complainant, since this was done by CWM. The fact that this company was not regulated in Malta, meant that STM should have provided greater protection to Coleman. STM should not have offered administration services. The Appellant should have used more prudence when the investments made should affect the fund. The company failed in giving additional information on the investment made. Furthermore, STM is not contesting that Coleman made losses. The Arbiter in his research found that the investments gave high interest and therefore, as a fact were high-risk investments and should only be made by professional investors. The Appellant company criticised the Arbiter for carrying out an investigation on his own accord. The Court held that there was nothing wrong with this and carried out his duties in terms of Article 25 of the Arbiter for Financial Services Act. The Arbiter’s role is to investigate complaints in terms of the Act and he should not limit himself to the documents presented by the parties. It was not aimed at helping one of the parties, however, to assure that justice is done.

The Court then concluded that although an investment portfolio case makes a loss, the risk may be decreased if there is proper diversification and prudent investments. The case in hand showed that there was a lack of diligence in administering the fund and in carrying out their obligations as a trustee. It did not reach the level of reasonable and legitimate expectations.

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

21 August 2020 | Case Updates

The Serious Fraud Office has charged three men with multiple offences in connection with its investigation into the collapse of the Axiom Legal Financing Fund. Timothy Schools, David Kennedy, and Richard Emmett are charged with carrying out a fraudulent scheme to divert money from the Axiom Legal Financing Fund for their own benefit.

The case will be listed at Westminster Magistrates’ Court on Wednesday, 30 September 2020.

Notes to editors:

1. Timothy Schools  (DOB 19.03.1961), a former solicitor, has been charged with three counts of fraudulent trading, contrary to Section 993(1) of the Companies Act 2006, one count of fraud, contrary to Section 1 of the Fraud Act 2006, and one count of transferring criminal property, contrary to Section 327(1)(d) of the Proceeds of Crime Act 2002.
2. David Kennedy (DOB 07.01.1953), a former independent financial adviser, has been charged with one count of fraudulent trading, contrary to Section 993(1) of the Companies Act 2006.
3. Richard Emmett (DOB 02.07.1973), a former solicitor, has been charged with one count of fraudulent trading, contrary to Section 993(1) of the Companies Act 2006, and one count of being concerned in an arrangement which facilitates the acquisition, retention, use or control of criminal property by another, contrary to Section 328(1) of the Proceeds of Crime Act 2002.
4. The SFO announced its investigation on 16 May 2017.
5. As these are live criminal proceedings, the SFO cannot comment further. The strict liability rule of the Contempt of Court Act applies.

Related Cases

• Axiom Legal Financing Fund

Quilter International, now owned by Utmost Group, has come under the spotlight for still taking client fees from a fund mis-sold by a subsequently jailed financial adviser, in a Sunday Times report on 12 December.

The Sunday Times said that Martin Rigney of Sheffield- based Topps Rogers Financial Management had not told clients that he was moving their money into high-risk unregulated investments, including Poland Geared Growth.

These investments have been frozen since 2008 and are now administered by JTC Fund Solutions (Guernsey) Ltd.

Quilter International has continued to take administration fees from investors to hold the mis-sold fund, it said, citing a number of clients affected by these ongoing costs.

While there was no suggestion of any wrongdoing by Quilter International, the adviser’s former clients “raised concerns about its failure to detect millions of pounds being transferred from ordinary regulated investments to high-risk unregulated ones over a short period by a single adviser”.

A spokesperson for Utmost Group confirmed to International Investment the following statement:

“Utmost Group completed the acquisition of Quilter International on 30 November 2021. Whilst we are not in a position to comment on individual cases, the provision of good customer outcomes is central to Utmost Group’s strategy and we take our obligations to clients seriously.

“The Group is continuously working to improve customer outcomes, providing value for money as well as full transparency around fees and charging structures. We apply the highest standards to the advisers we work with and work with advisers to ensure that customers outcomes are paramount.”

In a statement to the Sunday Times before it was taken over, Quilter International said: “Each case has been individually assessed and in some cases there was evidence of contributory negligence. We appreciate that these clients trusted Martin Rigby, but Quilter International cannot take responsibility for the adviser’s actions and is also not responsible for third-party fund selection. We would have conducted checks to ensure that Martin Rigby was a regulated adviser.”

In September 2017, Martin Rigney, formerly of Sheffield-based Topps Rogers Financial Management was sentenced to seven years in jail for forging client signatures.

He invested his clients, many elderly, into a high-risk unregulated collective investment scheme.

Rigney had forged documents by either writing clients’ signatures himself or photocopying real signatures.

He was found guilty of 16 counts of forgery back in July, following a 10-week trial, and sentenced on 1 September 2017.

At the time, according to the Derbyshire Times, detective constable Julie Wheeldon, who led the investigation, said: “Martin Rigney committed abhorrent abuses of trust against his clients, who were consequently caused financial difficulty and emotional distress.

“Our thorough and lengthy investigation demonstrates how seriously we take this kind of offence. Today’s passing of a seven-year sentence provides a significant deterrent to others that might think of defrauding trusting clients.”

Rigney had already been fined by the Financial Services Authority (now the Financial Conduct Authority) and banned from regulated activity for advising on unregulated collective investment schemes (UCIS).

“You will have read the most recent expose’s on the criminal activities of a rogue Investment Advisor Martin Rigney who with the unwitting assistance of the recently sold Isle of Man Insurance Company Quilter International managed to steal hundreds of thousands of Pounds from innocent mainly retired Pensioners by advising them to transfer their Pension Funds in safe ordinary regulated Investments and in many instances their life savings into high-risk unregulated Investments  Funds held by Quilter International Insurance in the form of Redemption Bonds for which Quilter paid  Advisors varying rates of Commission of 5% or more and additionally charged management fees deducted from the funds in these Investment Bonds held on behalf of the Investors. Apart from the criminal activities of Martin Rigney involving forgeries for which he served imprisonment in 2017, there remain hundreds, perhaps thousands of Investors whose money remains trapped in these failed Funds and unable to redeem such of their failed Investments as may remain in these Bonds due to outstanding Management Fees and the demand by the Insurers that Investors sign documents absolving the Insurers from any liability arising from these failed Investments. You may also have lost your investments as a consequence of having been advised to invest in these Funds by an Investment Advisor typically following the Financial Crisis of 2009 but subsequently as these fraudulent Schemes went well into 2015and beyond..

You might have suffered financial loss as a result of a failed investment through a Pension Scheme of QROPS. What these Articles are yet to disclose is the fact that there are current Court Proceedings in the form of a huge Class action against Quilter International and Friends Provident Insurance also in the Isle of Man based on recommendations by Financial Advisors who recommended these Funds on behalf of their Clients on receipt of which the Insurers invested in extremely high risk and in many instances fraudulent Funds without having to undertake any or insufficient due diligence which they were legally obliged to do which would have disclosed the inordinately high risk or fraudulent nature of these Funds which inevitably failed. If you are an Investor in any of these failed or fraudulent Funds through the Agency of a Financial Advisor or Trustee of a Family Trust in conjunction with an Insurance Company in particular Quilter International or Friends Provident Insurance feel free to contact us with a view of possibly joining the Current Class Action the particulars of which are set out in this Web Site and in any event we will be happy to advise you.