FINANCIAL SERVICES LEGISLATION

As the title of this paper has already indicated, we shall be focusing on the consumer of financial services. In fact, the consumer is today an important player, indeed a protagonist, in the constant development of the financial services industry, and the law has gradually recognised that it may no longer ignore or underestimate the significant part that he plays. In this sector the consumer is very often generally referred to as the investor, or as the depositor (in the case of banks), or as policy holder or insured person (in insurance).

Briefly, it remains one of the functions of the State to identify those areas of business activity warranting specific legislative intervention in view of the financial interest of the public in those areas, and because problems in such area may also carry disruptive social, economic and political consequences. Financial services constitute one such area. This sector is witness to the administration of people’s money by other parties acting as financial intermediaries. Collective investment schemes, bank deposits and policies for life insurance are typical examples where ordinary people entrust part of their funds to be administered by others. A number of different and complementary laws create a comprehensive network of checks and controls that seek to establish an appropriate level of security for these investors.

Financial services legislation in Malta consists of a number of laws which have created a complex though relatively streamlined and coherent system which allows for the carrying on of relevant business for the operators in the sector while broadly guaranteeing adequate safeguards for investors. The promotion and encouragement of new business activities in the financial sector is regulated by recent laws which have introduced principles reflecting the best practice current in the area concerned, and one may safely claim that this has not been undertaken at the expense of the investor.

One can start to analyse the status of the financial services consumer in Maltese law by assessing the wide-reaching legislative changes introduced by Parliament during the past twenty years. These laws have significantly altered, indeed revolutionised, the legal landscape in which financial services law shall be carried on in the foreseeable future. None of these laws make any reference to the Consumer Affairs Act or any other consumer law. Nor does the Consumer Affairs Act contain relevant direct links to any of the financial services legislation.

One fundamental question shall provide a constant backdrop to this exercise: are the rights and legitimate expectations of the small private investor adequately protected by the ordinary civil and criminal laws, by the recent consumer legislation, or are they better safeguarded by specific regulatory laws which govern areas of financial services, provide for a licensing requirement and authorise the taking of administrative measures by statutorily established supervisory authorities?

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