The Malta Financial Services Authority (MFSA) has revealed that over 25% of the 474 investigations it carried out in 2023 were related to suspected unauthorized financial activities or scams. These investigations targeted clone companies, unlicensed exchange platforms, and other dubious schemes that could harm consumers.

In a separate announcement from Tuesday, the Maltese market watchdog also issued a stark warning about the risks associated with finance-related content on social media platforms.

MFSA Investigations Uncover Scams, Unauthorized Activities in 2023

Enforcement actions in 2023 totaled 77, of which 60 were administrative penalties. These penalties amounted to €444,800, predominantly levied for the non-submission of statutory documentation by collective investment schemes and insurance undertakings.

“Enforcement is an important tool in ensuring that the MFSA complies with its statutory obligations Obligations In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you Read this Term and delivers on its strategic priorities,” commented MFA’s Chief Officer of Enforcement, Michelle Mizzi Buontempo.

“The meticulous work carried out over the past two years, on the penalty calculation model and the resulting guidelines issued to the public on how the MFSA calculates administrative penalties, are intended to provide more transparency on how we operate as a regulator.”

MFSA carries out over 470 investigations in 2023, a quarter of which relate to scams and unauthorised business https://t.co/kZeonNHnyi via @businessmalta pic.twitter.com/QEzFn3MUBk

— Malta Business Weekly (@BusinessMalta) June 11, 2024

In 2023, over half of the investigations were related to late submissions of documentation. The remaining investigations dealt with issues such as governance and internal control deficiencies, fitness and properness, market manipulation or abuse, misselling, and financial crime.

“Additionally, the introduction of a settlement policy and the revised administrative sanctions publication policy are some of the improvements that we have made to our internal processes to ensure that any action taken is dissuasive and effective whilst also being fair and proportionate in our decisions,” Buontempo added.

In comparison, the Cypriot CySEC, one of the most prominent financial market regulators in Europe, conducted over 700 on-site and remote inspections of supervised entities in 2023 and issued fines totaling over $2.2 million. These thematic audits were designed to ensure regulatory compliance and protect investors.

The same year, the British FCA revoked the licenses of 1,266 unauthorized firms and issued record fines totaling £52,802,900. The United States remains the record holder, with the SEC and CFTC collectively imposing financial penalties exceeding $9 billion.

MFSA Warns against Unqualified Financial Influencers

In a separate warning, the MFSA noted the rise of "finfluencers,” financial influencers who provide tips and personal finance experiences to their followers. However, many lack the expertise and qualifications to offer such content.

The MFSA warned that finfluencers often fail to appropriately disclose the risks associated with the financial products or services they promote, instead focusing on exaggerating potential gains. This can lead to unclear and misleading information, particularly when it comes to complex financial products like CFDs, FOREX, and cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term.

A separate recent study revealed that average investors trust finfluencers more than their friends or family for financial advice. Gerhard Van Deventer, the Divisional Executive of Enforcement at the Financial Sector Conduct Authority (FSCA), believes that the activities of influencers in the financial market pose a danger to the savings and finances of retail traders.

Also this week, the US FINRA reached a $250,000 settlement with the trading firm TradeZero over influencer marketing missteps.