IA reported in February that clients were lamenting a lack of communication from Momentum, as they said the firm was not replying to emails.

Nearly a month later, the clients said the company has not replied to their emails even after they had a lawyer contact the pension provider directly.

In 2020, a Maltese court ruled that clients were to be paid 70% of losses plus interest of 8% per annum.

But it’s not just the compensation sum they are anxious to find out about, as they do not yet know when they can expect to receive the money.

Personal details

The clients said that Momentum reached out in early March 2022 asking them to provide personal information – including address and bank account details – so that the firm could pay them.

But the members told IA they are refusing to give Momentum Pensions any details until a full compensation breakdown is provided.

After being sent reminders to update their personal data, one client said: “I’ve told them that nothing will be signed until they provide the information.”

A spokesperson for the firm told IA: “Momentum Pensions Malta maintains the highest standards in delivering its responsibilities as a trustee and retirement scheme administrator. We respect the arbiter and court ruling and have kept members continuously updated.

“The payment will be made in line with the arbiter ruling and a full and transparent breakdown of this payment will be provided to the member.”

In 2020, STM and Momentum Pensions were ordered to pay compensation to clients of CWM and they have lost appeals in Malta against this decision over the last few months.

But one of the clients told International Adviser that no one has received any money back yet.

Continental was the clients’ investment adviser but as it did not have the appropriate licences, it had to turn to STM and Momentum Pensions to make investments on behalf of its customers.

The investments heavily featured structured notes resulting in considerable losses for the clients.

Since 2021, Momentum has lost over 50 appeals, the latest one on 23 February 2022, and STM has lost three.

In all cases, the court sided with the former CWM clients who suffered investment losses.

Clarifications

The client told IA they are now getting frustrated because they are yet to receive the compensation the Maltese court awarded them – which was set at 70% of the losses plus interest at 8% from the date of the original court decision.

They received a letter from Momentum Pensions on 8 February 2022, seen by IA, which stated: “Further to our communication we issued on 31 January 2022, we are writing to you again to keep you updated.

“We confirm that we have now obtained what we needed from your investment companies to finalise the investment computations. We continue to liaise with our insurers and have written again to the Arbiter to seek clarification on the query raised. Additionally, given the compensation payments are Malta-sourced payments, we are currently obtaining tax advice.

“As soon as we have the required clarifications on the above, we will be able to update you further.”

Momentum added in the letter that it could not provide an “exact time period” for compensation payments.

IA understands that the clarifications Momentum has asked for are about the compensation sums, interest due, and any potential application of tax.

But the client, who sought legal advice, said that since they are not Maltese residents, there shouldn’t be any tax implications, and that sums and interest owed had already been set out in the court’s original decision.

Discording statements

A spokesperson for Momentum Pensions told IA: “Momentum Pensions Malta maintains the highest standards in delivering its responsibilities as a trustee and retirement scheme administrator. We respect the decision from the court, and we are following due process and have issued updates to members.”

The client added that the customers who won appeals against STM have not heard anything from the company.

But an STM spokesperson told IA: “We respect the decision from the court, and we are following due process and have issued updates to the members concerned.”

Presiding judge Lawrence Mintoff sided with the customers in all of the appeals – 43 of which were combined into a single case, while seven were handled individually.

The decisions were published on 19 January 2022 and saw the pension firm ordered to pay them compensation. At the time of publication, the Maltese court of appeal did not disclose the sums awarded.

They can be found via this link, under Court of Appeal (Civil, Inferior).

In one of the appeal decisions, which International Adviser translated from Maltese, judge Mintoff said: “The court decides on the appeal of the company dismissing the appellant [Momentum], upholding the contested decision in its entirety.

“The costs of the proceedings before the arbiter shall remain as decided, meanwhile the costs of this appeal shall be borne by the appellant company.”

The pension firm also lost two appeals in December 2021.

Disappointed

A spokesperson for Momentum told IA: “Momentum Pensions Malta maintains the highest standards in delivering its responsibilities as a trustee and retirement scheme administrator and only deals with regulated advisers and reputable discretionary fund managers working to clear investment guidelines.

“We did not provide investment advice to the customers affected by the collapse of Continental Wealth Management in 2017 and always ensured that scheme investments were executed in accordance with Malta regulatory requirements.

“Whilst we respect the decision from the court, we are disappointed that no consideration was given to the involvement of the other parties which is subject ongoing litigation. We believe this decision has potential wider repercussions for the Malta pensions industry. “

The case

CWM was appointed as an investment adviser by the clients in question. The problem, however, was that the wealth firm did not have appropriate licences.

It then instructed Momentum and STM Malta Trust to make investments on behalf of its clients, but they heavily featured structured notes, resulting in considerable losses to the CWM customers.

As a result, in 2020, Momentum was ordered to compensate CWM clients but it appealed the ruling, and so was STM who also appealed the decision, but lost in three instances in early December 2021.

Momentum Pensions is not related to Momentum Global Investment Management.

Separately, but during the same week, STM Malta Trust Company also failed to overturn a ruling in favour of a CWM client.

International Adviser understands that further decisions are in the pipeline and expected in the middle of December and into January 2022.

Who’s to blame?

Legal decisions are not known for their brevity and the Maltese courts are no exception. The Momentum cases run to 81 and 83 pages, respectively; with the STM document a more manageable 50 pages.

They can be found via this link, under Court of Appeal (Civil, Inferior).

While the bulk of the documents are in English, the more recent rulings are in Maltese – adding even greater complexity to interpreting the outcome.

The three cases in question have their own idiosyncrasies, but effectively centre on the same question: who is responsible for the losses incurred by the clients?

In a nutshell

The end clients each appointed CWM as their investment adviser – but the company was not appropriately licensed.

CWM instructed STM and Momentum to make investments on behalf of its clients.

Those investments heavily featured structured notes, resulting in considerable losses.

The clients argued that, as trustees, STM and Momentum should have acted to protect them.

The companies counter that there was no regulatory requirement to verify the status of appointed investment advisers until 2019.

Given that CWM collapsed in 2017, the companies say that they did not breach or fail to adhere to any rules in force at the time.

They say they acted on an execution-only basis under the instruction of a company appointed by the end clients.

End of the road

But the Malta appeals court ultimately agreed with the previous rulings that STM and Momentum had a greater responsibility to act in the best interests of their respective members – not least monitoring portfolio construction to ensure that it was appropriate.

They have been ordered to compensate the end clients to the tune of 70% of their realised losses.

International Adviser has reached out to both companies to request a comment on the latest rulings.

Momentum Pensions Malta said the firm “maintains the highest standards in delivering its responsibilities as a trustee and retirement scheme administrator and we are dedicated to supporting our members”.

“We did not provide investment advice and have worked to support customers affected by the collapse of Continental Wealth Management in 2017 as much as possible. We naturally respect the outcome of the full judicial process.”

The proposition aims to “deliver flexibility around retirement planning in a currency and jurisdiction that suits their needs” and it will be suitable for Irish expats or individuals with Irish pension schemes intending on retiring overseas.

Momentum’s offering has been developed fully in-house and supported by a senior team of Irish expats, alongside managing director Susan Brooks, a chartered tax adviser with the Irish Tax Institute, and a member of the Irish Institute of Pensions Management.

Transferring an Irish pension to a Momentum scheme enables expats to take advice from an independent financial adviser in the country where they live on how to achieve their retirement goals.

There are more than 500,000 Irish expats estimated to live overseas.

Demand

The proposition around Irish transfers enables members to manage their currency risks on investing and when taking retirement benefits.

In addition, it provides access to a wider range of investment options and discretionary fund managers and offers the possibility to consolidate existing Irish, UK and Qrops pension benefits into one Momentum scheme.

Brooks said: “Momentum has supported thousands of expatriates and international clients all over the world, offering regulated pension schemes across different jurisdictions.

“We’ve seen a growing demand for solutions for Irish expats and individuals who previously worked in Ireland and now reside permanently overseas.

“Leveraging our in-house experience and expertise, we’ve been able to develop and tailor our proposition for Irish transfers to address the demand and help advisers support more Irish expats around the world.”