Malta Financial Services Authority (MFSA) revealed that out of 474 investigations conducted in 2023, more than 25% involved suspected unauthorized financial activities or fraud. These investigations targeted clone firms, unlicensed trading platforms, and other suspicious schemes that could harm consumers.

In their statement, the Maltese regulatory body also issued stern warnings about the risks associated with financial content on social media platforms.

Unveiling Non-compliance Activities in 2023

Enforcement actions in 2023 totaled 77, with 60 resulting in administrative penalties amounting to €444,800, primarily due to non-submission of statutory documents by collective investment schemes and insurance firms.

Michelle Mizzi Buontempo, Head of Enforcement at MFSA, commented, "Enforcement is a crucial tool to ensure MFSA fulfills its statutory obligations and achieves strategic priorities. The meticulous work over the past two years, including the development of fine calculation models and corresponding guidelines, aims to provide more transparency on our operations to the public."

In 2023, over half of the investigations related to delays in document submissions, while others involved governance and internal control deficiencies, suitability and legality issues, market manipulation or abuse, mis-selling, and financial crime.

"In addition, we introduced settlement policies and revised administrative penalty publication policies as part of our efforts to enhance internal processes, ensuring that our actions are both deterrent and effective, while fair and reasonable in decision-making," Buontempo added.

In contrast, as one of Europe's most prominent financial market regulators, Cyprus's CySEC conducted over 700 on-site and remote inspections on regulated entities in 2023, imposing fines exceeding $2.2 million. These thematic audits aim to ensure regulatory compliance and protect investors.

During the same year, the UK's Financial Conduct Authority (FCA) revoked licenses of 1,266 unauthorized firms and imposed fines totaling £52,802,900, while the United States is renowned for imposing over $9 billion in financial penalties jointly by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

Warning against Unqualified Financial Influencers

In another warning, MFSA highlighted the rise of "financial influencers" who provide financial advice and personal finance experiences to followers on social media. However, many lack the professional knowledge and qualifications required to provide such content.

MFSA cautioned that "financial influencers" often fail to disclose properly the risks associated with the financial products or services they promote, focusing more on exaggerated potential returns. This can lead to unclear and misleading information, especially concerning complex financial products like Contracts for Difference (CFDs), forex, and cryptocurrencies.

Recent research indicates that ordinary investors tend to trust advice from "financial influencers" more than recommendations from friends or family. Gerhard Van Deventer, Head of Enforcement at the Financial Sector Conduct Authority (FSCA), believes that influencers' activities in financial markets pose a threat to retail traders' savings and financial well-being.

Additionally, the US Financial Industry Regulatory Authority (FINRA) reached a $250,000 settlement agreement this week with trading firm TradeZero over marketing missteps involving influencers.