Rome [ENA] Falcon Funds, a Malta-based asset manager, whose directors included Nationalist MP and former finance minister, is being investigated by the Swedish Economic Crime Authority (SECA) after claims that it has defrauded 22,000 Swedish pension investors of hundreds of millions of Swedish krona. Falcon had been accused by the Swedish Pensions Authority (SPA) of “deceitful and fraudulent actions".
The three sub-funds – cautious, balanced and aggressive – in the Falcon Funds SICAV had previously been registered as eligible UCITS funds in the Swedish Premium Pension System. In fact, Swedish savers can choose to allocate a part of their retirement pension, equivalent to 2.5% of their annual salary to any of the private pensions regulated by the pensions authority. Falcon Funds is one of them. Malta financial Services Authority defined Falcon Funds SICAV plc Falcon as Aggressive Fund. The sub-funds were managed by Malta-based Temple Asset Management (TAM), although Falcon has not only cancelled the contract but is now suing TAM.
The SPA launched its own probe into Falcon in late 2015 and subsequently de-registered the sub-funds, with most of the investors’ interests moved to AP7’s Såfa default option. The Swedish regulators also issued a redemption order in June 2016 for the return of investors’ capital from the company. So far, nearly SEK1.3bn (€136m) has been returned, out of the SEK2.4bn total value of the sub-funds at the time of the order. According to the Swedish Authority Falcon Funds made risky investments and exaggerated the value of the funds.
It was late last year when the SPA asked SECA to investigate Falcon, after it denied to return all the investors’ money. There were allegations that the company had illicitly defrauded pension savers to put their savings into its funds, and that the investment policies of the funds were not comprehensive . Falcon was also accused of conflicts of interest in investing savers’ money. A key player appears to be a Swedish businessman who acted as an introducer for Falcon Funds to the SPA, and who is also being sued by Falcon Funds. The businessman has been linked by the SPA with improper behaviour in relation to the sub-funds’ investments in exchange-traded instruments (ETIs).
The SPA strongly suspects that Falcon Funds has chosen to invest in the ETIs due to a business relationship with the said swedish businessman, which constitutes a serious conflict of interest. The Agency concludes that the instruments’ design may be purposely non-transparent in order to veil any further analysis of the underlying assets and the risks connected to an investment in the ETIs. Arne Fors, the SECA prosecutor said: “If a crime has been committed in Sweden, then legal action would be brought in Sweden. But if the crime was committed only in Malta, proceedings would only take place there.” Meanwhile, the Malta Financial Services Authority (MFSA) has appointed KPMG Malta to run Falcon Funds in place of the company’s own management.
Last September, the MFSA had supported the SPA’s demand for the return of investors’ capital, ordering Falcon to comply with EU regulations. Falcon Funds has inflicted serious damage on both Swedish pension savers and the Swedish pension system and the objective of the authorities to get as much money back as possible. On the other hand, Falcon Funds are now suing Temple Asset Management (TAM) the fund manager whose responsibility was to invest the money. They have also sued the Swedish businessman, who acted as an introducer for Falcon Funds with the SPA and TAM which invested at least €10 million in financial instruments in which the Swedish broker had an interest in, and then used to issue loans to other companies at high interest rates.