Bonds prospectuses - Letter (Times of Malta)

Times of Malta - Letter to the Editor
Wednesday, 9th September 2009

Bonds prospectuses

Karm Farrugia, Madliena
The two current corporate bond issues describe them as "unsecured and unsubordinated". Previous ones having been "subordinated", there was obviously no point to mention "security" or its absence.
Not so with "unsubordinated", since this might well induce the ordinary investor to infer some kind of security. It always baffles me why prospectuses meant for public consumption use phrases which are beyond the public's comprehension. Why not just circularise them among the professionals and merely advertise their highlights?


Sergio Galea Vincenti
I share - totally - Mr. Farrugia's concerns: In my opinion, prospective subscribers to bond issues should always ensure they read the small print published in any prospectus and always ensure they get the right clarifications and advice before committing themselves to any subscription.

My concerns are that one day, we may be faced with serious repercussions as a result of possible non-fruition of certain projects. For example, subscribers to bond issues in relation to, say, property development projects should always ensure that all due permits are in hand and uncontested before committing their savings. This is just one example of possible issues which the regulator and financial institutions should carefully consider.

Risk is always a part of any investment endeavor: Carelessness or, worse, the omission of information is a much more serious issue.

We are lucky, in Malta, to have above-average diligence exercised by regulators and financial service operators. Let's ensure that this is enhanced by ironing out any gaps that might exist in regulation for the benefit of both investors and operators alike.

Note: Click here to see related Letter on Times of Malta September 14, 2009 titled "Investing in a low-interest environment" by Norman Mifsud, Madliena.


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