The Malta Financial Services Authority has proposed two amendments to its bond issues policies which it had published on August 16, 2010.

The two policies introduced last year, targeted at the local retail market, were a requirement to set up a Sinking Fund (a pool of money set aside by a corporation to help repay a bond issue) and a requirement to report on the financial soundness of an issuer.

On Friday the MFSA said that since the publication of these policies it has been approached by several interested parties including prospective applicants and stockbrokers “for guidance on the applicability of these policies”.

In response to these queries the Authority is proposing the following two amendments to its policies:

The introduction of an exemption from the requirement of having a Sinking Fund and the Financial Soundness Report for bond issues where the minimum subscription amount is at least €50,000 per individual investor and where subsequent trading takes place only in multiples of €50,000 per individual investor.

Where a person is subscribing for securities on behalf of third parties, the minimum amount shall apply to each underlying beneficial owner. For the exemption to apply, an issuer cannot use any form of advertising or promotional activity to invite or induce the public to subscribe for or otherwise acquire these types of debt securities.

“After considering the local market trends, the Listing Authority feels that an investor affording a minimum investment and a subsequent trading threshold of €50,000 should not be considered as a retail investor and therefore a bond issue targeted at such investors should be exempt from the applicability of these policies,” the MFA said.

The second proposed amendment is the introduction of an exemption from the applicability of the policy on the preparation of a Financial Soundness Report for bond issues which satisfy adjusted criteria. Now, the minimum subscription amount is at least €10,000 per individual investor with subsequent trading taking place only in multiples of €10,000 per individual investor. Where a person is subscribing for securities on behalf of third parties, the minimum amount shall apply to each underlying beneficial owner.

The bond issue is now directed at investors having the necessary expertise, experience and knowledge to be in a position to make their own investment decisions and to understand the risks involved.

In this regard the bond issue may only be subscribed to through the services of an investment services licence holder duly authorised in terms of the Investment Services Act to provide investment advice, execute orders and/or send and transmit orders in relation to transferable instruments.

The investment services licence holder will be required to carry out a suitability or appropriateness test with respect to prospective bondholders and must be satisfied that the investment in the bond issue is suitable and/or appropriate for his client prior to purchasing the bonds. In the case of non-advisory clients, the investment services licence holder shall not accept any requests to purchase bonds in the relevant issue unless the licence holder is satisfied that the client has passed the appropriateness test.

“The reporting on the financial soundness of an issuer was introduced to reduce the possibility that a prospective local retail investor invests in companies approaching the market which are not financially sound.

“The Listing Authority believes that the investors satisfying the above criteria would be in a position to make an informed decision with regards to the bond issue without the need of specific reporting on the financial soundness of the issuer,” the MFSA said.

The MFSA will receive comments by not later than September 5 on the proposed amendments. Interested parties are to send their comments in writing addressed to the Chairman – Listing Committee (e-mail: listcomm@mfsa.com.mt).

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.