Two of the eight companies which offered private placement bonds failed to file their annual reports on time, raising fears that investors may not be keeping up to date with developments that may affect them.

Eight companies have offered private placement bonds since 2012, which are not listed and therefore do not fall under the same regulatory regime. Although the Malta Financial Services Authority approves the issue of the bond, there is then no supervisory mechanism in place.

This means that there is no entity tasked with governance, which sources said was quite alarming.

“This is a very risky model to start with and investors need to be aware that they should be following the progress of the issuers – especially when the bonds are unsecured. But that some of them did not even file their annual accounts on time – which they should be doing anyway under the Companies Act – certainly highlights that governance is required,” the sources said.

Companies that issue private placement bonds must present their audited accounts to an annual general meeting within seven months of the end of their financial year. They then have 42 days in which to file them with the Company Registrar.

Although there are penalties for all companies that file their accounts late, thousands do, something that the Registrar is hoping to tighten up.

However, when private investors’ money is involved, there would usually be an entity to protect their interests through ongoing supervision. The private placement bonds are not always aimed at local investors. Delta1, for example, is a special purpose vehicle which was constituted for the purpose of issuing asset backed securities as permitted in terms of the Securitisation Act. About half of the private placements are not secured.

Questions to the MFSA remained unanswered.