The Malta Financial Services Authority has launched an Investor Awareness Campaign to coincide with World Investor Week, aimed at educating the general public.
“Consumers of financial services are often unaware or not fully aware of how trading venues operate and the difference between regulated and unregulated ones, and what the obligations of financial services providers are. Often, consumers who are not conversant and familiar with financial instruments and trading venues end up investing in the wrong type of product,” Deputy Head of the Securities and Markets Supervision Function at the MFSA, Lorraine Vella told The Malta Independent on Sunday.
The campaign aims to tackle these issues, educating and raising awareness amongst the general public and retail and small investors, about the different regulated markets, including Multilateral Trading Facilities and the financial investment instruments available.
“The target audience might be investing as a means of generating extra income, in addition to their pension or salary, for example,” explained Lorraine Vella. “Educating investors, especially retail investors on capital markets, will raise awareness on the inherent risks and therefore ensure that they make informed decisions about their investments. “
The campaign highlights the difference between regulated and non-regulated markets and the types of trading venues. “Some might ask, what is a trading venue? In simple terms it is the place where buyers and sellers meet to buy or sell financial instruments. There are different types of trading venues, with the traditional one being the regulated market (in Malta’s case, the Malta Stock Exchange),” Lorraine Vella said.
The Malta Stock Exchange is regulated by the MFSA. The traditional financial instruments include locally issued bonds or shares offered to the general public that are traded on the Stock Exchange.
Another type of trading venue is a Multilateral Trading Facility [MTF]. “An MTF is a self-regulated financial trading venue. This acts as an alternative to the traditional stock exchange regulated market, and typically buyers and sellers exchange shares and bonds in line with the rulebook of that trading platform.”
An example of an MTF in Malta is ‘Prospects’. It is operated by the Malta Stock Exchange and issues admitted to trading on this market are not approved by the Listing Authority. In this case, the conditions for admission to trading are managed by the Malta Stock Exchange.
“The main difference between a Regulated Market and an MTF is that bonds or shares trading on the Regulated Market (the Malta Stock Exchange) go through a vetting process by the Listing Authority before these bonds or shares are admitted to trading,” said Lorraine Vella.
“Also, such entities need to comply with what we call ongoing obligations. On the other hand, instruments admitted to trading on MTF need to follow the market’s rules and are not required to comply with the Listing Authority’s rules. Usually, companies having financial instruments traded on an MTF are smaller companies and considered riskier than those traded on a Regulated Market.”
For more information on how to make informed decision when it comes to investing, visit www.mfsa.mt/investorawareness or call the MFSA on Freephone 8007 4924.