Corporate bonds as well as bonds and bonds, as they are called, can be a great investment and a slump. Whoever wants to invest in them, however, must know something about them. What is your weight? How bonds can be offered to the public and under what conditions is discussed in the commentary by economist Luk Vcha from Conseq Investment Management.

Let’s face it, we’re still not investing, and anything that has a solid income at least to the eye is for many of us a capitalist. We do not realize that the guarantee of solid input is as strong as the financial strength of its provider. Therefore, if the issuer of a bond is a company generating a continuous loss without any valuable assets and not providing adequate collateral, its promise to be sufficiently binding is minimally debatable.

It is no wonder, then, that corporate bonds have recently taken on the promise of some media, which often first draws attention to some sad stories when the owner of some issues drank or soon lost their invested pension. How can bonds actually be offered to the public and under what conditions?

The prospectus is not a safe deposit

The word word in this regard is called a prospectus. Several pages of pages, a large document with a fixed structure set out in the legislation, contain, among other things, information on the economic situation of the issuer, the issuance conditions of a specific bond and a warning of risks.

The prospectus must be approved by the bond issuer at the national bank and, if the bonds are offered to the public, it must also be published in an adequate manner. The approval procedure usually takes several weeks and its closure closes, which means that the document has met all legislative requirements. In this case, the investor itself does nothing about the security of the title.

Whether the bond tax meets the investment preferences, each investor must evaluate the basis for the first information from the prospectus. Approval of the prospectus means only the fact that the material contains all the information prescribed by law and is a necessary (and certain exceptions) condition for the bonds to be offered to the public. In this place, a number of investors are wrong to believe that the approval of the prospectus is a guarantee of a safe investment, because it was assessed by the NB. For this mistake, a number of investors pay their pensions.

Some bonds may not have a prospectus

This is the debt of a bond investor, if he also mentions the fact that not all publicly offered bonds must have a public prospectus, which, if nothing else, is at least a guarantee that the potential buyer has the opportunity to invest in his investment. to study. There are a few exceptions, where the publicly offered bond issue does not have to be prospectus.

Probably the most debatable of them is the size of the issue up to the equivalent of one million euros, ie currently less than 26 million crowns, which the prospectus may not have been approved for the public offer, even though they may still be offered to the public. This is widely used by many bond servers, the so-called three, which happily offer mini issues without a lot of key information. A potential buyer cannot reasonably evaluate such a bond here, even if he wants to and would have a patina of professional capacity.

It should be noted, however, that not all mini-bond issues suffer from this information failure, but there are not many exceptions. With a strong rope after a solid entry, I strongly recommend that they avoid bonds without a new information package like a devil. A reasonable investor should not invest in it, about which he has no information or does not offer it to him, a credible entity or intermediary.

The supervisor and the regulator also try to react to the given situation. In the field of education and strengthening of financial literacy, I can provide a very reasonable guide to the scorecard of corporate bonds, both actively and advanced bond investors, currently prepared by the Ministry of Finance, which will guide investors through the relevant parameters of bond issues and their evaluation.

Regulation versus education

There will also be voices and voices calling for strict regulation offered and invested in bonds. The first guideline is the NB’s deposit statement, which indicates how the NB will comply with the obligation of so-called professional care on the part of investment companies, investment managers and securities dealers when offering investments and own investments in corporate bonds.

The material is reserved for regulated entities and seeks to regulate once regulated and the most warming investors offered bonds outside the regulated financial sector. This will have a very limited impact on improving the transparency of the home market in corporate bonds.

I believe that intensive regulation is not the most effective way. In my opinion, this is the education and gradual building of investment literacy and the experience of the domestic investment audience. As in some areas, some of the experience is difficult to transfer and the hunter must wear it on his own or at least have it called first hand. The first of the first on the bond market will make the investor fully aware of the risks and difficulties that the bonds offer, and will be the first guide for our future investment.