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Five suggestions to better protect Maltese investors from Non-Timely Filings
08 Jul 2018

The timely publication of financial statements is not just an essential requirement for companies but also a vital necessity for investors who use Income Statements, Balance Sheets, and Cash Flow Statements as their basis for the analysis of the financial soundness of a company.

The proper and timely filing of financial statements is even more of a prerogative for listed companies and those having publically traded bonds. As financial statements provide an insight of the company's overall performance, prospective investors use them to make an informed decision before investing in the company.

In the absence of a proper publication of financial statements, the market for a company's shares and bonds could be jeopardised as publicly available information about the company becomes unavailable. This increases the risk that trading would take place between two parties who do not possess the same level of information about the company's operating performance.

These risks are even more pronounced in small markets like ours. Modest communication levels from listed companies and relatively few participants in some areas of the market makes the reliance on the timely and proper publication of financial statements even more indispensable.

Indeed, almost every listed Maltese company ensures that accounts are issued on time and in line with the market rules, which allow companies four months to release their financial statements following the end of the financial year. However, the recent behaviour of very few bad apples is putting at risk the efforts of many stakeholders, who have been carrying out a sterling job in nurturing an effective and robust local capital market.

The present listing rules, which regulate the behaviour of Maltese listed companies, presently permit the suspension of trading in bonds and shares of non-compliant companies for ten days. The suspension can be rolled-over as long as the company remains in breach of the regulation. Beyond this, however, the rules seem to limit the powers of the regulator in ensuring proper and timely financial statement publications by listed companies.

Besides, merely suspending trading in bonds or shares of non-compliant entities, without enforcing the adherence to timely filing rule, can potentially punish the investors rather than the company itself.

Given the ripple effect that such situation could have on the reputation of our Industry, market, and the country, it might just well be our wake up call to improve the powers of the MFSA, related to the enforcement and adherence to the listing rules.

The following are some suggestions:

  1. Impose immediate and relevant financial penalties to companies failing to issue financial statements on time.

  2. Preclude companies to raise capital from the public until they demonstrate proper and consistent adherence to the rules for a prolonged, consecutive and continuous time period.

  3. Oblige the company to make an offer to fully reinstate investors with the value of their investment before the suspension if the company fails to issue its financial statements for a prolonged period of months.

  4. Bondholders could also be protected through debt covenants which would allow them to ask early repayment of the bonds in these instances. A similar clause could be included for shareholders as well. Rather than a listing rule, this could be an added level of comfort provided by the company at offering stage.

  5. Allow companies to file a Late Filing request which would permit corporations a very short extension period (less than a month) for the issuance of the statements. This should be done on an exceptional basis, following a request by the auditors explaining the reason for the delay.


It is in the interest of everyone to ensure proper conduct in the local stock exchange. The success of a capital market is not measured just by volumes of trades or the number of listed companies, but most of all, by the quality of issuers, the conduct of all participants and the reputation that emanates from such.

Steve Ellul is a chartered financial analyst, a visiting lecturer at the University of Malta and Unit Head at BOV Asset Management Limited.  

Published on The Times of Malta on Sunday - 08th July 2018 - Click here to download
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