I refer to the report titled ‘Governance lacking in private placements’ (The Business Observer, June 2).

The report touches upon a fundamental regulatory dilemma faced by regulators of financial services. Should regulators protect investors from making risky investment decisions?

Or should the regulator limit itself to ensure there is a proper framework to enable a reasonable investor to make an informed choice of the risksand rewards?

A financial services regulator should not have as its function that of precluding an investor from making a risky investment decision but, rather, its role is to ensure a proper framework to enable the investor to make an informed decision.

Applying this principle to the companies mentioned in the report, I have checked the prospectuses of three of these entities (Schembri Finance, Pendergardens Developments and Cars International).

One ought to clarify that these are not private placements, as said in the report, but, rather, they represent an issue of securities to the public (on the back of a fully-fledged registered prospectus in conformity with EU laws) without these securities being listed on any stock exchange. It goes without saying that there are inherent risks in buying securities that are not listed on an exchange since, without a proper platform for trading, the liquidity wouldbe low.

In addition, the Registry of Companies should clearly insist that companies file their audited accounts and fine the directors for any breaches.

Whether, however, there should be any additional regulation is entirely another matter. The important issue is that an investor is aware of the risks involved and that these risks are properly disclosed.

The most-often quoted articulation of this argument is that ‘sunlight is said to be the best of disinfectants; electric light the most efficient policeman’.

The Maltese regulator should not be a nanny regulator protecting people from taking riskier investment decisions.