The Malta Financial Services Authority (MFSA) has urged investment firms to adequately consider the characteristics of vulnerable and elderly clients when selling investment products.

Local bond issues are heavily subscribed by customers that are 60 years of age and over.

"Care should also be taken (by the investment firms) to provide the necessary explanations to ensure that investors within this demographic are aware of the features and risks of the bond issue," the authority said.

It pointed out that a supervisory review among a third of the sector’s regulated entities operating in the local market suggested that a number of investment firms did not undertake a sufficiently detailed assessment of how their processes could impact their vulnerable clients, whilst others did not outline how automated services with limited human interaction would impact this vulnerable cohort."

The supervisory review also observed that in some cases, investment firms’ procedures failed to specify that selling the product to clients who were not within the target market should only be a rare occurrence.

Investment firms are expected to establish the suitability of a particular financial product for their clients by considering a number of criteria, namely: whether they are retail or professional, their knowledge and experience, their risk tolerance and investment objectives. Firms are also expected to take into consideration the client’s financial situation, with a focus on their ability to bear losses.

When assessing their target market for the distribution of investment products, licensed firms should refer to the guidelines published by the European Securities and Markets Authority, the MFSA said.

In terms of advertising, the MFSA found that some entities were not conducting a proper assessment to establish which medium was the most suitable for their target market, and they were often resorting to mass communication to clients, as opposed to a more customised approach which reached only those clients who fit the product’s target market.