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'Mis-Sold Bonds' - A Resounding Wakeup Call

Oct. 08, 2017 12:50 PM ETBPESF, BPESY, BMDPY, EUFN, EUFL, EUFS9 Comments
Mark J. Grant profile picture
Mark J. Grant

The Financial Times stated,

The commission said retail investors who were not 'adequately informed' about the potential risks of their investment could be eligible for compensation. 'MPS will compensate retail junior bondholders who were mis-sold by converting these bonds into equity and buying those shares from the retail investors,' the commission said. 'MPS will pay retail investors in more secure senior instruments.'

Reuters reported, "This capital injection could only be approved after junior bondholders and shareholders have contributed to the costs of restructuring, in line with 'burden-sharing' requirements under EU state aid rules," said EU Competition Commissioner Margrethe Vestager…"At the same time Monte dei Paschi has earmarked 1.5 billion euros to compensate retail junior bondholders who are the victims of mis-selling, it added."

CityA.M. now reports,

Retail bond investors in the world's oldest bank, Monte dei Paschi di Siena, are set to be reimbursed by the Italian government in the coming weeks… Retail investors were promised compensation totaling €1.5bn from state authorities. In yesterday's statement, Monte dei Paschi said it would issue senior debt to those retail investors affected which can be cashed in on 15 May 2018.

This marks the fourth round of "mis-sold" European bank bonds. The first was Banco Popular (OTCPK:BPESF) in Spain, then the two regional Italian banks and now Monte dei Paschi (BMDPD). The appropriate word, in my opinion, in English, is "scam," but I do not know the Italian translation. All of the institutional holders of this Italian Bank's debt either took a serious hair-cut or were wiped out. None were spared.

All of the American retail holders of Monte dei Paschi's senior debt, or subordinated debt, will take serious hair-cuts or will be wiped out. None will be spared. In other words, the Italian debt holders will be paid back, in full, while every debt holder, outside of Italy, gets macerated. This, in my

This article was written by

Mark J. Grant profile picture
Mark J. Grant is the Chief Global Strategist at Colliers Securities, LLC. The highlights of a 48-year career in the financial services industry include positions as President of an investment bank, head of Capital Markets for four investment banks, and serving on the Board of Directors of four investment banks. He has been designated as a Bloomberg Prophet, one of only 15 globally. Mark is one of the longest serving guests on CNBC’s “Squawk Box”, is frequently interviewed on Fox Business and Bloomberg TV, and is regularly quoted in the Wall Street Journal, Barron’s, MarketWatch and other business publications. His commentary, “Out of the Box,” is subscribed to by over 5,000 money managers and financial institutions in more than 46 countries. He is also the author of a book titled “Out of the Box and onto Wall Street.” While Mark’s institutional clients include some of the largest money managers in the world, he also works with high-net worth individual investors. His unique investment strategy is especially useful for people who need yield and monthly cash flows. He employs carefully chosen closed-end funds and exchange traded funds and notes to produce monthly income for his clients, currently he is able to provide yields are 10%+, however current performance is no guarantee of future results. For additional information, email Mark at Markjgrant@Bloomberg.net.

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Comments (9)

Wah La,"'The Hart of Darkness"
I honestly can't think of anything worse in a world that should be govern by law.
Mark J. Grant profile picture
Uh, hello, what about the American grandmothers and grandfathers that relied upon their retail broker who relied upon what the indenture claimed? Helpless, here, is not a matter of location
IDK guys. I was taught to not over leverage yourself and to save for my retirement. But damned if the US powers that be said during the financial crisis that uninformed borrowers were defrauded by the evil bankers. Solution? Lower interest rates, let defaulted borrowers live in houses mortgage and rent free while the rebuild their balance sheets and let the savers bear the brunt of the remedy to borrowers. Why is this different from Europe's decision? Until accountability returns to any of our cultures expect more of the same until the dominoes begin to fall.
fhbecker profile picture

Think you forgot the part about extracting huge amount of cash from evil bankers and share holders, after the evil bankers took over (forced?) failing dishonest institutions.

Think you will be waiting quite a while for politicians and their appointees to be held accountable.
Didn't forget. Government vilified bankers and arranged mergers between financial institutions and then fined them severely for "taking advantage" of borrowers. Talk about a swindle!

What I was trying to say is that our own government is the role model for what is happening abroad. You can't trust any government these days. They are all dysfunctional.

Ain't no one being punished until the middle class shows up to the doors with pitchforks. At that point it's gonna be ugly.
mikenh profile picture
Yes, there's a lot of screwing going on and your indignation is justified, but a good number of those 'local investors' were indeed hapless grandmothers and grandfathers who relied on their local bank and bankers and the assurance of the government. We probably have never had a comparable misrepresentation in the USA.
Windy Hill profile picture
I wonder if the mis-sold (scammed) investors here have a cause of action against any assets they can locate in the US? Seems like the star witness would be the EU Competition Commissioner.
And I have no doubt the political class of the club med countries are strong supporters of the "climate change " scam designed to rip off America; and of course military midgets depended on our protection.
ArtfulDodger profile picture
Good comment, xander. Very true. Thanks, AD
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