We’re excited to announce that Notes will be launching on Mintos on 25 May 2022!
In anticipation of the upcoming launch, we’ve put together some key information regarding the transition from the current set-up to investing in Notes.
- As a licensed investment firm, Mintos created the financial instruments Notes, which allow investors to invest in loans in a fully regulated environment
- Key benefits for investors include the safeguarding of investor assets, investor protection scheme, a suitable and appropriate product offering, and increased transparency
- On 25 May, the first Notes will launch on Mintos, marking the beginning of the transition period
- Up until 30 June, investors will be able to purchase both claims via assignment agreements (the current set-up) and Notes. Then from 1 July, we will switch to Notes only
- The way investors will invest on Mintos will remain largely unchanged, except for a few details
Paving the way for investing in loans in a regulated environment
Last year, Mintos became a licensed investment firm, and we created Notes as regulated financial instruments. Notes allow investors to invest in loans in a fully regulated environment with increased investor protection and transparency.
We’ve been working on submitting multiple base prospectuses for the Financial and Capital Market Commission’s (FCMC) approval, and now that the first are approved, Notes are ready to be launched!
If you’d like to learn more about Notes in general, we suggest reading our previous Overview of Notes or the FAQs on Notes
The transition from claims to Notes
Currently, investors can only invest in loans on Mintos by purchasing claims via assignment agreements. Whereas with Notes, investors will be able to purchase loan-backed securities – bringing investments in loans up to the standard of mainstream financial markets.
From 25 May, the first Notes will become available on Mintos – marking the beginning of the transition period where the purchasing of claims will be phased out step by step.
Up until 30 June, investors will be able to purchase both claims and Notes. Then from 1 July, investors will only be able to invest in Notes.
Please note that all investments made by acquiring claims before 30 June will remain unaffected and run as usual until the respective loans are repaid
Key benefits for investors on Mintos
Once we introduce Notes, the most significant change for investors will be the additional layers of investor protection and transparency that come into effect.
Safeguarding of investor assets following MiFID II
Mintos is required to hold all Notes and investor funds separately from its own funds, subject to the requirements of MiFID II. These requirements safeguard investors by ensuring Mintos keeps accurate records and accounts that distinguish all Notes and investor funds from any assets owned by Mintos. As part of this, Mintos reconciles its internal records and accounts regularly and takes steps to ensure it has adequate organizational requirements to minimize the risk of loss for investors.
See our previous blog post for more details.
Protection of Notes and investor funds under the investor protection scheme
As an authorized investment firm, Mintos is a member of the national investor compensation scheme. Established under Directive 97/9/EC, the scheme protects investors by providing compensation if Mintos fails to return financial instruments (in this case, Notes) or investor funds to investors. The scheme covers situations that typically arise from operational errors, for example, if Mintos is involved in fraud or administrative malpractice or if Mintos goes out of business.
The maximum compensation an investor can claim under the investor compensation scheme is 90% of their net loss, up to a maximum of €20 000.
Importantly, the scheme does not protect against investment risk, for example, poor performance of underlying loans, borrower default, or lending company default.
For more on this, see our page on investor protection.
Suitable and appropriate investment product offering
As part of being regulated, Mintos must ask all investors to complete an assessment that deems how suitable and appropriate the investment offerings on Mintos are for them.
When Notes launch on 25 May, we’re required to offer ways of investing deemed suitable and appropriate for an individual investor, based on their answers to the assessment. This ensures investors don’t take on excessive risk – as investing on Mintos isn’t risk-free. So for investors wanting only to preserve capital, for example, our offering wouldn’t be considered suitable.
In addition, the responsible investing requirement also comes into effect. Based on an investor’s circumstances, they’ll be able to invest using automated investing strategies up to a particular investment amount to protect them from excessive risk.
If you find that your circumstances have changed since you last completed the assessment, you can update your answers at any time in the Suitability & Appropriateness section of your account profile.
Increased transparency for investors
Investors will have access to in-depth prospectuses and “Final Terms” documents covering information about Notes.
Prepared under Prospectus Regulation and approved by the FCMC, a Mintos Notes base prospectus aims to help investors make well-informed investment decisions. It provides details about the risk factors, general information about the underlying loans, the lending company, Mintos, and general transactional information. Details that aren’t included in the Mintos Notes base prospectus but are required by Prospectus Regulation are in the Final Terms, such as details about the underlying loans (for example, currency and loan terms).
Also included in the Final Terms is a unique International Securities Identification Number (ISIN), provided by Nasdaq CSD SE’s regional central securities depository. ISIN codes are the most popular global securities identifier, which help create clarity and accuracy when trading, clearing, and settling investments in securities.
The currently approved base prospectuses are already available for viewing via the FCMC website.
Other important information
Changes to the Secondary Market
Until 30 June, investors can buy and sell investments via claims on the Secondary Market as usual. Then from 1 July onwards, investors will be able to buy and sell Notes only, as a result of regulatory requirements that only allow us to process transactions in regulated financial instruments on the Secondary Market.
This means starting 1 July, investors won’t be able to buy or sell investments via claims on the Secondary Market. Therefore, investors will have to hold the investment through to its maturity by waiting for the respective loan to finish.
Cashing out from Mintos strategies remains available
After 1 July, investors can still cash out any investments via claims they have made using Mintos strategies (for example, a Conservative strategy). As usual, cashouts are subject to demand from other investors at the time and current market conditions.
Tax withholding for investments in Notes
When private individuals invest in Notes, we’re legally required to deduct a withholding tax from their income, depending on their country of tax residence. Importantly, investors are entitled to relief from double taxation under double tax treaties.
While income tax differs from country to country, we don’t expect the withholding tax to be higher than the income tax that individuals are currently paying for income from investments via claims. We’ll provide more details on tax withholding on the date of Notes launch.
More information is on its way!
We’ll also provide a deeper insight into Notes and answer any questions investors may have about Notes as we approach the launch date. That’s why we’d like to invite you to share your questions.
Based on your questions, we’ll prepare a special “Mintos Investor Q&A: Let’s talk about Notes” article where we provide answers to the most “up-voted” questions on the provided link.
We’re looking forward to hearing from you!
Want to know more about Notes?
No question is left unanswered! If you’re just getting started with Notes, you can begin by reading the must-have information. You can also get insight into how Notes are created and discover the transparency benefits of the Mintos Notes base prospectuses. Or learn about the transition period from claims to Notes, take a deep dive into taxation, find out about the changes to the Secondary Market, and other general questions from investors in the Mintos Investor Q&A. Then, for anything not covered here, you can visit our dedicated Notes Help page.
Still curious to learn more? You’re welcome to share your questions in the Notes thread on the Mintos Community.