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Thursday, December 04, 2008

Bonds

Question - When is a bond not a bond?

Answer - When it is a "Guaranteed Equity Bond".

The definition of a bond (as per Wikipedia) is "a debt security, in which the authorised issuer owes the holder's a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity".

How strange then that various "respected" financial organisations in the UK are marketing "Guaranteed Equity Bonds" which do not pay any interest, but merely guarantee to underpin the capital invested and offer the chance of a modest capital appreciation in the event that the stock market rises over a set period of time.

Surely these cannot be termed bonds?

Are these companies not breaching various FSA and Advertising Standards Authority rules by describing these financial products as bonds?

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