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February 06, 2008
Short, Automated Prospectuses To Lower Printing and Postage Costs
Investor communication is in dire need of reform, said Forrester analyst Craig LeClair in a webcast this afternoon on the SEC's proposed short-form prospectus. Most prospectuses are "written by lawyers for other lawyers to digest," he said. "It's an arcane format, it's hard for investors to get what they need out of it." The prospectus for an variable annuity, for example, might be 1,000 pages long and it may not be clear to the investor which product he owns. "The value of the information put in that large book is diminished by its inclusion with non-relevant information," he said.
The SEC has been encouraging transparency in investor communication for several years and as part of that effort has proposed a simple, two-page summary of an investment product. Although issuers will be required to file both short and long prospectuses, they will not have to deliver the long form to investors, they will merely have to make it available on demand.
Forrester Research recently conducted a survey of 150 broker-dealers, banks, insurance companies, providers of retirement services and mutual fund companies, to find out whether and how they'd adopt the short-form prospectus. The majority -- 64% -- said they'd consider using it. A benefit to providers is that that these shorter documents lend themselves to automated delivery; overall 86% of respondents said they would explore electronic delivery of short prospectuses and thought they'd be able to save more than 50% in printing and postage costs as a result.
Posted by Penny Crosman at 02:50 PM
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