Ninety-five percent of the 150 companies surveyed said they would be somewhat or very likely to use short-form prospectuses if the Securities and Exchange Commission approves of it. The SEC has said it will propose a short-form prospectus ruling this year. It would still require fund companies to file a long prospectus with the SEC but only supply a long prospectus to investors upon request.
Respondents said not only would it reduce costs but it would be a better way to communicate with investors.
According to the study, “Investor communication for the securities industry is in need of reform. The current prospectus delivery method provides information in an arcane format that’s hard for investors to digest. Not only does the investment industry spend exorbitant amounts of money printing and sending these often unread prospectuses, the environmental impact of producing and shipping that wasted paper is irresponsible in today’s climate of sustainability and energy efficiency.”
Forrester estimates that the mutual fund industry spends $1 billion a year supplying investors with annual and semi-annual prospectuses, and that the short form would save the industry $300 million a year.
“The study found the majority of distributors in the support of the proposed short-form largely because it would significantly reduce their overall costs, support their efforts to be environmentally conscious and supply their shareholders with more transparent and effective communications,” said Len Driscoll, vice president of product marketing at NewRiver. “Because we help many of the leading financial services companies streamline their compliance initiatives, decrease their operational costs, improve their employee productivity and enhance their customer relations, we think this study clearly demonstrates the overwhelming support from distributors who view the short-form prospectus as a way to unleash cost savings and provide improved clarity.”