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Survey backs need for simpler share offer information

A new Colmar Brunton survey validates this year’s legislative changes that see investment information simplified. The Financial Markets Conduct Act, coming into effect in a two stage process in April and December this year, comprehensively overhauled our securities law.

It replaces the requirement for issuers to offer a prospectus and investment statement with a product disclosure statement (PDS) designed to make it easier for retail investors.

The survey, commissioned by the Financial Markets Authority and the NZX, shows Kiwi appetites for investing in public share offers is strong, but previous IPO documents have created barriers to participation.

Two thirds of those surveyed last November and December had bought share in an IPO, had considered the move or would do so in future. Of those who had reviewed an offer document, only 15 percent had read the offer document entirely, while just over half said they read most of it.

Just seven percent of those who looked at an offer document found it very easy to understand; with sixty three percent saying they found it fairly easy to understand.

“The PDSs will be short retail-investor focused documents, much shorter than the prospectus and investment statements we have seen in the past,” said the FMA’s acting head of primary regulatory operations, Simone Robbers. “The information must be presented in a clear concise and effective manner.

“Issuers will need to include clear and succinct information about the offer, such as key risks to the business. Long lists of generic risks will no longer be permitted. Overall, the PDSs will assist retail investors to make better-informed decisions.”

The fact 34 percent of respondents had sought professional advice over an offer was “less than ideal”, she said.

“We would like to see a greater willingness by consumers to take financial advice before they make investment decisions such as investing in a public company.” 

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Review overview