The SEC has indicated it will propose a Short-Form prospectus ruling this year, which would allow issuers to reduce the number of pages needed in a prospectus and only deliver the large prospectusâwhich would still need to be filed with the SECâwhen requested by an investor.
While investors need clear, concise information about their investments, the industry currently wastes significant dollars generating the information it provides, and the carbon footprint caused by the excessive use of paper undermines todayâs climate of concern around sustainability. The Short-Form prospectus presents a significant opportunity to reduce costs and to supply shareholders with more transparent communication. For example, the survey also found significant support for combining the Short-Form prospectus with the trade confirmation in a single delivery as more than 9 out of 10 (90%) would consider a printed combination of the Short-Form prospectus and confirm if allowed.
According to the study, âInvestor communication for the securities industry is in need of reform: The current prospectus delivery method provides information in an arcane format thatâs 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 all that wasted paper is irresponsible in todayâs climate of sustainability and energy efficiency.â
Forrester Consulting estimates that the total cost of printing and postage for delivering the current prospectus annually and semi-annually is approximately $1 billion. Based on Forresterâs estimate of total printing and postage costs and survey respondentsâ estimates of potential savings the proposal, passage, and widespread adoption of the Short-Form prospectus would yield a savings of approximately $300 million per year. In addition, respondents also cited the chief executive officer (CEO) and chief compliance officer (CCO) as the key decision-makers for implementing the change and nearly all (86%) said they would likely explore electronic delivery if the Short-Form ruling is passed.
"The study found the majority of distributors in support of the proposed Short-Form largely because it would significantly reduce their over-all costs, support their efforts to be environmentally conscious while supplying their shareholders with more transparent and effective communications," said Len Driscoll, Vice President, Product Marketing at NewRiver. âBecause 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, provide improved clarity, and enable innovative new approaches to bolster shareholder communications.â