"The FMA has published research showing that investors see the Product Disclosure Agreement (PDS) as an improvement on previous documents, though certain areas of the document still need work"
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Investors have provided insights in an FMA report on how they use information provided to them by companies offering investments.
According to the report, investors see the Product Disclosure Statement (PDS) as a ‘significant’ improvement on previous offer documents, but still struggle with certain aspects of the document.
The key issues identified include the length and repetitiveness of the document, the excessive academic terminology and the risk information being too broad and generic. Investors also stated that financial information is seen as a critical part of the document, but the technical terms and fine print caused unnecessary complexity. However, most of those surveyed valued key information summaries and the document’s online accessibility, and were happy to do additional research.
The PDS is a document aimed at practical but non-expert investors, and aims to present information in a clear, concise and effective manner.
“The significant work issuers have put into PDS documents is paying off, with investors paying attention to the information,” says FMA director of capital markets Garth Stanish. “The PDS is a significant improvement to the previous disclosure regime and this research provides valuable insights from investors into how the PDS can be improved further.”
Investors said that the PDS was their first port of call when seriously considering an investment; they don’t tend to read the document from cover to cover, but review the key information that they find to be the most informative and valuable. The complexity was the key issue however, with one investor telling researchers “it gets a bit much after a while. I leave that to my broker.”
The risks section was identified as needing the most work, with investors wanting the PDS to reflect risks that are unique to the offer and give in-depth detail on how those risks may affect their investment returns, which would in turn help companies become more self-aware about their ability to deliver returns as promised.
The FMA will be using this research to make further improvements to the PDS.
