Investors provide valuable insights for issuers
Investors have provided valuable insights about how they use the information that’s provided to them by companies
offering investments.
The Financial Markets Authority (FMA) today published research showing that investors saw the Product Disclosure Statement (PDS) as an improvement on previous offer documents.
Investors said that they find the PDS useful, however, even those who are experienced with investments struggle with
some aspects of the document.
Garth Stanish, FMA Director of Capital Markets said, “The significant work issuers have put into PDS documents is paying
off, with investors paying attention to the information. 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 told researchers that the PDS was the first thing they read when seriously considering an investment. They do
not read the document cover to cover, instead reviewing the document to find the information they consider to be most
valuable.
Investors also explained that they wanted to see more detailed information about the company and its management,
especially about a company’s board of directors and senior management. Leadership was seen as particularly important for
many investors.
One investor in a bond offer told researchers, “You can see who is what and what they bring to the table.”
While financial information was viewed as critical, many investors told the FMA this part of the PDS was overly complex
rather than providing investors with useful information. One investor told researchers, “it gets a bit much after a while. I leave that to my broker.”
Investors also wanted the key risks section of the PDS to reflect risks that were unique to the offer and give explicit
detail on how this may affect their investment returns. Investors suggested this would help companies be more self-aware
and clear about their ability to deliver the returns they promise.
The FMA expects issuers to use the research to improve their disclosures.