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Article
Publication date: 13 June 2008

Len Driscoll

The purpose of this paper is to discuss the SEC's Proposed Release 33‐8861 of November 21, 2007, “Enhanced disclosure and new prospectus delivery option for registered…

Abstract

Purpose

The purpose of this paper is to discuss the SEC's Proposed Release 33‐8861 of November 21, 2007, “Enhanced disclosure and new prospectus delivery option for registered open‐end management investment companies.”

Design/methodology/approach

The paper provides an overview of the proposed rule. It then discusses its impact on the industry, investors, and the environment; and how the summary prospectus could impact retirement plans. The paper answers some frequently asked questions; and provides an implementation timeline.

Findings

The paper finds that the SEC has proposed a rule for a shorter, simpler, standardized prospectus that would tell investors what they need to know within three to four pages and provide web access to more detailed information if desired. The stated goal is provide the average investor with clear, succinct information and also to standardize information to facilitate fund‐to‐fund comparisons. The summary prospectus also offers a significant opportunity to reduce publishing and mailing costs and may provide the mutual fund industry with the impetus to migrate from paper‐based to electronic disclosure.

Originality/value

The paper provides insight from a financial disclosure systems provider.

Details

Journal of Investment Compliance, vol. 9 no. 2
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 12 June 2009

Robert A. Robertson and Joseph P. Kelly

The purpose of this paper is to examine SEC rule amendments that permit a mutual fund to use a three‐ or four‐page “summary prospectus” to satisfy statutory prospectus

Abstract

Purpose

The purpose of this paper is to examine SEC rule amendments that permit a mutual fund to use a three‐ or four‐page “summary prospectus” to satisfy statutory prospectus delivery obligations and amendments to a fund's statutory prospectus requirements that require key information in a standardized order at the front of the document.

Design/methodology/approach

The approach is to explain the SEC's regulatory changes to the basic mutual fund disclosure documents designed to help investors choose among the more than 8,000 mutual funds.

Findings

The investing public's use of the internet for fund research and fund transactions has made it possible for the SEC to take a “layered” approach to disclosure documents, providing an investor with a short‐form document and making available more detailed information on fund web sites. The SEC will likely follow suit with other documents and updated compliance requirements.

Originality/value

The paper will assist fund legal counsel and compliance professionals: to comply with the new statutory prospectus requirements; and to determine whether the summary prospectus is an appropriate disclosure document for a particular fund.

Details

Journal of Investment Compliance, vol. 10 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 6 November 2017

Dorothee Fischer-Appelt

To analyse the changes brought about by the new EU Prospectus Regulation, which replaced the EU Prospectus Directive, which has been the cornerstone of EU securities…

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322

Abstract

Purpose

To analyse the changes brought about by the new EU Prospectus Regulation, which replaced the EU Prospectus Directive, which has been the cornerstone of EU securities regulation for over a decade. The Regulation is part of the EU Commission’s plans for a Capital Markets Union launched in September 2015, which is intended to achieve a true single market for capital across the EU and allow companies to access the capital markets in a more cost efficient way.

Design/methodology/approach

This article discusses the key changes to the European prospectus regime included in the new EU Prospectus Regulation and highlights the changes compared to the old prospectus regime.

Findings

The new Prospectus Regulation will change current prospectus rules and practice for both equity and debt issuances in several areas and will contribute to a more uniform European prospectus regime. For EU Member States, the format of a regulation (rather than directive) that the new Prospectus Regulation has taken means that there will be much less room for divergence of prospectus rules across its member states. The Regulation’s success in making EU capital markets more uniform will depend to a great extent on whether the application of the new rules by member states’ regulators will be more consistent.

Originality/value

Key EU securities law changes are explained by an experienced EU and US securities lawyer practising in London.

Details

Journal of Investment Compliance, vol. 18 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 1 December 2020

W. Thomas Conner, Nathaniel Segal and John M. Sanders

To analyze the SEC’s newly adopted Rule 498 A, the variable contract summary prospectus rule, and concurrently adopted prospectus disclosure requirements in order to…

Abstract

Purpose

To analyze the SEC’s newly adopted Rule 498 A, the variable contract summary prospectus rule, and concurrently adopted prospectus disclosure requirements in order to propose to insurance companies issuing variable contracts a project implementation plan for companies seeking SEC approval for summary prospectuses compliant with the new rules.

Design/methodology/approach

Discusses the history, requirements, effects, and expected implementation timeline of the new rules, then offers a detailed project plan and timeline for compliance.

Findings

The Rule does not require insurers to use summary prospectuses, but there are several compelling reasons for doing so. The Rule allows insurers to use a new concise and brief selling document, and by so doing to begin generating very significant cost savings as soon as May 1, 2021. The article provides a detailed implementation plan for insurance companies that want to comply with the new prospectus disclosure requirements and implement policies and procedures to begin using summary prospectuses.

Practical implications

A coordinated project implementation plan like that outlined in the article might assist insurance companies to make the requisite statutory prospectus revisions and prepare and obtain SEC approval of summary prospectuses by May 1, 2021.

Originality/value

Analysis from experienced attorneys who frequently advise insurance companies issuing fixed and variable annuities, and assist clients in navigating the complex regulatory requirements governing insurance and securities products.

Details

Journal of Investment Compliance, vol. 21 no. 2/3
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 1 December 2005

Per Nikolaj Bukh, Christian Nielsen, Peter Gormsen and Jan Mouritsen

The purpose of this paper is to examine whether information on intellectual capital (non‐financial information on knowledge based resources) is disclosed in Danish IPO…

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6693

Abstract

Purpose

The purpose of this paper is to examine whether information on intellectual capital (non‐financial information on knowledge based resources) is disclosed in Danish IPO prospectuses. Further, to analyse whether this voluntary disclosure has changed in the period from 1999 to 2001 and to analyse what factors can explain the amount of disclosure in the prospectuses.

Design/methodology/approach

The paper uses content analysis to compile a measure of disclosure on each prospectus and statistical analysis to test whether there is an association between disclosure and company type, the existence of managerial ownership before the IPO, the size of the company or the age of the firm.

Findings

Based on statistical analysis, it is concluded that the extent of managerial ownership prior to the IPO and industry type affects the amount of voluntary intellectual capital disclosure, while company size and age do not affect disclosure. The results are interpreted in the light of the increasing importance of disclosing information on value drivers, strategy and intellectual capital to the capital market and constitute a contribution to the ongoing debate on corporate reporting practices.

Practical implications

Since information on intellectual capital is already disclosed in IPO prospectuses this reporting form can be used as inspiration when an intellectual capital report is developed. The results also indicate that companies and their advisers believe that this type of information is important in the capital market's assessment of the company's value. Further, it is suggested that intellectual capital reports should be read in the context of the firm's strategy in the same manner as an prospectus is read.

Originality/value

Very few papers have analysed disclosure in prospectuses and it has been from a different perspective from this paper. Further, this paper analyses a time series of data and demonstrates how the amount of disclosure has developed over the years. Finally, the paper contributes to the body of literature on what factors explain disclosure in general.

Details

Accounting, Auditing & Accountability Journal, vol. 18 no. 6
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 1 March 2000

Paul Mather, Alan Ramsay and Adam Steen

This paper investigates the use of graphs, selection of variables to graph and construction of graphs in prospectuses issued by Australian companies making their initial…

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2047

Abstract

This paper investigates the use of graphs, selection of variables to graph and construction of graphs in prospectuses issued by Australian companies making their initial public offering (IPO) of shares to the Australian capital market. The paper formulates and tests hypotheses concerning selectivity in the use of graphs and distortion in the construction of graphs presented in IPO prospectuses, as well as providing descriptive evidence about the use of graphs in such prospectuses. Results show that firms enjoying improving profit performance are significantly more likely to include graphs of key financial variables in their prospectuses than firms suffering deteriorating profit performance. Thus, similar to studies of graphs in annual reports, evidence of selectivity in the inclusion of graphs is found. No significant relationship is found between performance on the variable being graphed and distortion in the construction of the graph. When the graphs are split between those covering key financial variables and other variables, a significant relationship is found in both categories. For graphs of other variables, a significant positive association is found between performance and distortion. However, the relationship for key financial variables is in the opposite direction to that suggested by impression management. Further analysis identifies significant sub‐period differences in selectivity and distortion which are consistent with the view that the major regulatory and institutional changes outlined in the paper, reduced the extent of selectivity and graphical distortion in the post‐1991 period. As far as we are aware, this is the first study reported in the literature to investigate the use of graphs in prospectuses. The results also have policy implications for the regulatory authority in Australia.

Details

Accounting, Auditing & Accountability Journal, vol. 13 no. 1
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 1 March 2004

Don T. Johnson

A mutual fund must provide prospectuses to each potential investor before the fund may accept monies from that individual. The prospectuses are a major source of…

Abstract

A mutual fund must provide prospectuses to each potential investor before the fund may accept monies from that individual. The prospectuses are a major source of information about the fund and yet they have historically been largely unreadable by the public. While the poor readability has been a problem in the past, it is becoming a greater problem as the number of individuals responsible for their own investment decision making increases. Recognising this problem, the Securities and Exchange Commission (SEC) adopted Rule 421 in 1998, requiring that prospectuses be made more readable as measured by a subjective reading of the document. This study applies four objective tests to mutual fund prospectuses from both preand post‐Rule 421 periods and finds substantial evidence that mutual fund companies have complied with Rule 421 and are producing prospectuses that are much more readable and accessible by the general public.

Details

Journal of Financial Regulation and Compliance, vol. 12 no. 1
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 9 January 2017

Tatiana Garanina and John Dumay

This study contributes to intellectual capital (IC) disclosure research. Focussing on reducing the information asymmetry associated with agency theory, the purpose of this…

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2065

Abstract

Purpose

This study contributes to intellectual capital (IC) disclosure research. Focussing on reducing the information asymmetry associated with agency theory, the purpose of this paper is to investigate the extent to which managers and owners disclose IC in initial public offering (IPO) prospectuses. In particular, it examines the influence on post-issue stock performance based on the IPOs of technology companies listing on the NASDAQ from 2002 to 2013. Parallels are drawn to integrated reporting (<IR>), which was developed after the global financial crisis (GFC) because of the perceived shortcomings of regulated forms of financial reporting.

Design/methodology/approach

The authors apply a two-stage methodology, using content analysis of prospectuses to determine the extent of IC disclosure, then combining this data with market data using regression analysis to determine the influence of IC disclosure in IPO prospectuses on post-issue stock performance.

Findings

According to the content analysis results, these IPO prospectuses contain significant amounts of IC disclosure for the subsequent analysis. The authors find that after the GFC technology companies disclose more IC information. The econometric analysis also reveals that IC disclosure has a higher influence on post-issue stock performance after the GFC than before.

Research limitations/implications

The research shows how IPO prospectuses are a valid form of disclosure to investigate the impact of reducing IC information asymmetry because they contain significant amounts of forward-looking non-financial information about the company’s development. Additionally, the results are relevant to discussions about the impact of <IR>. If IC and non-financial disclosures contained in an integrated report are forward-looking and reduce information asymmetry then <IR> may have value relevance to a firm.

Practical implications

The research confirms that more IC disclosure information in prospectuses may positively influence companies’ post-issue stock performance, especially in the long run. However, the authors caution that disclosing IC information to investors is not the panacea for increased post-IPO share performance.

Originality/value

This paper is novel because it shows the value relevance of IC disclosures to reduce information asymmetry through its focus on prospectuses, which helps to understand of the potential impact of <IR>.

Details

Journal of Intellectual Capital, vol. 18 no. 1
Type: Research Article
ISSN: 1469-1930

Keywords

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Article
Publication date: 26 November 2019

Sin Huei Ng and Chen Suen Lee

The study intends to shed lights on whether the risk factors disclosed in the initial public offering (IPO) prospectus in Malaysia are able to reflect the actual risks of…

Abstract

Purpose

The study intends to shed lights on whether the risk factors disclosed in the initial public offering (IPO) prospectus in Malaysia are able to reflect the actual risks of stocks once they are traded on the exchange. In other words, the purpose of this paper is to explore whether prospective investors will be able to benefit, in terms of the more accurate risk information, from the risk disclosures in the IPO-prospectus.

Design/methodology/approach

Using data obtained from 118 IPO prospectuses of Malaysian companies that issued shares on Bursa Malaysia in the period from 2009 to 2016, the authors investigated whether the “risk factor” section in the IPO prospectuses provides sufficient risk-relevant information to investors. To determine whether companies disclose risk-relevant information, a detailed content analysis of the risk sections was carried out to obtain an aggregate measure of risk disclosure.

Findings

The findings revealed that the aggregate measures of risk extracted from these texts did not successfully predict the following outcomes: the volatility of companies’ future stock prices, the sensitivity of future stock prices to market-wide fluctuations and the severe declines in future stock prices.

Practical implications

As indicated by the findings, the authors, therefore, deduce that the IPO prospectuses of Malaysian companies do not provide sufficient risk-relevant information in the risk factor section. The findings imply that overall the management of Malaysian companies would neither be able nor willing to disclose the right and relevant information to the public via IPO prospectus.

Originality/value

Many corporate risk disclosure studies focus primarily on the disclosures of annual reports of companies. The study intends to fill the gap by focusing on the risk disclosure in the IPO-prospectus. Risk disclosures in IPO-prospectus are farmore extensive than annual reports and, therefore, provide a richness of information that will not be available in the annual reports.

Details

Asia-Pacific Journal of Business Administration, vol. 11 no. 4
Type: Research Article
ISSN: 1757-4323

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Article
Publication date: 20 September 2019

Emmanuel Mogaji and Hyunsun Yoon

Prospective students are exposed to abundant choices, and they are eagerly searching for information to select the best universities for themselves. Likewise, prospectuses

Abstract

Purpose

Prospective students are exposed to abundant choices, and they are eagerly searching for information to select the best universities for themselves. Likewise, prospectuses are regularly produced by universities to meet this information needs; the purpose of this paper is to examine the key marketing messages used in their prospectuses.

Design/methodology/approach

The 2017 undergraduate prospectuses of 121 universities in the UK (out of the 134 members of University UK) were thematically analysed using NVivo10.

Findings

Messages were predominantly about the location, the course, student experience, credibility and career progression. They are framed in an appealing way, filled with facts and figures, images of beautiful buildings and smiling students, testimonials of facilities and experiences that form a sense of compatibility and belonging.

Research limitations/implications

This study provides insights for the higher educational institutions to enhance their future marketing communications strategies in terms of effectively differentiating one university from another by highlighting the predominantly used appeals among 121 prospectuses and the need for adopting a more consistent approach between the clearing period and non-clearing period in terms of designing the prospectuses. This study has considered only the print platform, and therefore future studies should also look at social media and university websites in the context of the integrated marketing communications.

Practical implications

Accurate and coherent narratives should be provided, taking into consideration the diverse nature of target audience. Universities need to realise that they can be held responsible for the promises presented in their prospectuses. Using the city appeal by many universities may be challenging, as there is need to attract students not just to the city itself, but to the university’s campus.

Originality/value

Having a significantly larger sample than any other previous studies in this field, the empirical evidence provided in this paper is rich and in-depth, thanks to the size and age of the sample as well as the integrated and combined methodological approach. Five keys themes with sub-themes, descriptions and examples were provided, suitable for future research in higher education marketing.

Details

International Journal of Educational Management, vol. 33 no. 7
Type: Research Article
ISSN: 0951-354X

Keywords

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