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1 – 10 of over 1000Robert 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 delivery…
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.
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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…
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.
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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 propose 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.
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The purpose of this paper is to recommend a print distribution and web site disclosure strategy that is both cost effective and compliant with the SEC summary prospectus rule.
Abstract
Purpose
The purpose of this paper is to recommend a print distribution and web site disclosure strategy that is both cost effective and compliant with the SEC summary prospectus rule.
Design/methodology/approach
The paper explains the economics of offset printing versus digital printing on demand (POD) and printing prospectuses at the traditional printer's site versus creating print‐ready PDFs electronically and making them available to fund distributors so they can print and deliver “on demand” on site. It provides a checklist of web site disclosure requirements for a fund to be compliant with the summary prospectus rule.
Findings
The paper finds that, by establishing a rock‐solid web strategy, coupled with new thinking on their printed prospectuses, firms can comfortably maximize their savings and establish a rational framework for investor disclosure envisioned by the SEC.
Originality/value
The paper provides cost effective guidance for compliance with the SEC summary prospectus rule.
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Elena Fedorova, Pavel Chertsov and Anna Kuzmina
The purpose of this study is to assess how the information disclosed in prospectuses impacted the initial public offering (IPO) underpricing at a time of high government…
Abstract
Purpose
The purpose of this study is to assess how the information disclosed in prospectuses impacted the initial public offering (IPO) underpricing at a time of high government interference amid the ongoing pandemic.
Design/methodology/approach
The design of this study has several tracks, namely, a macro-level track, which is represented by the government measures to halt the pandemic; a micro-level track, which is followed by textual analysis of IPO prospectuses; and, finally, a machine learning track, in which the authors use state-of-the-art tools to improve their linear regression model.
Findings
The authors found that strict government anti-COVID-19 measures indeed contribute to the reduction of the IPO underpricing. Interestingly, the mere fact of such measures taking place is enough to take effect on financial markets, regardless of the resulting efficiency of such measures. At the micro-level, the authors show that prospectus sentiments and their significance differ across prospectus sections. Using linear regression and machine learning models, the authors find robust evidence that such sections as “Risk factors”, “Prospectus summary”, “Financial Information” and “Business” play a crucial role in explaining the underpricing. Their effect is different, namely, it turns out that the more negative “Risk factors” and “Financial Information” sentiment, the higher the resulting underpricing. Conversely, the more positive “Prospectus summary” and “Business” sentiments appear, the lower the resulting underpricing is. In addition, we used machine learning methods. Consisting of more than 580 IPO prospectuses, the study sample required modern and powerful machine learning tools like Isolation Forest for pre-processing or Random Forest Regressor and Light Gradient Boosting Model for modelling purposes, which enabled the authors to gain better results compared to the classic linear regression model.
Originality/value
At the micro level, this study is not confined to 2020, but also embraces 2021, the year of the record number of IPOs held. Moreover, in this paper, these were prospectuses that served as a source of management sentiment. In addition, the authors used a tailor-made government stringency index. At the micro level, basing the study on behavioural finance hypotheses, the authors conducted both separate and holistic analysis of prospectuses to assess investors’ reaction to different aspects of IPO companies as well as to the characteristics of the IPOs themselves. Lastly, the authors introduced a few innovations to the research methodology. Textual analysis was conducted on a corpus of prospectuses included in a study sample. However, the authors did not use pre-trained dictionaries, but instead opted for FLAIR, a modern open-source framework for natural language processing.
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Rita Molesworth, Deborah A. Tuchman, Dianne E. O'Donnell, Jonathan Burwick and James Lippert
The paper aims to analyze amendments proposed by the US Commodity Futures Trading Commission to its disclosure, recordkeeping and reporting rules that are designed to resolve or…
Abstract
Purpose
The paper aims to analyze amendments proposed by the US Commodity Futures Trading Commission to its disclosure, recordkeeping and reporting rules that are designed to resolve or minimize certain conflicts between CFTC rules and US Securities and Exchange Commission rules applicable to registered investment companies (Futures RICs) whose futures and swaps trading will subject their advisers to regulation as commodity pool operators as a result of the amendments to CFTC Rule 4.5.
Design/methodology/approach
The paper explains certain significant differences between the CFTC's rules applicable to commodity pool operators (CPOs) and the SEC's rules applicable to Futures RICs and their advisers in the areas of disclosure, reporting and recordkeeping and describes how the CFTC's proposed rules for Futures RICs are intended to resolve or minimize conflicts with SEC rules.
Findings
CFTC and SEC rules differ in several significant areas, including the required contents of the disclosure document by which the pool is offered; when the disclosure document has to be delivered; how disclosure documents are updated and reviewed; when periodic reports are required to be made and what they are required to contain; and whether required books and records may be maintained at a location other than the main business office. The proposed harmonization rules attempt to resolve these conflicts by exempting the CPOs of Futures RICs from certain CFTC requirements regarding delivery of disclosure documents and recordkeeping, permitting CFTC‐required disclosures to appear in the prospectuses of Futures RICs after the SEC‐required disclosures and requiring monthly account statements to be posted to the CPO's website rather than distributed to shareholders of Futures RICs. Other conflicts between CFTC and SEC rules applicable to Futures RICs were not addressed by the proposed harmonization rules.
Practical implications
The proposed harmonization rules attempt to adapt CFTC requirements to Futures RICs that have not been subject to CFTC regulation since 2003. Other conflicts between CFTC and SEC rules were not addressed. The CFTC has not adopted the final rules in this area.
Originality/value
The paper provides expert guidance by lawyers experienced in regulation of CPOs and RICs.
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Fangliang Huang, Li Sun, Jing Chen and Chaopeng Wu
The purpose of this study is to examine investors’ intention and behavior concerning ex ante information acquirement and ex post claims from the micro-level perspective with the…
Abstract
Purpose
The purpose of this study is to examine investors’ intention and behavior concerning ex ante information acquirement and ex post claims from the micro-level perspective with the deepening of the initial public offering (IPO) reform of China.
Design/methodology/approach
The authors made surveys and collected 932 valid questionnaires from investors in China. The authors also conducted interviews with sophisticated investors, investment bankers and government regulators to obtain first-hand information. Based on the survey results, the authors make the empirical analysis.
Findings
Investors’ attention to the first-hand information of the IPO prospectuses is inadequate. Individuals rely more on second-hand information, while institutions conduct more surveys. The higher the institutional practitioners’ degree of education, the more surveys they make. Only 1/3 investors intend to seek judicial remedy when getting fraud information due to high litigation costs and proof collecting difficulties. The investors who read more about prospectuses in advance are more likely to seek judicial protection afterwards. Compared with investors who know less about government administrative protection measures, those who know more have a low probability to choose “not to seek judicial protection.”
Originality/value
The authors enrich the research studies of IPO information acquisition and investor protection by conducting surveys to get first-hand data. Previous literature mostly makes empirical tests by using proxy variables.
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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…
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.
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Benny Hutahayan, Mohamad Fadli, Satria Amiputra Amimakmur and Reka Dewantara
This study aims to analyze the causes and implications of legal uncertainty in the issuance of conventional municipal bonds in Indonesia and to draw lessons from Vietnam’s…
Abstract
Purpose
This study aims to analyze the causes and implications of legal uncertainty in the issuance of conventional municipal bonds in Indonesia and to draw lessons from Vietnam’s approach in providing better legal certainty.
Design/methodology/approach
This study adopts a normative legal method with a legislative approach and applies a comparative approach. Data sources involve primary and secondary legal materials from both Indonesia and Vietnam.
Findings
The legal uncertainty is caused by a lack of coherence and consistency in legislation. Based on Vietnam’s experience, Indonesia can gain valuable insights related to providing strong legal certainty for parties involved in issuing or investing through conventional municipal bonds.
Research limitations/implications
This study focuses on the comparative legal analysis of conventional municipal bonds in Indonesia with Vietnam.
Practical implications
This research provides recommendations for the refinement of legislation regarding conventional municipal bonds to the government.
Social implications
This study is related to legal certainty as a strategy to attract investment through municipal bonds and to ensure the municipal bond issuance process is transparent and efficient.
Originality/value
This study provides a comparative perspective on the issuance of municipal bonds in Indonesia, with a special focus on Vietnam, emphasizing the urgency of harmonization in legal regulation and the sustainability of legal certainty.
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Domenick Pugliese, Michael Rosella and David Hearth
To explain a guidance update recently issued by the USA Securities and Exchange Commission (SEC) Division of Investment Management that furthers the SEC’s goal of clear and…
Abstract
Purpose
To explain a guidance update recently issued by the USA Securities and Exchange Commission (SEC) Division of Investment Management that furthers the SEC’s goal of clear and concise, user-friendly disclosure by focusing on certain specified requirements of Form N-1A and the rules under the Securities Act of 1933.
Design/methodology/approach
Discusses five areas where the SEC staff had been providing significant numbers of comments related to mutual fund disclosure after the adoption of the amendments to Form N-1A in 2009 by summarizing the applicable instructions of Form N1-A and/or rule and the SEC staff’s observations with respect to such instruction or rule.
Findings
Funds should ensure that during their next annual update they review their prospectus disclosure in light of this guidance update and make necessary changes so that the disclosure is clear and concise and not overly technical.
Originality/value
A concise summary of the SEC’s guidance update from experienced investment management lawyers.
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