The new rules come into effect next year and require a much shorter disclosure statement for investors, with further information available online.

The FMA yesterday released a report on its review of prospectuses and investment statements.

Head of primary regulatory operations Simone Robbers said there were positive signs but issuers had some way to go in providing better quality information to retail investors.

The report came a year after the FMA issued a guidance note outlining what it would look for in reviewing documents’ compliance.

It said there had been a range of approaches in response to the guidance, including issuers who adopted the new approach and put their customers at the forefront of the disclosure document writing and design process, issuers who continued to view disclosures as lawyer-led risk control mechanisms for directors and produced long documents that put investors off, and issuers who made no attempt at all to follow the guidance.

Robbers said the disclosure documents for IPOs were so long and dense that it was doubtful retail investors would read them. And those who did would still have had difficulty understanding the risks and benefits to them.

“FMA is concerned that such long documents may in fact have deterred members of the public from investing in the offers.”

She said issuers who made changes now would be better prepared for next year’s regulatory changes.

There had been major progress in presentation and layout of documents, the FMA report said. Some issuers had made an effort to cut down on jargon and some included a “key information” section.
“We reiterate the need to keep sentences short and remove (or explain) legal terms and industry jargon,” the report said.

Risk disclosures were too lengthy and generic, it said, and were rarely ranked in order of significance to the business.

The FMA said it had been working on effective disclosure since 2012 and there would be a long transitional period with the FMC Act, and it would not be until December 2016 that all issuers were required to comply with the new requirements.

“During this transition we will continue to review disclosure documents against the Guidance Note. We encourage participants to work with us to help achieve ‘clear, concise and effective’ disclosure. In turn this will assist with transition to the new FMC Act requirements. “