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Andrew Godwin, Ian Ramsay, Short-form disclosure documents—an empirical survey of six jurisdictions, Capital Markets Law Journal, Volume 11, Issue 2, April 2016, Pages 296–316, https://doi.org/10.1093/cmlj/kmw002
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1. Introduction
A fundamental principle that underpins the securities and financial markets is that investors, both institutional and retail investors, should be given all information necessary to enable them to make informed decisions about whether to acquire securities or invest in financial products. In conjunction with financial advice and measures to improve financial literacy, a core mechanism for implementing this principle is the use of disclosure documents. These come in a variety of forms, ranging from lengthy prospectuses or offer documents, to short-form documents that are designed to make it easier for investors, particularly retail investors, to read and understand the features and risks of securities and financial products.
There are a number of questions that jurisdictions must consider when designing disclosure documents for use with financial products. For example, what is the purpose of the disclosure document and should it be the sole basis for investment decisions? Should the length and format of disclosure documents be prescribed? Should the same approach be adopted for all financial products or only a specified range of financial products? Should any restrictions be imposed for complex financial products as a result of the difficulties that investors, particularly retail investors, face in understanding how such products work? The answers to these questions will inevitably turn on the answers to various threshold questions: Does length matter? Does presentation or format matter? How important are length and format relative to other factors such as content and language? And how useful are devices such as synthetic risk indicators in helping investors to understand risk?
