Concerns about the increasing amount of securities disclosure in offering documents and public filings

In his article “More is Better?: Concerns on the Growing Amount of Securities Disclosure in Offering Documents and Public Filings,” by Akin Gump Investment Management Partner James Deeken, discusses the optimal length of disclosures for offering documents and public filings. supply of securities and public filings. Deeken begins by asking if it is better to have a shorter document with less content, but more likely to be read by people, or a longer document which has more content, but less likely to be read. by people because of its length and possibilities. hiding important disclosures in the longer verbiage.

He responds to her question by noting, “There is no ‘one size fits all (one length) approach’. There is no one type of homogeneous audience for a securities offering document. Although this is not a perfect summary and a possible oversimplification, there are generally two types of audiences to which securities information is directed: (i) a “retail” audience consisting retail investors and (ii) an institutional investor audience consisting of investment funds, insurance companies, pension plans and other large financial institutions.

“I argue that it is time to consider another form of securities disclosure that is shorter but at the same time, perhaps more useful than the current form of prospectuses which are more like liability management documents than ‘to those written with useful disclosure in mind.’

Deeken also describes the growing volume and length of prospectus disclosures – with an estimated average length of 184 pages, compared to the 88-page prospectus for its first initial public offering in 2001 – and the problems associated with this growth, suggesting that “[W]We should consider adjusting securities information for two distinct audiences: (i) information intended for the average retail investor and (ii) information intended for institutional investors who might actually read the information. voluminous contained in the prospectuses. »

He also discusses a possible short summary document, five to 10 pages, and what would be included, then concludes by noting: “Is the function of securities disclosure to provide useful and practical disclosure to investors? If that is the goal, then current disclosure standards appear to be failing because they are based on unrealistic expectations of how much time an investor will spend reading a prospectus in fine print. Current standards allow material details to be surrounded and encompassed by disclosure of a more boilerplate nature. Deeken concludes by offering proactive steps to improve prospectuses.

The article is copyright 2022 Thomson Reuters. All rights reserved. Reprinted with permission from Thomson Reuters/West of Securities Regulatory Law Review.

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