Commission critical of some finance companies
Finance companies will have to tell clients much more than they do now if the Securities Commission gets its way..
Monday, September 27th 2004, 7:09AM
There has been a surge of aggressive marketing of this kind of offering over recent years, the commission says.
“(We have) seen some investment statements and prospectuses that provide a good level of useful information for investors. (We have) seen some that do not.”
Some finance companies “are not meeting the minimum requirements of the legislation… these finance companies need to consider the disclosures that they are making, and make changes where necessary to their disclosure documents.”
It is believed some finance companies are under the impression they are complying with the Securities Act, and the relevant regulations issued under that Act, when in fact they are not.
Rather than start by making prosecutions the commission has opted to set out what it believes the law states finance companies should be disclosing.
And that is quite a bit, particularly in the area of risk. The commission believes too many investors are not being given the full story.
“The prudent but non-expert person is unlikely to be able to gain an adequate understanding or appreciation of the risks of a particular debt security investment from the information contained in the investment statements of most finance companies.”
The discussion document says the law, as it stands, means there needs to be much greater disclosure of risk to investors. This includes the likely risks of a particular industry, as well as details about lending, liquidity, economic, interest margin, pricing, solvency, and regulatory risks.
Finance companies “will need to assess what the finance company’s main exposures and risks are, and describe them in the investment statement.”
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