Summary Prospectus – To Partner or Not To Partner?

Recently I’ve been doing quite a bit of research into the potential impact of the SEC’s Summary Prospectus Rule on financial firms and financial printers. While this issue is clearly top of mind for financial industry associations such as the ICI and NAVA, I was surprised to find that it was not on the radar at all for print-centric organizations such as NAPL, NPES, PRIMIR and Xplor. Then it occurred to me how concentrated the traditional offset prospectus printing business had become. A very small group of very large printers control the market, and the rest of the crowd has stopped competing for it. With the advent of the summary prospectus, and the trend toward digital printing, a good chunk of that market may be up for grabs and the big players are shoring up, or partnering up with their offers to hang on to their clients. For example:

In March, Bowne entered into a strategic alliance with Firehouse Financial Communications LLC (“Firehouse”), a Massachusetts-based document simplification firm. Firehouse’s design and content capabilities have been integrated with Bowne’s content management system and robust composition network and marketed as the the Bowne Firehouse Summary System for Summary Prospectus.

Also in March, Broadridge expanded their long-time partnership with NewRiver by signing an exclusive agreement to offer NewRiver’s Prospectus Express and Virtual Document Warehouse products for pre-sales and first-dollar prospectus deliveries in the brokerage market. With Prospectus Express, Broadridge can offer a solution that not only makes the summary prospectus available online, but also links directly to the statutory prospectus in support of the SEC’s requirement for layered disclosure. Virtual Document Warehouse (VDW), the companion product, provides a comprehensive library of print-ready summary prospectuses (via PDF) with links to the corresponding statutory prospectus. Using VDW, Broadridge will be able to fulfill first-dollar delivery requests using print-on-demand rather than traditional pick and pack processes, thereby creating efficiencies for investment companies and brokers. NewRiver has also started tracking the funds implementing stand along summary prospectus in their Summary Prospectus Index.
In May, Merrill Corp. another market giant in offset prospectus printing, announced a joint marketing agreement with Mobular Technologies to market Summary PRO AR, a new software application designed to meet the technical requirements of the rule for linking and web presentation. Summary PRO AR is built on the same technology platform as Mobular’s Proxy Notice and Access solution.

In contrast, a firm not particularly known for prospectus printing, DST, announced in February their intent to “go it alone” with their “eProspectusDirect fully integrated, single-vendor solution,” offering printing and mailing of annual prospectus (using their Digital Press Technology inkjet printers versus traditional offset), first-dollar fulfillment combining the prospectus with the confirmation mailing, electronic delivery and Internet hosting of compliance documents, and consent management services.

The summary prospectus rule, approved in January 2009, requires mutual funds to deliver a summary section in the statutory prospectus. Fund companies have the option to print and mail the full statutory prospectus to their shareholders or they can send only the 4 page summary prospectus document, as long as they post the statutory prospectus to the internet within 24 hours. The rule also requires cross referencing between the summary and the statutory prospectus and specific online navigation links. Shareholders who receive the summary prospectus must be able to easily request a printed copy of the full statutory prospectus and their order must be fulfilled within 5 days. The huge potential shift in print volume, investor website requirements and untested demand for follow-on statutory prospectus fulfillment means substantial change for mutual funds and financial printers alike.

So while the traditional players are trying to hang on to business and offer companion services, the rest of the industry should be assessing their own opportunities to shore up, partner up and maybe gobble up some of the shifting print volume and demand for enhanced online compliance solutions driven by these new requirements for layered disclosure. 

Elizabeth Gooding

Elizabeth Gooding is the editor of the Insight Forums blog and president of Gooding Communications Group

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About Elizabeth Gooding

Elizabeth Gooding is the editor of the Insight Forums blog and president of Gooding Communications Group