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Sambhar Mafia - Cooked To Kill!

Monday, May 30, 2005

Financial Advertisements – Read at your own RISK

Print Ads

Many of you would have come across IPO application forms in India. The printers have to be commended for printing large volume of data (statutory disclosure of information) in one sheet of paper. Most of the stuff mentioned in the IPO Offer Document relate to mandatory information stipulated by SEBI. These are meant to be risk factors. But the font size is so small that you will be putting your eyes at risk by attempting to read the Risk Factors. The disturbing fact is that not many people read the fine print before investing in these IPO’s. Most of these IPO forms used to make their way to groundnut stores and provision stores so that the shopkeepers can use them to wrap the products. However, because of the proliferation of plastic bags it is difficult to find these forms in our neighbourhood shops. The way out is to request the IPO issuer to publish the Offer Document in a readable font. But by doing so, the flotation costs of the Public Issue might shoot up. Hence we have to live with the current system.

TV Ads

In recent times, we come across many TV & Radio ads for IPO’s, Mutual Funds and Insurance. All these ads end with the Risk Factor. You might have observed that they talk in crystal clear English at the time of the main ad. Towards the end of the ad they just rattle of the Risk Factor in jet speed. Since prospective investors can’t really understand sentences delivered at a breakneck speed, SEBI can actually do away with such statutory disclosures in TV and Radio Ads. The only people making money are the TV / Radio firms, Ad agency and the guy who gives the voice to the ad.

7 Comments:

  • Those statutory lines are there for a simple reason - to ensure that the final investor can blame 'himself' if something goes wrong :-p

    By Blogger Aye Kay, at 6:55 PM  

  • Even if an investor was to go thru the risk factors, he wouldn't be able to make head or tail out of it.

    I don't think the stipulation of reminding about the risk factors should be done away with becuase somewhere, it does make the investor ask ..hey! wat are those market risks they mention on TV? plus it is a safeguard for these companies against litigation for misleading avertisements.

    Also I have noticed that the font size of the written text in the ads has been increased and the speed at which they speak has been decreased, mebbe a new SEBI stipulation!

    By Blogger Miss Sea, at 7:38 PM  

  • if u really are a smart/serious investor you dont need to get the risk factor from the TV ads!

    iyer

    By Blogger 3 potties, at 7:57 PM  

  • the risk factors...hmm they are there because SEBI wants them, i doubt if many retail investors would understand them....any ordinary guy would need a dictionary to understand what the risk factors says....it spretty useless as u say...but as some1 earleir said its to absolve the company of any blame, the company can say if anything goes wrong 'we disclosed it, investors didnt read it' okie they have to understand that disclosing is not equal to ppl being able to understand it. i cant go t an expert to decipher what the risk factor says..

    By Blogger ada-paavi!!!!, at 9:24 PM  

  • Good posting on the risk factors kaps... many got burnt because of the "non-readng" of the risk factors.

    By Blogger Venky Krishnamoorthy, at 8:24 AM  

  • When I was in the merchant banking, I had worked on several new issues.. I used to wonder about the purpose of putting risk factors in such a small font on the application form.

    It is just an eyewash to satisfy SEBI. The issues succeed merely based on the writings / inferences on the newspapers and the normal investor don't go thru this printing in detail.

    By Blogger Ram.C, at 11:39 AM  

  • Its just a comliance or a statutory issue. I have never seen sopmeone reading the offer document carefully before investing. They all go by word of mouth or by what a CNBC or an Economic Times got to say. The scene is bad man. Agree with u.
    I am an investment banker and I have hardly read even one offer document. I shall do so today for sure to know ehat it has.

    By Blogger Suguna Purushothaman, at 12:52 PM  

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