12 January 2012

How much should you rely on a prospectus?

We always advise against excessive reliance on written marketing material. Glossy brochures can be deceiving and should not divert the investor's attention from the crucial aspects of safety and performance. The same can also be said for impressive premises, fancy conferences and well-tailored suits worn by your financial advisers. But some clients may think that a formal prospectus, seemingly approved by the regulators, may be in a different league and give an official stamp of approval on the investment product that is suggested to be put into a portfolio. A recent court judgement in Austria gives a warning in this respect. The regulatory authority there stated that while it checks the formal correctness of an investment prospectus it does not verify the actual facts that contained in it.