ALSO SEE NEWS ABOUT PROSPECTUS-RELATED LAWSUITS
Prospectus Auditing and Verification Services
We verify the accuracy of prospectus fee tables, share class sales limits, suitability text, and online tools. We guarantee work and provide independent attestation letters from a CPA, CFA, and securities lawyer.
Think we can't help, or that there's no risk? Take our quick quiz and then decide.
Suitability cuts across investment types. Take mutual fund share classes. When investors buy an unsuitable share -- based on faulty math -- regulators step in. The problem is fixed, so people think. Counsel and auditors tell fund boards that all is well. But buried deep in the math, problems remain.
Investors still buy fine products - wrap programs, VAs, funds - that are unsuitable for their situation. Prospectus inaccuracy is one cause. Another is the pull of conventional wisdom. The problem takes many forms. We found and fixed the following ones for our clients.
Inaccurate Prospectus Fee and Expense Table: B-share cost figures were far too high. The share looked uncompetitive when, in reality, it was often best. The B/A "flip" had been forgotten. (C-shares also often flip, by the way.) This is one of several ways to get costs wrong.
Misleading Prospectus Tax Text: Descriptions of taxation were wrong for several share classes. The document did not describe accurately that different tax burdens apply to different share classes. This omission led readers to underestimate the tax burden on institutional shares.
Transposed Brochure Text: "In the long-term A-shares almost always outperform." So said one brochure. This was true for the firm's stock funds, but not its bond funds. (This firm also transposed stock and bond pay scales in 25 prospectuses.)
Inaccurate Online Calculator: The A-share load was forgotten. Also, both returns and expenses were improperly calculated. A-shares were presented as the best share class by a wide margin. The actual margin was tighter or zero.
Wrong B-Share Sales Limit: A fund firm set a limit of $49,999 on all B-shares. A partner B/D was more restrictive, setting it at $24,999. In fact, for several funds, the limit should have been $249,999, so said the math.
In the past, most of the top 20 load fund firms had at least two of the problems; several had more.
Broker Village is in a unique position to help fund firms identify and fix issues before they manifest, protecting their profits and brand. Fixes are fast, easy, and inexpensive to implement. Our firm has provided these services for years. We provide analytics and consulting to fund firms, B/Ds, and regulators. We will determine if:
a) Conflicts of interest exist at the advisor, B/D, or fund firm levels;
b) Share class sales limits are suitable, particularly for typical trade sequences;
c) Fee and performance tables are accurate and consistent with SAI text; and if
d) Textual rationales are consistent with the math.
Click here to see exactly how we can help you.
We also offer our Share Class Analyzer. It creates perfectly accurate prospectus expense examples. It shows account values, costs, rep pay, and revenue for any class of any fund. It is licensed by the regulators and audited by independent CPAs and a securities lawyer.
How our tools and verification services can help your firm:
1) Investors can evaluate share classes more objectively and avoid paying undue fees
2) Compliance officers can ensure the accuracy of prospectus figures and related suitability text
3) Boards of Directors can ensure that prospectus content satisfies new SEC mandates
4) I.T. can create online tools where the results precisely match those of the regulatory sites.
5) Product development can model how portfolio attributes affect a fund's competitive profile
6) CFOs can evaluate the financial impact to the firm of launching, closing, or re-pricing a fund
7) Sales executives can ensure that advisor pay is competitive yet free of conflicts of interest
8) Accounting staff can more quickly and accurately create prospectus expense tables
9) Marketing can more quickly and accurately create sales material