Commission wants risks fully explained to client

Finance companies should improve the disclosure they make to investors, especially the risks of the investment, says the Securities Commission.

"We have identified areas where disclosure by finance companies generally could be improved in order to comply with the law," chairman Jane Diplock said yesterday, when releasing the commission's report on disclosure by finance companies.

This follows a discussion paper released in September last year, when the commission noted that few finance companies adequately discussed the risks of the investments they offered against the returns.

The paper, which incorporates the main themes in the 33 submissions received, explains the commission's disclosure expectations under the Securities Act and Securities Regulations.

Areas singled out for attention and improvement include: risk disclosure, principal risks, company activities, related party lending and the use of rating information and other disclosure issues.