The average small stockholder carefully reads corporate annual reports, signs proxy statements but doesn't always remember what they said, is willing to take some but not a lot of risk, and relies less on what a broker says and more on personal judgment, according to a poll released yesterday by the Securities and Exchange Commission.
The poll, conducted last spring, surveyed 4,400 small investors (defined as an individual owning fewer than 1,000 shares) in 15 major U.S. corporations. It was commissioned by the SEC's Advisory Committee on Corporate Disclosure, which is expected to issue a wide-ranging study on company reports this fall.
In some instances, the results of the poll support the committee's preliminary findings that corporate financial reports should be made more comprehensible to the individual investor. In other cases, the poll suggests the SEC may be pressing its disclosure campaign too far.
For example, in contrast to a recent SEC announcement that it will hold hearings on the adequacy of proxy statements, the poll showed that 79 per cent of those surveyed believe proxy statements already to be either "reasonably" or "extremely" adequate.
An SEC spokesman said the commission has not yet had time to study the poll.
The survey revealed that 88 per cent of small investors hold their stock directly rather than leaving it with a broker.Fifty-five per cent said they have not traded their stock within the past 12 months.
A majority of the group said that when evaluating securities, they rely mostly heavily on a "fundamental approach," meaning an analysis of general business conditions, industry outlook and company earnings, as opposed to the "technical approach" (analysis of stock market movements interest rates, and the like) many brokerage houses also use. Only 17 percent said they rely primarily on a broker.
Not useful in deciding whether to buy, the survey showed, are the company's financial statement and balance sheet, the future economic outlook of the industry of which the company is a part, and information about the quality of the company's management. But 33 per cent of those who said information about management quality is important also said this information was "inaccesible."
Ninety-one per cent of those surveyed said they read proxy statements and 83 per cent said they sign and return them. But when asked, "Was there a management proposal contained in the proxy material?" 43 per cent said they did not remember.
Ninety-one per cent also said they read the company's annual report.