PLAIN ENGLISH AND THE SEC

• Rules requiring plain English and related adopting releases
• SEC guidance regarding plain English
• Speeches and other public statements

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Rules requiring plain English and related adopting releases

Executive Compensation

• Rule 13a-20 [mislabeled 13a-19]: Plain English Presentation of Specified Information
  
  This rule requires plain English for disclosures about executive compensation; security ownership of 5%-plus beneficial owners, directors, and named executive officers; related person transactions; and corporate governance.
  
  
• Rule 15d-20: Plain English Presentation of Specified Information
  
  This rule requires plain English for disclosures about executive compensation; security ownership of 5%-plus beneficial owners, directors, and named executive officers; related person transactions; and corporate governance.
  
  
• Adopting Release: Executive Compensation and Related Person Disclosure (effective November 7, 2006)
  
  This release discusses new Rules 13a-20 and 15d-20 and related amendments.

Offerings

• Rule 421: Presentation of Information in Prospectuses
  
  This rule requires all information in a prospectus to be written in a “clear, concise and understandable manner.” The front and back covers, the risk factors, and the summary section must be written using plain English principles for the organization, language, and design.
  
  
• Adopting Release: Plain English Disclosure (effective October 1, 1998)
  
  This release discusses Rule 421 and related amendments.
  
  

Shareholder Communication

• Adopting Release: Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Investment Management Companies (effective March 31, 2009)
  
  This release discusses new rules that, among other things, require a plain English summary of key information at the front of every mutual fund prospectus.

• Adopting Release: Shareholder Choice Regarding Proxy Materials (effective January 1, 2008, with some amendments effective sooner)
  
  This release discusses amendments that require public companies and other soliciting persons to provide electronic access to proxy materials.

• Toward Greater Transparency: Modernizing the Securities and Exchange Commission’s Disclosure System (January, 2009)
  

• Final Report of the Advisory Committee on Improvements to Financial Reporting to the United States Securities and Exchange Commission (August 1, 2008)

This report recommends, among other things, that the SEC require public companies to include an executive summary at the beginning of each annual report and quarterly report that summarizes, in plain English, the most important information about the company and provides context for the disclosures that follow.

• Division of Corporation Finance, Staff Observations in the Review of Executive Compensation Disclosure (October 9, 2007)
  

Sample quote: “[C]areful drafting consistent with plain English principles could result in a shorter, more concise and effective discussion that complies with our rules.”

• Order approving the amendment of the NASD Code of Arbitration Procedure to, among other things, “simplify the rule language into plain English.” (January 24, 2007)
  
  

• Christopher Cox, “Enhanced Disclosure for Mutual Fund Investors” (November 19, 2008)

Sample quote: “[I]nvestors have to dig through pages of legalese to obtain the key information they’re after.”

• Press Release announcing the “21st Century Disclosure Initiative” to Fundamentally Rethink the Way Companies Report and Investors Acquire Information (June 24, 2008)
  
  Sample quote: “We'll be examining how to improve the way disclosure works, including tapping the full potential of today's technology and integrating it seamlessly into our regulatory approach. That could mean fewer confusing forms, and more useful information at investors' fingertips in a form they can really use."

• Christopher Cox, “Plain Language--The Benefits to Small Business” (February 26, 2008)

          Sample quote: “At the SEC . . . we’re dead serious about plain English.”

• Christopher Cox, “Plain Language and Good Business” (October 12, 2007)
  
  Sample quote: “[I]f time is money, then poorly written proxy statements are wasting one of investors’ most important assets.”

• John W. White, “Where’s the Analysis?” (October 9, 2007)
  
  Sample quote: “Disclosure can fail in either of two different ways — it can be presented clearly and understandably without being meaningful or responsive to disclosure requirements or, conversely, it can be responsive in content without being clear and understandable.”

• Statement of Chairman Christopher Cox Before the U.S. Senate Committee on Banking, Housing and Urban Affairs (July 31, 2007)
  
  Sample quote: “[T]he Commission is hard at work on a simplified, plain English disclosure for mutual funds that would give investors what they need to know, in a form they can use.”

• Press Release announcing the creation of an “Advisory Committee to Make U.S. Financial Reporting System More User-Friendly for Investors” (June 27, 2007)
  
  Sample quote: “Christopher Cox today announced the establishment of an advisory committee that will examine the U.S. financial reporting system with the goals of reducing unnecessary complexity and making information more useful and understandable for investors.”

• Christopher Cox, Closing Remarks to the Second Annual Corporate Governance Summit (March 23, 2007)
  
  Sample quote: “The SEC is dead serious about shedding 70 years of accumulated bad habits in writing. We are well aware that our retail disclosure system has devolved into a self-serving exercise for issuers, underwriters, and their lawyers. No company that serves retail customers would seek to draw their attention to important subjects with an 80-page doorstop. Nor should we, if we are to continue to deserve our title as ‘the investor’s advocate.’”
  
  

• Christopher Cox, Address to the 2007 Corporate Counsel Institute (March 8, 2007)
  
  Sample quote: “[T]he SEC is waging an all-out war on complexity.”
  
  

• Lori Schock, Acting Director of the Office of Investor Education and Assistance, “Feedback from Individual Investors on Disclosure” (January 19, 2007)
  
  Sample quote: “[I]nvestors consistently have been telling us that disclosures should contain language that the average investor, not the average lawyer, can read and understand.”
  
  

• John W. White, “Principles Matter” (September 6, 2006)
  
  Sample quote: “Write for investors, not lawyers.”
  
  

• Christopher Cox, “Improving Financial Disclosure for Individual Investors” (May 3, 2006)
  
  Sample quote: “[I]n order for investors to make sound decisions, the seller’s information has to be understandable, accessible, and accurate.”
  
  

• Cynthia Glassman, “Does SEC Disclosure Eschew Obfuscation? Res Ipsa Loquitur!” (November 4, 2005)
  
  Sample quote: “Very simply put, it is my perception that disclosing parties and their lawyers — be they mutual funds, broker-dealers, investment advisers, or operating companies — view their disclosure obligations with an eye toward limiting their potential liability. Thus, the disclosures that they make, while often voluminous, do not necessarily provide information in a helpful, informative manner. In contrast, the recipients want timely, complete, and useful information that is readily understandable.”
  
  

• Arthur Levitt, “Fulfilling the Promise of Disclosure” (July 23, 1997)
  
  Sample quote: “It is possible that no document on Earth has committed as many sins against clear language as the prospectus. The prose trips off the tongue like peanut butter. Poetry seems to be reserved for claims about performance, and conciseness for discussions about fees.”
  
  

• Isaac Hunt, Jr., “Plain English and the U.S. Securities Markets” (July 17, 1997)
  
  Sample quote: “We want documents that are meant for investors to read to be prepared so that investors can use them.”