Click for Home Page         “It's important for lawyers who may be drafting these documents to understand that use of language that cleverly obscures the real story or of highly equivocal language seeking to absolve their clients of all real or imagined conflicts or bad practices will be self-defeating.”

Commissioner Elisse B. Walter, July 21, 2010

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securitieseditor PLAIN ENGLISH AND THE SEC
Rules requiring plain English and related adopting releases

Executive Compensation



Offerings

  • Adopting Release: Asset-Backed Securities

    This release discusses registration, disclosure, and reporting requirements for asset-backed securities, and states that "even the most complex structures can be described clearly and accurately without resorting to overly legalistic presentations."

  • 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

    This release discusses Rule 421 and related amendments.



Shareholder Communication

  • Rule 14a-16: Internet Availability of Proxy Materials

    Rule 14a-16 requires public companies to provide proxy statements and annual reports online after providing shareholders a Notice of Internet Availability of Proxy Materials. Under subsection (g) of the rule, “the registrant must use plain English principles in the organization, language, and design of the notice.”


 



Periodic Reports
  • Adopting Release: Securities Offering Reform

    Among other things, this package of rules requires risk factor disclosure in annual reports on Form 10-K to be written in plain English.

  • Item 406 of Regulation S-K

    This item, which requires public companies to disclose whether they have a code of ethics for their executive officers, defines “code of ethics” to include “written standards that are reasonably designed to ... promote ... [f]ull, fair, accurate, timely, and understandable disclosure ....”


Investment Advisers
  • Adopting Release: Amendments to Form ADV

    These amendments require investment advisers to provide plain English narrative brochures to clients and prospective clients describing (among other things) their business practices, conflicts of interest, fees, and disciplinary history.

SEC guidance regarding plain English

Summarizing the findings of a study mandated by the Dodd-Frank Act, the staff notes that "investors prefer that disclosures be written in clear, concise, understandable language, using bullet points, tables, charts, and/or graphs" and "investors favor the use of a summary document containing key information about an investment product or service."

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.

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.”


Speeches and other public statements


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


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

  • John W. White, “Wheres 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.”