Are issuers heeding SEC guidelines on clear writing?

If you glanced through the recent 341-page Regulation SK ‘concept release’ issued by the SEC, you probably missed it. But it’s there, under the heading ‘Plain English’ at the bottom of page 18 and the top of page 19: ‘In 1998, the commission adopted rules intended to improve the readability of prospectuses by promoting clear, concise and understandable disclosure (‘Plain English Rules’). These rules required registrants to write the cover page, summary and risk factors section of prospectuses in plain English and were extended to Exchange Act reports in 2005.’

And that’s it: two sentences – just 51 words – buried within a document seeking comments on how to improve corporate financial and non-financial disclosures. This document has as many pages as the US version of the second Harry Potter book, but only two sentences (along with a few footnotes) on the importance of writing in plain English.

On the one hand, it’s admirable that the SEC can sum up its commitment to good writing in just two sentences. On the other hand, if the SEC is serious about encouraging concise and understandable writing, it should have devoted more space to the subject in its release.

It has been 18 years since the SEC adopted its Plain English Rules. These rules were written at the time to apply only to ‘the front portion of the prospectus’, but they are good guidelines for all financial disclosures. In fact, all writers (not just those composing SEC filings) should be familiar with these principles, succinctly stated by the SEC:

– Short sentences

– Definite, concrete, everyday language

– Active voice

– Tabular presentation or bullet lists for complex material, whenever possible

– No legal jargon or highly technical business terms 

– No multiple negatives.

Also in 1998, the SEC issued its Plain English Handbook to provide further guidance for writers of disclosure documents. This book is only 83 pages long, and it’s worth reading. It includes a preface from Warren Buffett in which he says: ‘For more than 40 years, I’ve studied the documents public companies file. Too often, I’ve been unable to decipher just what is being said or, worse yet, had to conclude that nothing was being said. If corporate lawyers and their clients follow the advice in this handbook, my life is going to become much easier.’

I’d be interested to know, 18 years later, whether he thinks his life has actually become easier as a result of the Plain English Rules. Even the US government has made an attempt to clean up its own writing: the Plain Writing Act of 2010 led to the adoption of Federal Plain Language Guidelines, intended to help readers of government documents ‘find what they need, understand what they find and use what they find to meet their needs.’ That’s a goal we all can get behind.

So it seems there’s a sincere effort in at least some circles to promote good writing, in the government’s own documents as well as the filings it requires from public companies; we just don’t hear about it much. I never expected to say this, but all writers would be wise to follow the government’s guidelines. As Buffett states in his preface: ‘Write as this handbook instructs you and you will be amazed at how much smarter your readers will think you have become.’ I’m going to study that handbook.

Jon Barnes is vice president of Dix & Eaton, an IR and PR firm in Cleveland

This article appeared in the fall 2016 issue of IR Magazine