{"id":32606,"date":"2016-03-31T19:23:19","date_gmt":"2016-04-01T00:23:19","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/new-sec-plain-english-disclosure-rules.html"},"modified":"2017-04-28T14:39:32","modified_gmt":"2017-04-28T19:39:32","slug":"new-sec-plain-english-disclosure-rules","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/finance\/new-sec-plain-english-disclosure-rules.html","title":{"rendered":"New SEC Plain English Disclosure Rules"},"content":{"rendered":"
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As a lawyer, you understand the importance of effective communications, but your clients should as well. This is especially true when filing documents with the Securities and Exchange Commission (SEC) as the agency scrutinizes disclosures, both in terms of substance as well as style and format. The SEC has even published a handbook<\/a> on how to use plain language. In some cases, the SEC has required amended disclosures<\/a> based on such things as font size and poorly structured sentences. Clarity of communication is important for the SEC and also for investors who rely heavily on disclosures when making investment decisions. You can help your clients save the time and expense of having to amend disclosures by getting it right the first time. Read on to learn more about compliance with the SEC\u2019s plain English disclosure rules.<\/p>\n

What Does the SEC Require?<\/b><\/p>\n

In 1998, the SEC adopted plain English disclosure rules<\/a> impacting the drafting and formatting of every prospectus<\/a> submitted by domestic and foreign issuers for registered public offerings. The rules do not apply to annual meeting proxy statements or periodic reports, even if the periodic report is incorporated by reference into a registration statement.<\/p>\n

Specifically, when drafting the front and back cover pages as well as the summary and risk factor sections, the SEC expects issuers to substantially comply with the following six principles of plain English:<\/p>\n

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  1. Use short sentences;<\/li>\n
  2. Use definite, concrete, everyday language;<\/li>\n
  3. Use an active voice;<\/li>\n
  4. Use tabular presentation or bullet lists when possible;<\/li>\n
  5. Avoid legal jargon or highly technical business terms; and<\/li>\n
  6. Avoid double negatives.<\/li>\n<\/ol>\n

    Regarding the prospectus as a whole, the rules require that it be "clear, concise and understandable." In addition to the plain English principles above, this generally requires avoiding:<\/p>\n