Plain Language from Financial Advisers

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SEC rule.PNG

A Wall Street Journal writer asks financial advisers to speak to us in plain English. A new Securities and Exchange Commission rule—described in 564 pages—calls for simpler writing. But the author wants advisers to go further, for example, to use more visuals and categories: “color-coded from red to green, for instance, or arrayed on a scale from 1 to 10.”

Fortunately, the rule includes a summary, although students of business communication will find problems:

The Securities and Exchange Commission (the “Commission” or the “SEC”) is adopting new rules and forms as well as amendments to its rules and forms, under both the Investment Advisers Act of 1940 (“Advisers Act”) and the Securities Exchange Act of 1934 (“Exchange Act”) to require registered investment advisers and registered broker-dealers (together, “firms”) to provide a brief relationship summary to retail investors. The relationship summary is intended to inform retail investors about: the types of client and customer relationships and services the firm offers; the fees, costs, conflicts of interest, and required standard of conduct associated with those relationships and services; whether the firm and its financial professionals currently have reportable legal or disciplinary history; and how to obtain additional information about the firm. The relationship summary will also reference Investor.gov/CRS, a page on the Commission’s investor education website, Investor.gov, which offers educational information to investors about investment advisers, broker-dealers, and individual financial professionals and other materials. Retail investors will receive a relationship summary at the beginning of a relationship with a firm, communications of updated information following a material change to the relationship summary, and an updated relationship summary 2 upon certain events. The relationship summary is subject to Commission filing and recordkeeping requirements.

Plain language in government documents started as an initiative in the 1990s, and the group highlights before-and-after examples.

Discussion:

  • How could you rewrite the summary, above, for easier reading?

  • Review the Plain Language website. What are your impressions of the group’s work?