Plain English and Sec

I am submitting this memorandum with the explanations of the following: 1) what is meant by “plain English”; 2) why the Security and Exchange Committee (SEC) mandates financial disclosures to be in “plain English”, and 3) what actions the U.S. Government and the SEC have taken towards realization of this initiative.

Definition: Plain English (Plain Language)

In “A Plain English Handbook”, the SEC defines “plain English” as the “orderly and clear representation of complex information” (5). Garner defines “plain English” as language that is “robust and direct” and language that expresses ideas in the “simplest, most straightforward way” by using everyday words (xiv). Despite the numerous guidelines for plain English, it is not possible to easily measure the level to which the language used, is plain.

Reasons for the SEC to require “plain English” usage

To understand more about the SEC’s ambition and reasons to promote plain English, we should consider two major aspects. Firstly, we should view the SEC’s actions in the context of the U.S. governmental initiatives, and secondly, we should concentrate on the SEC’s responsibilities for the proper functioning of the securities market.

In the 1970s, the U.S. Government saw the need for accessible and consistent regulations that are precisely and clearly written in plain language and that are easy to understand. Presidents Carter, Reagan, Clinton, and Obama made serious contributions to this plain English initiative that all culminated into the current law, the Plain Writing Act, signed by President Obama in October 2010.

The most important events that influenced the SEC’s firm actions occurred in 1998. On June 1, 1998, President Clinton issued a Presidential Executive Memorandum, which made the usage of plain language a requirement for all Executive Departments and Agencies. They had to fulfill this requirement based on a time line defined in the Memorandum. Three months later, in August 1998, the SEC was the first agency that published its Handbook about the usage of plain English in financial disclosures. The SEC added new paragraphs to Rule 421 under the Securities Act of 1933 to enforce the usage of plain language. This almost immediate reaction was possible because the SEC had been working on a Plain English Pilot Program since 1996. In 1998, the SEC made the plain English writing style a legal duty for publicly traded companies. Gradually other agencies followed the leading example of the SEC such as the Department of Transportation and the Nuclear Regulatory