SEC's Requirement for Plain English in Disclosures

by William H. DuBay

A news release on September 9, 1996, from Washington D.C. stated that Bell Atlantic and NYNEX became the first companies to file Plain English disclosure documents as participants in the Securities and Exchange Commission's (SEC) Plain English pilot program. The SEC program encourages companies to use simplified and readable English in disclosure documents for investors, in exchange for expedited staff review of their filings. The Commission also announced drafting a Plain English handbook and Rule 33-7183, which requires that each prospectus have cover pages, summaries, and risk factors written in Plain English.

In April of 1996, when SEC asked for volunteers to design Plain English disclosure documents, Bell Atlantic and NYNEX quickly stepped forward in a joint effort. Their cover page and the summary of their joint proxy statement and prospectus are written in Plain English.

Chairman Arthur Levitt, in a speech before the North American State Securities Administrators conference, said: "Although lawyers get most of the blame for creating unreadable documents, today they have earned my deep appreciation for enthusiastically leading the charge for Plain English. This is a victory for investors, for public companies, and for state and federal regulators-to say noting of the English language. As you examine the cover page and summary of the proxy statement and prospectus for Bell Atlantic and NYNEX, you should notice the following hallmarks of Plain English: everyday language, active voice, personal pronouns, shorter sentences, a 'questions and answers' format, a straightforward tone, more white space, and double columns of text that make it easier to read."

On January 19, 1997, an SEC news release announced the release of the draft of A Plain English Handbook, How to Create Clear SEC Disclosure Documents. The final version is available online at:

The attempt to define a controlled language for English goes back to C. K. Ogden's Basic English in 1936. In the 1960s and 70s, Caterpillar Tractor Company developed its own system of Fundamental English for technical manuals. In addition to a controlled vocabulary, this system uses simple sentence structures that both English-speaking and non-English speaking readers can easily understand.

Early on, other companies bought into Caterpillar's Fundamental English (also called Basic English, Controlled English, Simplified English, and International Service Language), including NCR, Eastman Kodak, and Sundstrand.

With special training, non-native readers can actually read a manual in English. According to Caterpillar Tractor, readers can learn the language in 30 to 60 hours of class. Kodak found that it takes two to three months for non-English-speaking service people to become proficient at its International Service Language.

If classes are not feasible, readers use a Controlled English dictionary. As another alternative, manuals first written in Controlled English are easily translated by human or machine translators because of the limited vocabulary and sentence structure.

An important element in Plain English is the use of visuals wherever possible. The "New Look" standard adopted by the U.S. Department of Defense prescribes a one-page illustration opposite each page of Plain English text.

In the last 10 years, many companies have found that Plain English also increases the effectiveness of documents for English-speaking readers and reduces support costs.

One of the most striking examples of the success of a controlled technical language is Fannie Farmer's Boston Cooking School Cook Book (1896) by Fannie Merritt Farmer (1875-1915). This book revolutionized cooking and became an enduring best seller in the U.S. It used standard procedures and measurements using ordinary household items such as teaspoons, tablespoons, and cups.

In each recipe, Ms. Farmer first states the ingredients and the amounts required. Then she describes the procedure in standard language: "In a large bowl, mix flour, water, and yeast." Not a word too many or too few.

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William H. DuBay
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