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Plain Writing Initiative: Act and Prospectus Report (Assessment)

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Updated: May 5th, 2022

Different fields use languages that have varying degrees of complexity. The complexity or simplicity of the language depends on the recipients of the information. It is vital to communicate in a form that the recipients of the information can easily comprehend. The legal profession has one of the most complex English. This makes it hard for members of the public to comprehend the content of legal documents. The business world also uses English that is only comprehensible to people within the precincts of the business world. When communicating to members of the public companies must use comprehensible language. This is because members of the public may not have the literacy skills that would enable them to comprehend information using complex English terminologies.

The Plain Writing Act (2010) aims at making it easy for the public to comprehend various documents. The US Securities and Exchange Commission (SEC) demands companies communicate with investors in an easily comprehensible language. The SEC has a guide that helps lawyers and companies reduce the level of complexity of the language in their documents. In 1998, SEC put in place a law that necessitates companies to use plain English in certain sections of their prospectus. However, companies can still write certain parts of the prospectus in plain English (Lehman & DuFrene, 2010).

The SEC discourages companies from using complex English in their prospectus. The prospectus is a formal document that a company prepares when issuing new stock. The prospectus helps in promoting the new stock issue. It provides information on the company’s business model and operations. The prospectus may also provide information on how the company intends to use the funds that it would raise from the stock offering. Investors base their investment decision on the information that the company presents in the prospectus. Therefore, it is critical to use comprehensible language in the prospectus. Using comprehensive language would help investors understand the operations of the company and its financial position clearly. This would enable investors to make informed decisions.

Since the prospectus is a document that is a public document, companies should ensure that they write the whole prospectus in a language that is easily comprehensible. All sections of the prospectus are vital to the potential investor; otherwise, the company would not have included the information in the prospectus. The potential investor should be able to read the prospectus from cover to cover while understanding all the information.

Information in complex English is usually prone to different interpretations. It may enable an organization to trick investors who do not fully understand the information into buying the new stock. Therefore, if an organization is not playing mischief, it should disclose all information that is vital to the potential investor. To do so, a company should present the information in a comprehensible language. If a company targets only corporate investors, it may use complex English. This is because complex language is the normal means of communication in the corporate world. However, companies rarely target corporate investors in a new stock offering. In most instances, companies target both corporate investors and individuals. Therefore, companies should write all parts of their prospectus in a language that is easily comprehensible. This would enable both the corporate investors and individual investors to understand the content of the prospectus clearly.

Reference

Lehman, C.M. & DuFrene, D.D. (2010). Business communication. Belmont, CA: Cengage Learning.

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IvyPanda. "Plain Writing Initiative: Act and Prospectus." May 5, 2022. https://ivypanda.com/essays/plain-writing-initiative-act-and-prospectus/.

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IvyPanda. 2022. "Plain Writing Initiative: Act and Prospectus." May 5, 2022. https://ivypanda.com/essays/plain-writing-initiative-act-and-prospectus/.

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IvyPanda. (2022) 'Plain Writing Initiative: Act and Prospectus'. 5 May.

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