Plain English in Corporate Disclosures: Review and Implications for Consumers, Producers, and the Free-Market System

Abstract

The Internet is revolutionizing the investment world. There are clear benefits to these changes, including lower costs and faster access to the market for investors. There also are consequences to these changes when investors take risks without having access to clear, accurate, and full disclosures. In a free-market system, investors must have access to information they can understand and use autonomously to have full and equal access to the investment market. The Securities and Exchange Commission (SEC) recently passed a rule requiring businesses to use plain English to try and rid disclosures of their traditionally complex and ambiguous language. However, SEC's rule only addresses the front and back sides of prospectus disclosures. Consequently, the success of plain English will depend on the writer and business using it. Public corporations committed to using plain English will empower investors with the information they need to participate in the market freely and safely. In return, businesses will create a more effective and efficient free-market system by maximizing utility, benefiting producers, consumers, and the market as a whole.