ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Tuesday, January 14, 1997 TAG: 9701140048
SECTION: BUSINESS PAGE: B6 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: ASSOCIATED PRESS
The Securities and Exchange Commission is asking corporations to rewrite their stock and bond documents into another language: English.
The stock market regulator unveiled proposed rules Monday that would require companies to present their securities prospectus documents - the frequently dense paperwork describing a sale of stocks or bonds - in a summary that Joe Six-Pack could comprehend.
Simple as it sounds, SEC commissioners and staff solemnly noted it represents a mini-revolution of sorts for corporate attorneys and the SEC itself.
``I've been around our markets for most of my life, and I can't understand much of what passes for disclosure,'' said SEC Chairman Arthur Levitt Jr.
Anyone who's spent a few minutes reading SEC filings knows this is an area ripe for change.
Consider this passage from a 1996 proxy statement concerning the merger of Bell Atlantic Corp. and Nynex Corp.: ``In the Merger, each share of NYNEX Common Stock issued and outstanding immediately before the Effective Time (excluding those held in the treasury of NYNEX and those owned by Bell Atlantic), without action on the part of the holder thereof, will be converted into the right to receive 0.768 of a share of Bell Atlantic Common Stock.''
Whew. What did that mean?
Here's Bell Atlantic's revision: ``If the merger is completed, Nynex stockholders will receive 0.768 of a share of Bell Atlantic common stock for each share of Nynex common stock that they own.''
Bell Atlantic is one of 23 businesses that volunteered to help SEC staff develop the proposed rules, as well as a how-to handbook on plain English writing. The agency is releasing for public comment new rules that would require companies to use plain English in the cover page, summary and risk factors sections of stock, bond and mutual fund prospectuses. The rules followed two years of work with attorneys, English professors and investors.
The push for corporate clarity is significant, considering that 15,000 corporations, mutual funds and individuals file an estimated 12 million pages with the SEC yearly. The proposed rules initially will apply to a fraction of this paperwork, but the SEC eventually wants to expand the rules to annual and quarterly reports and other periodic filings, said Brian Lane, the SEC's corporation finance director.
Under the proposals, companies are to write in the active voice, using short sentences and definite, concrete words, the SEC said. No multiple negatives or ``highly technical business terms'' will be allowed in these one-page summaries. The rules also spell out plain English guidelines for the rest of the prospectus, including use of a glossary of terms whose meanings aren't clear at first reading.
Companies that persist with murky prose typically have the filing returned to them for a rewrite, Lane said.
The rules are being circulated for a 60-day comment period. Ann D. Wallace, a senior SEC corporation finance attorney, said Wall Street money managers welcome the change because they won't have to assign researchers to plow through the verbiage.
LENGTH: Medium: 62 linesby CNB