Clear, concise and effective: what ASIC says about disclosure documents

It’s the law. Many types of disclosure documents – prospectuses, financial services guides, statements of advice and the like – must be written in a way that is clear, concise and effective.

Too often disclosure documents are complete and accurate, but they don’t communicate well. They don’t help readers fully understand the issues so they can make an informed investment decision.

But what does it mean to be clear, concise and effective? ASIC’s recent update (Nov 16) to Regulatory Guide RG 228 ‘Prospectuses: Effective disclosure for retail investors’ unpacks this phrase. In short it recommends using the principles of plain language when writing a prospectus and other disclosure documents.

The guidance ASIC provides comes as no surprise to Plain Language Professionals – we’ve been advocating using plain language and a deliberate focus on the needs of users in all sorts of documents for years. It’s the best way to get your message across.

Ignoring these guidelines, just writing the way disclosure documents have always been written, is risky. The consequences of a disclosure document being found to not be clear, concise and effective could be very costly. RG 228 provides some ways to judge a disclosure document, but ASIC says the guide will not be used as a simple checklist.

The foundational principle of plain language is to focus on the user or reader of the document. RG 228 says that when writing a prospectus to focus on your readers’ need to understand the content and use the information to make an informed decision.

The guide lists a number of writing techniques that help; things like using the active voice, talking directly to the reader, using verbs rather than nouns, avoiding jargon, writing with short sentences.

Plain Language Professionals have been using these ideas for decades, but this writing style is rare in disclosure documents. I guess that’s not surprising: most disclosure documents are written by people with financial and legal expertise rather than by expert communicators.

Writing in plain language is no longer a ‘nice to have’; it’s essential. See plainlanguage.site for a list of Plain Language Professionals who can help write clear, concise and effective disclosure documents.

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