I posted the above picture on my FB page yesterday morning and that picture garnered many "Likes". Frankly it's about time prospectus be written in plain English! There is another interesting article on writing in plain English here.
MAS said in its consultation paper that "You should always draft prospectus with the retail audience in mind as they are the audience with the greatest need for information". The link to the MAS consultation paper is here.
Given that I have diligently read hundreds of prospectus since July 2007, I think my views should be heard too since I am the retail user they are targeting ^_^
If you think about it, what I am essentially doing at my blog is to read through the prospectus, sift through the pages to look for material information and then summarize them in an easy to understand format. Of course, more importantly, I tell you whether the IPO is chilli hot and the possible fair value range.
Let me share with you why the prospectus are so difficult to read and can cure people with acute insomnia.
Prospectus are written by lawyers...
In my line of work, I have worked with many lawyers. Lawyers are trained and paid to "cover all angles of risks".
In order to prevent their clients from being sued by investors in future for non-disclosure, all risks (no matter how immaterial) will be listed as a potential risk in the prospectus. As such, half the time, the risk factors in the prospectus are purely "CYA" stuff written in convoluted legalistic jargons.
Proposed changes is definitely great news for investors
The proposed changes include:
- write in plain English without jargon
- present information in a clear, concise and logical manner
- avoid legal and financial jargons
- write in active rather than passive voice
- use short sentences
- write in personal pronouns
- avoid multiple negatives
- use tables, charts and graphs
- use bullet points, examples and descriptive headings
- keep prospectus as short as possible and remove redundant information
Examples of proposed changes
I have gone through the detailed consultation paper. It is definitely a huge step forward in the right direction. You should support it too!
Public may submit their feedback to MAS by March 13 to PartXIIISFA_SFR_amendments@mas.gov.sg
but the bigger problem which MAS should quickly address is the IPO famine in Singapore.
While it is good that retail investors can start reading prospectus written in plain English, what is the point if there are no meaningful IPOs to begin with.... Isn't it time MAS and SGX do something about this? Mr. IPO has been "jobless" for quite a while already...
What happened to the past consultation paper?
Now i suddenly remember SGX consultation paper in October 2012 to allocate more shares to retail investors, especially if the IPO is chilli hot. Isn't that long over due too? Perhaps some kind readers can remind MAS to remind SGX....
Comments
I own a plain language consultancy in Singapore. Our single goal is to create trust between institutions and individuals in society. I'm a former lawyer too.
Until this MAS initiative, listing companies had little regulatory incentive to spend money on making themselves clear. Particuarly when lawyers are involved. But hopefully that will change, to everyone's benefit.
If you're interested in Plain Language in Singapore, visit Your Statement to find out more.
I see a conflict between creating a prospectus that is retail investor friendly and safeguarding the legal interests of listing companies.
For a start, I sincerely hope that the prospectus can be condensed by half.