Financial industry urged to use plain English for investment documents

Singapore's financial regulators have rolled out a set of proposals aimed at fixing a problem that has long plagued the financial industry - bad writing. -- ST PHOTO: NG SOR LUAN
Singapore's financial regulators have rolled out a set of proposals aimed at fixing a problem that has long plagued the financial industry - bad writing. -- ST PHOTO: NG SOR LUAN

SINGAPORE - Singapore's financial regulators have rolled out a set of proposals aimed at fixing a problem that has long plagued the financial industry - bad writing.

Specifically, the Monetary Authority of Singapore wants issuers of financial products to write their prospectuses in plain English.

It also wants them to present information in a clear, concise and logical manner and avoid unnecessarily lengthy sentence structures.

A prospectus is meant to contain all the information that investors and their advisers would need to make an informed investment decision about a financial product.

However, "in recent years, MAS has observed that prospectuses have grown in length and are often drafted in a technical, convoluted or legalistic manner," the regulator noted.

"As a result, even though prospectuses may contain comprehensive disclosures, investors often find them difficult to read and understand."

Many prospectuses are long and repetitive, include unnecessary or irrelevant details and use financial or technical jargon to conceal important information, the MAS added.

They also employ vague disclosures that may not be meaningful to investors, use convoluted descriptions or explanations and include terms and conditions which are lengthy and difficult to understand.

"You should always draft prospectuses with retail investors in mind as they are the audience with the greatest need for the information required to be disclosed in a prospectus," the MAS said in its consultation paper on the proposed guidelines.

For example, financial institutions should use short sentences and plain, everyday words such as "then" instead of "thereafter" and "if" instead of "in the event that", the MAS suggested.

Members of the public can submit their feedback on these proposals to the MAS by March 13. The proposed guidelines can be viewed on the MAS website.