Prospectuses should be in plain English: MAS

MAS sets out to fix problem of bad, jargon-filled writing


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

The Monetary Authority of Singapore (MAS) wants issuers of financial products to write their prospectuses in plain English, not jargon-laden gibberish.

It is urging them to present information in a clear, concise and logical manner and avoid unnecessarily lengthy sentences.

A prospectus is meant to contain all the information 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 lengthy and difficult-to-understand terms and conditions.

"You should always draft prospectuses with retail investors in mind as they are the audience with the greatest need for the information," the MAS said in its consultation paper.

The MAS suggested that financial institutions use plain, everyday words such as "then" instead of "thereafter" and "if" instead of "in the event that".

They should also write in an active rather than passive voice, the MAS urged, as the active voice is easier to read and more engaging.

For example, a sentence in the passive voice might read: "No inferences should be made from any of the foregoing statements to determine future profitability."

Written in an active voice, this would be: "You should not make any inference from any of our foregoing statements in determining our future profitability."

As much as possible, issuers of financial products should also avoid jargon such as "pari passu" or "revolving credit facility".

"However, if you must use legal, financial or technical business jargon in your disclosure, you should explain the meaning of these terms clearly when you first use them and consider putting these terms in a glossary," it said.

Issuers should use short sentences as much as possible and avoid multiple negatives.

So instead of writing, "We will not accept applications from any person who has not attained the age of 21 years", the issuer could instead say, "We will reject applications from any persons under the age of 21 years."

To present information in a clear, concise and logical manner, issuers should make use of tables, charts, graphs and other visuals.

They should also use bullet points, examples and descriptive headings that clearly organise the information into sections and highlight key information.

The MAS added that issuers should keep prospectuses as short as possible by removing redundant information and using cross-references to reduce repetition.

The public can submit feedback to the MAS by March 13.

The full set of proposed guidelines can be viewed on the authority's website.

Separately, the MAS has issued its response to public feedback received on a set of proposals aimed at improving the readability of prospectuses.

These proposals, which it issued in October 2013, suggested, for example, that financial institutions be made to include a "product highlights sheet" when launching debt securities, hybrid instruments and equity securities.

Currently, this sheet is required only for more complex investment products such as asset- backed securities and structured notes.

The MAS has made some amendments to the proposals based on the feedback and will proceed to implement them.

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