Keeping it simple

TO the uninitiated, reading legal texts can be a daunting affair. Often written in a language to protect the interest of the client, legal English can make cumbersome reading. Unfortunately, that too has found its way to the investment world. Surely that is to be expected when companies sign on the dotted line to ink deals, as the legal language must be thorough enough to cover any and all eventualities that may happen. But not all investors are well versed in such a script. Furthermore, not all also have the time to devour the reams of pages in a prospectus to analyse whether an investment is worth their money and risk. When the Securities Commission announced that all prospectus from March next year must contain a maximum 10-page reader-friendly summary of pertinent infor- mation that is not publicly available, the move will come as a welcome relief to a number of people. The idea is to ensure that the 10 pages, an executive summary of sorts, is written in concise and easily legible language most people would have no problem understanding. Adhering to that will be a challenge to many who have used legal language to ensure their clients are protected at all times. Using simple and concise language to produce a succinct executive summary with relevant information about the prospects and risks of a company would at least give prospective investors a snapshot of what the company is offering them. The truncated prospectus should serve as a menu for the larger and more indepth document, where an investor whose interest has been piqued would then peruse the voluminous document to decide further if the investment is worth making. What advisers should continue to make available to investors is the more traditional prospectus so that all information will be given to them should they want to know more about a company’s risk-reward offering.