SEC brings companies on to plain English bandwagon

Vice President Al Gore Wednesday hailed the Securities and Exchange Commission for getting companies to write financial documents in plain English.

Gore presented two SEC employees, Nancy Smith and Brian Lane, with his seventh monthly No Gobbledygook award, which honors federal workers who turn bureaucratese into easily understandable writing.

Gore's award to the SEC marks the first time he has honored a federal program that tries to get the private sector to write clearer. In October, SEC started requiring financial companies to write the cover page, summary and risk factors sections of prospectuses in plain English. The agency published a plain language guide to help companies.

Here's one example of a before-and-after prospectus:

"Drakecorp has filed with the Internal Revenue Service a tax ruling request concerning, among other things, the tax consequences of the Distribution to the United States holders of the Drakecorp Stock. It is expected that the Distribution of Beco Common Stock to the shareholders of Drakecorp will be tax-free to such shareholders for federal income tax purposes, except to the extent that cash is received for fractional share interests."

The new version says:

"While we expect that this transaction will be tax free for U.S. shareholders at the federal level (except for any cash paid for fractional shares), we have asked the Internal Revenue Service to rule that it is."

The plain language awards stem from a June 1 presidential memorandum instructing agencies to put communications into everyday language that people can understand clearly.