When Words Get in the Way

8/4/2019 When Words Get in the Way

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When Words Get in the WayNew SEC Trove o Plain English Disclosures by Money Manage

Reveals Much, Leaves Much to Be Desired

Gadi Dechter October 2011

www.americanprogress.o
http://www.americanprogress.org/http://www.americanprogress.org/


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When Words Get in the WayNew SEC Trove o Plain English Disclosures by Money

Managers Reveals Much, Leaves Much to Be Desired

Gadi Dechter October 2011

CAPs Doing What Works project promotes government reorm to eciently allocate scarce resources and

achieve greater results or the American people. This project specically has three key objectives:

Eliminating or redesigning misguided spending programs and tax expenditures, ocused on priority areas

such as health care, energy, and education Boosting government productivity by streamlining management and strengthening operations in the areas

o human resources, inormation technology, and procurement

Building a oundation or smarter decision-making by enhancing transparency and perormance

measurement and evaluation


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1 Introduction and summary

4 Progress: From check-the-box to plain English

8 Problems: Not-so-plain English and not so easy to use

12 Recommendations: Release, test, and enforce

14 Conclusion

15 About the author and Acknowledgements

16 Endnotes

Contents


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1 cener r Aeran prgre | Wen Wrd Ge n e Way

Introduction and summary

People paid o manage ohers money have a legal duy o pu clien ineress

above heir own. And ye your rused adviser a AXA Equiable Lie Insurance

Company won ge healh benes unless he convinces you o buy he insurance

gians wares over hird-pary producs. Bank o America Corp.s wealh manag-

ers a is Merrill Lynch subsidiary have a policy o ring cliens who reuse o

engage in a ype o ransacion idenied by Congress as poenially abusive. And

raders a Goldman Sachs Group Inc.s proprieary rading desks someimes be

agains he very people whose money hey manage.

Tese are among he many revealing disclosures released publicly wih litle an-

are earlier his year by he Securiies and Exchange Commission, he Washingon

regulaor ha keeps abs on more han 11,000 invesmen advisers. Now, under

new rules more han a decade in he making, all money managers regisered wih

he SEC mus publicly release annual disclosures o heir ees, conics o ineres,

and disciplinary hisoryand do so in plain English.1

For he rs ime since he SEC began regisering money managers in 1940, hese

brochures are now available o he general public and in one searchable daa-

base. Tey represen one o he mos imporan invesor proecion iniiaives

in decades, according o SEC Commissioner Elisse B. Waler. Indeed, hey are a

major sep orward by he ederal governmen in helping invesors make inormed

choices abou perhaps he single-mos imporan nancial decision hey make:

Whom o enrus wih heir money.2

Unorunaely, he new Form ADV Par 2 disclosures (he bureaucraic name

or hese documens) are also an objec lesson in missed opporuniy. Teyre sill

oo hard o undersand, cumbersome o navigae, and will likely coninue o beignored by he very people heyre inended o helpunless he SEC releases he

daa in a more user-riendly way, or encourages he privae secor o do i.
http://www.adviserinfo.sec.gov/%28S%28l3lkmxtiomqpvb23nwihy03r%29%29/IAPD/Content/IapdMain/iapd_SiteMap.aspx.http://www.adviserinfo.sec.gov/%28S%28l3lkmxtiomqpvb23nwihy03r%29%29/IAPD/Content/IapdMain/iapd_SiteMap.aspx.http://www.adviserinfo.sec.gov/%28S%28l3lkmxtiomqpvb23nwihy03r%29%29/IAPD/Content/IapdMain/iapd_SiteMap.aspx.http://www.adviserinfo.sec.gov/%28S%28l3lkmxtiomqpvb23nwihy03r%29%29/IAPD/Content/IapdMain/iapd_SiteMap.aspx.


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Teyre a vas improvemen over wha we had beore, which ses a prety low bar,

says Barbara oper, direcor o invesor proecion wih he Consumer Federaion

o America. Teres beter disclosure abou conics o ineress. Teres a clearer

descripion o he services hey re oering.3

William Luz, a reired English proessor who led a yearlong SEC disclosure iniia-ive during he Bush adminisraion, is less chariable. Te random sample ha I

looked a were prety errible, he says.4

For he SEC o make good on is regulaory goal o ensuring ha invesors ge

clearly writen, meaningul, curren disclosure o he business pracices, conics

o ineress and background o he invesmen adviser,5 he agency should ake

he ollowing hree seps:

Te commission should bulk-release all adviser regisraion inormaion on daa.

gov, in a orma ha mos readily allows he daa o be sliced and diced in mean-ingul ways by privae companies and consumer advocaes.

Te SEC should use is newound auhoriy under he Dodd-Frank nancial

reorm law o conduc invesor esing o deermine wheher he new disclo-

sures are comprehensible, useuland improve hem accordingly.

Te SEC should vigorously enorce is plain English requiremen, penalizing

money managers ha ail o explain heir business pracices and conics o

ineress in a way ha he average invesor can undersand.

In general, he commission and oher governmen agencies should move oward

an oucome-ocused way o measuring wheher regulaed indusries are airly,

eecively, and ecienly disclosing inormaion.

Wha do we mean by ha? oday, laws ha require companies o share inorma-

ion wih invesors or consumers end o measure compliance by wheher man-

daory disclosures are made. Bu any casual reader o a Federal egiser noice

or credi card agreemen knows ha ineecive disclosures can undermine he

civic and proecive aims o a responsible governmen. oo much inormaionis overwhelming. Poorly presened inormaion creaes conusion. Grauious

complexiy sows disrus.
http://data.gov/http://data.gov/http://data.gov/http://data.gov/


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We need a beter sandard or deermining wheher he governmen and he

indusries i regulaes are ullling heir obligaions o communicae openly and

honesly wih he public. Tas why in addiion o measuring wheher companies

are complying wih disclosure requiremens by oupuswheher a required

disclosure orm was lled ouhe SEC should measure ransparency by ou-

comeswheher he inormaion was comprehensible o is inended audience.Tis paper deails how his can and mus happen.


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Progress

From check-the-box to plain English

Unil his year, nancial advisers who managed more han $25 million in clien

asses had o le a series o orms every year wih he SEC, one o which was also

given o prospecive and curren cliens. Ta disclosure was a generic check-he-

box shee ha ofen ailed o meaningully convey wha powers advisers had, how

hey were paid, poenial conics o ineress, and disciplinary record, according

o SEC Chairman Mary Schapiro.6

Under new rules rs proposed in 2000 and nalized las year, advisers mus

now also give cliens deailed narraive disclosures in plain English, including

ar more inormaion abou he conics o ineres ha bedevil he money man-ager businessor example, when advisers are also sockbrokers who peddle

rades or commission, or when hey ge cliens o buy securiies o he rms

own books. (See box)

So do he new disclosures give invesors meaningul disclosure ha invesors can

acually undersand, as SEC ocials inended? Well, hey cerainly give invesors

more inormaion, judging by a cursory examinaion o several dozen new disclo-

sures. And more disclosure is generally good.

o wi, some o he revelaions conained in hese housands o lings should give

pause o anyone huning or a rused adviser, such as he AXA Advisory acknowl-

edgmen ha is nancial planners may qualiy or cerain [employee] benes,

such as healh and reiremen benes, based solely on sales o proprieary

producs issued by AXA raher han producs issued by hird paries. 7

Or consider Goldman Sachs Asse Managemen, careaker o $523 billion in cli-

en asses, which ells wealhy cliens abou midway hrough is 74-page disclosure

ha heir advisers may buy or cusomers a sock ha he marke-moving rm is

simulaneously beting agains. Such a so-called shor posiion may impair hecliens holdings, Goldman admis in is disclosure.8

Anoher o he poenial conics o ineress he SEC requires advisers o

highligh in heir brochures is wheher hey engage in principal ransacions. A


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principal ransacion is when he adviser causes he clien o buy an invesmen

produc rom he advisory rms own accoun. Tese ransacions are more heavily

regulaed because o congressional worries ha rused advisers would use clien

accouns as a dumping ground or undesirable or hard-o-sell rm holdings.

Careul readers o he Bank o Americas Merrill Lynch Personal Advisor Programdisclosure will learn i doesn care or cliens who are uncomorable wih hese

rades. I you revoke your consen o principal ransacions, Merrill says in is

new disclosure, we will erminae your paricipaion in [Merrill Lynch Personal

Advisor Program].9 A cauious invesor migh be wise o ask why. (Te company

did no reply o a reques or more inormaion abou his pracice.)

Single, searchable website is major step forward

Anoher major developmen under he new disclosure rules is he SECs laudabledecision o make hem all available o anyone or ree hrough one websie. Unil

now, advisers only had o oer he disclosures o prospecive and exising cliens,

alhough oher regisraion inormaion has been available online since 2001.

Te new and improved policy should make i easier or people o go online and

compare, evaluae, and rae he rms hey enrus wih heir savings, reiremen,

and uure amily securiy.

Tas good. oday, less han 10 percen o people searching or a nancial services

rm use he Inerne o make heir decision, according o a 2010 RND survey,

even hough nearly 90 percen o Americans making over $75,000 a year conduc

consumer research on he web.10

Despie hese advances, here remain wo major obsacles sanding in he way o

he SECs goal in he redesign, which was o ensure invesors had clear and con-

cise inormaion presened in a way ha makes i easy o compare and conras

advisers. Well explore hose obsacles in he nex secion.
http://www.sec.gov/rules/final/2010/ia-3060-secg.htm.http://www.sec.gov/rules/final/2010/ia-3060-secg.htm.


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Old Form ADV Part 2 brochure

FORM ADV

Part II - Page 6

Applicant: SEC File Number:

801-

Date:

12. Investment or Brokerage Discretion.

A. Does applicant or any related person have authority to determine, without obtaining specific client consent, the:

Yes No

(1) securities to be bought or sold? ...............................................................................................................

Yes No

(2) amount of securities to be bo ught or so ld? .........................................................................................Yes No

(3) broker or dealer to be used? ................................................................................................................

Yes No

(4) commission rates paid? ...........................................................................................................................

________________________________________________________________________________________________________

Yes No

B. Does applicant or a related person suggest brokers to clients? .......................................................................

For each yes answer to A describe on Schedule F any limitations on the authority. For each yes to A(3), A(4)

or B, describe on Schedule F the factors considered in selecting brokers and determining the reasonableness

of their commissions. If the value of products, research and services given to the applicant or a related

person is a factor, describe:

the products, research and services

whether clients may pay commissions higher than those obtainable from other brokers in return for those products

and services

whether research is used to service all of applicant's accounts or just those accounts paying for it; and

any procedures the applicant used during the last fiscal year to direct client transactions to a particular broker in

return for product and r esearch services received.

13. Additional Compensation.

Does the applicant or a related person have any arrangements, oral or in writing, where it:

A. is paid cash by or receives some economic benefit (including commissions, equipment or non-research Yes No

services) from a non-client in connection with giving advice to clients? . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Yes No

B. directly or indirectly comp ensates any person for clien t referrals?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(For each yes, describe the arrangements on Schedule F.)

14. Balance Sheet. Applicant must provide a balance sheet for the most recent fiscal year on Schedule G if applicant:

has custody of client funds or securities (unless applicant is registered or registering only with theSecurities and Exchange Commission); or

requires prepayment of more than $500 in fees per client and 6 or more months in advanceYes No

Has applican t provided a Schedule G b alance sh eet?..............................................................................

Answer all items. Complete amended pages in full, circle amended items and file with execution page (page 1)


Source: SEC.gov

The old brochure was

meant to help investors

it doesnt even address

to them. It looks more lgovernment orm lled

an applicant or a licen

permit o some kind.

The check-the-box orm

doesnt give context or

what a yes or no mea

Relevant details are rele

to schedules that are

appended to the orm.

Confict-o-interest ino

is presented in a generi

that doesnt convey wh

investor should care or

the risks areor even u

phrase confict o intere
http://sec.gov/http://sec.gov/


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New plain English brochure

Source: SEC.gov

The new brochure is w

as a narrative, ollowing

ormat set by the SEC tsure certain topics are c

Conficts o interests ar

clearly labeled and det

The degree to which ea

new disclosure conorm

to the plain English va

with advisers, but they

are told to be concise a

direct, using denite,

concrete, everyday wor

The new ormat allows

encourages advisers to

explicit about how they

conficts o interests.

- 7 -

Bauman Advisory Group, LLC

Material Relationships Maintained by this Advisory Business and Conflicts ofInterest

Managing Member Todd Baumans principal business is as an insurance agent andan estate planner. Greater than 50% of Mr. Baumans time is spent in thesebusiness practices. From time to time, he will offer clients advice or products fromthose activities.

These practices represent potential conflicts of interest because it gives Mr. Baumanan incentive to recommend products based on the compensation amount received.This conflict is mitigated by the fact that clients are not required to purchase anyproducts or services. Clients have the option to purchase these products or servicesthrough another insurance agent or estate planner of their choosing.

Recommendations or Selections of Other Investment Advisors and Conflicts ofInterestBAG may at times utilize the services of Third Party Money Managers to manageclient accounts. In such circumstances, BAG will share in the Third Party assetmanagement fee. This situation creates a conflict of interest. However, whenreferring clients to a third party money manager, the clients best interest will be the

main determining factor of BAG.These fees do not include brokerage fees that maybe assessed by the custodial broker dealer. Fees for these services will be based ona percentage of assets under management not to exceed any limit imposed by anyregulatory agency. The final fee schedule will be attached to Exhibit D in BAG'sInvestment Advisory Agreement.

This relationship will be disclosed to the client in each contract between BAG andThird Party Money Manager. BAG does not charge additional management fees forThird Party managed account services. Client's signature is required to confirmconsent for services within Third Party Investment Agreement. Client will initial BAG'sInvestment Advisory Agreement to acknowledge receipt of Third Party fee Scheduleand required documents including ADV2 disclosures.

Item 11: Code of Ethics, Participation or Interest in Client Transactionsand Personal Trading

Code of Ethics DescriptionThe employees of BAG have committed to a Code of Ethics that is available forreview by clients and prospective clients upon request. The firm will provide a copyof the Code of Ethics to any client or prospective client upon request.

Investment Recommendations Involving a Material Financial Interest andConflict of InterestBAG and its employees do not recommend to clients securities in which we have amaterial financial interest.


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Problems

Not-so-plain English and not so easy to use

Te rs problem is ha hese plain English disclosures are ofen writen in ur-

gid and convolued prose ha is anyhing bu plain. Tis obscures he very inor-

maion heyre mean o reveal. In some cases, hese documens seem o violae

in a single paragraph every rule o plain wriing laid down in he SECs own Plain

English Handbook.11 Consider his 104-word senence rom Goldman Sachs:

Emerging Markets and Growth Markets RiskIn addition to the risks

described in Non-U.S. Securities Risk below, investing in the securities o

governments in emerging markets involves certain considerations not usually

associated with investing in securities o developed market companies or coun-tries including, without limitation, political and economic considerations, the

potential difculty o repatriating unds, general social, political and economic

instability and adverse diplomatic developments, the small size o the securities

markets in such countries and the low volume o trading , resulting in potential

lack o liquidity and in price volatility, and certain government policies that may

restrict an Advisory Accounts investment opportunities.

(ranslaion ino acual plain English: Lending money o poorer counries, even

i heyre growing as, is riskier han buying U.S. reasury bonds. Tese counries

are more likely o have poliically unsable governmens and volaile economies.

Ta means you migh no ge paid back on ime or ever, and you migh no be

able o sell he bonds when you wan o.)

Te second big problem is ha he disclosures and he daa hey conain are no

presened in a way ha enables invesors o easily compare, search, or rae di-

eren nancial advisers. An invesor in upsae New York, or example, who is

looking o place $500,000 in he care o a alened money manager should be able

o use he wealh o inormaion gahered by he SEC o nd and hen compare all

regisered advisers ha mee he ollowing crieria:

Locaed wihin driving disance o his address Have been in business a leas 10 years Have beween $100 million and $500 million in asses under managemen (big
http://www.sec.gov/pdf/handbook.pdfhttp://www.sec.gov/pdf/handbook.pdfhttp://www.sec.gov/pdf/handbook.pdfhttp://www.sec.gov/pdf/handbook.pdf


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enough o be repuable, bu no so big ha his $500,000 is insignican o hem) Charge beween 0.5 percen and 1.5 percen o asses under managemen (o all

wihin he low end o naional adviser ees) eceive no commissions on sales or rades (o avoid conics o ineres or

churning o clien unds or ransacion ees)

Accep no perormance-based compensaion (o avoid incenives or excessiverisk-aking by he adviser) Have no record o disciplinary acion agains he rm or is employees wihin

he las 10 years

Alas, he primiive uncionaliy o he governmen websie only allows users o

search advisers by nameno locaion, size, ee schedules, or any oher useul search

variable. Te erm primiive is oo generous, says Luz. Neanderhal leaps o mind.

Te SEC is aware o hese limiaions. Agency sa in Januaryrecommended ha

he commissioners enhance he search eaures o he websie and add educa-ional conen o make he daa more useul o invesors.12 Te repor also rec-

ommended merging he adviser disclosures daabase wih a separaely mainained

one called BrokerCheck ha conains he disciplinary hisory o sockbrokers

(who are ofen also regisered advisers).

Tese are welcome suggesions. Te commissioners should ac on hem, bu is

unlikely ha a bureaucracy ha produced such an unwieldy produc will sud-

denly ransorm ino an exper creaor o user-riendly web services. Case in poin:

Te new disclosures are so hard o nd on he SECs websie ha Te Wall Sree

Journal had o recenly publish a guide or is readers on he nine-sep process:13
http://www.adviserinfo.sec.gov/%28S%28dqa3ddxywm55jjlimdrkr452%29%29/IAPD/Content/Search/iapd_Search.aspx.http://www.sec.gov/news/studies/2011/919bstudy.pdf.http://www.sec.gov/news/studies/2011/919bstudy.pdf.http://www.adviserinfo.sec.gov/%28S%28dqa3ddxywm55jjlimdrkr452%29%29/IAPD/Content/Search/iapd_Search.aspx.


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Happily, we don have o wai or he SEC o become a paragon o user-cenered

design beore his valuable inormaion can be pu o eecive use. Jus as Yahoo!

Finance and oher websies mine he commissions EDGA corporae lings daa-

base o give users a usable presenaion o company nancials, so should privae

companies be able o le reail invesors slice and dice he unwieldy Invesmen

Adviser Public Disclosure daabase.

One rm, San Diego-based BrighScope, has already begun o manually gaher

and republish SEC adviser daa in a ree, searchable websie ha already has ar

more robus search uncionaliy han he governmen sie. BrighScope co-

ounder and CEO Mike Alred says his company has no plans o charge invesors,

who will evenually be able o conduc searches like he one described above. Bu

he acknowledges i won happen overnigh. Everybody wries a narraive dier-

enly, so you need o have MBA-level people guring ou whas behind he daa,

says Alred, whose eam o 40 employees has been working on he projec or a

year. Tis is he area has absoluely going o be he bigges challenge.14

Brighscopes rs-ieraion Advisor Pages are promising, and he companys

pledge o keep is daa ree o consumers is imporan. Bu he SEC should make i

easier or oher companies and invesor advocaes o also disribue such daa, and

encourage healhy compeiion in his space.

In he nex secion we recommend hree seps he SEC can ake o enhance he

impac o is new adviser disclosure rules.
http://www.brightscope.com/financial-planning/find/advisor/http://www.brightscope.com/financial-planning/find/advisor/http://www.brightscope.com/financial-planning/find/advisor/http://www.brightscope.com/financial-planning/find/advisor/


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A tour of plain English disclosures by asset managers

The good

Heres an example o a clearly written disclosure o a potential confict o interest by Sunlake Investment

Management o Ithaca, New York:

Sunlake may reer clients to unaliated proessionals or specifc needs, such as accounting and estate

planning. These proessionals may reer clients to Sunlake or investment management. We do not have any

agreements with individuals or companies that we reer clients to, and we do not receive any compensation or

these reerrals. However, it could be concluded that Sunlake is receiving an indirect economic beneft rom the

arrangement, as the relationships are mutually benefcial. For example, there could be an incentive or us to

recommend services o frms who reer clients to Sunlake.15

The bad

And heres Credit Suisse Asset Managements attempt at explaining a related business practice in their

plain English brochure:

Written agreements may be entered into between the Registrant and solicitors pursuant to Rule 206(4)-3

under the Advisers Act. Pursuant to such agreements, the Registrant provides the solicitor with this Part 2 o its

Form ADV, or the relevant Schedule H, Managed Accounts Brochure, as applicable (Disclosure Documents).

The solicitor must provide to clients, at the time o solicitation, (i) the Registrants Disclosure Documents and

(ii) a written disclosure statement on the solicitors letterhead which shall: (a) advise the client o the nature

o the relationship between the solicitor and the Registrant; (b) include a statement that the solicitor will

be compensated or its solicitation services by the Registrant; (c) indicate the terms o such compensation

arrangement, including a description o the compensation paid or to be paid to the solicitor by the Registrant as

a result o the solicitation agreement,; and (d) indicate whether client will be charged amounts in addition to the

investment advisory ee in connection with the solicitation agreement between solicitor and the Registrant.16

and the bizarre

Finally, heres a paragraph rom Annapolis, Maryland-based Adrian Day Asset Managements disclosure

that ends up disclosing Mr. Days worldview o, among other things, the SEC, the Internal Revenue

Service, and the Transportation Security Administration, in addition to his business practices:

We do not accept as clients employees o the IRS, SEC or TSA, nor other known criminals (whose crimes

involve serious violations o other individuals rights), nor illiberal dictators or their agents unless and until a

public apology or their crimes is orthcoming.17

In an e-mail, Day claried: Yes, I do indeed mean that people who spend their working day ondling

people, and others who steal 40 percent o productive workers income are criminals. A liberal dictator

might be more acceptable than an i lliberal democracy. I you have to ask, you obviously dont get it.18


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Recommendations:

Release, test, and enforce

As he Brighscope example shows, governmen ocials do no need o designperec inormaion sysems o improve he useulness o disclosure regimes. In

many cases, complemening governmen websies by also releasing inormaion

in machine-readable ormas will allow he privae secor o ransorm daa ino

usable ools, websies, and services.

I he inormaion is useul, and he daa are easy o manipulae, hen enerprising

companies and public-ineres advocaes have an incenive o gure ou how o

bes presen ia no addiional cos o he axpayer. As a rs sep, hen, he SEC

should release all adviser regisraion inormaion on daa.govin a orma ha

mos readily allows he daa o be manipulaed. Te daa should be available orbulk download, as well.

I should hen require FINR, he independen regulaor o sockbrokers, o

likewise release all BrokerCheck daa. FINRs erms and condiions requires

BrokerCheck users o agree hey will no use he inormaion rerieved rom

FINR BrokerCheck o develop or creae a daabase o inormaion o be sold,

licensed or made oherwise commercially available. Tas an ourage. Tis is

inormaion colleced or public bene, and he public should be able o access i

in whaever manner i sees .

Meanwhile, he SEC should ake advanage o is claried auhoriy in he Dodd-

Frank nancial reorm bill o engage in invesor esing, somehing ha migh

have helped hem design more user-riendly disclosure brochures in he rs

place.19 I you ook mos SEC disclosures ou ino he eld and esed hem you

would nd ha mos people don have a clue, and ha he commission is no pro-

viding inormaion in a orm ha invesors are eiher willing o look a or capable

o undersanding, says oper o he Consumer Federaion o America. So obvi-

ously, he SEC should es hese orms.20

Agood model or he SEC in his regard is he new Consumer Financial

Proecion Bureau, which is subjecing revamped morgage disclosures o con-

sumer esing beore beginning he ormal rule-making process. We hink he
http://data.gov/http://brokercheck.finra.org/Support/TermsAndConditionsText.aspxhttp://www.americanprogress.org/issues/2011/05/atw_top_model.htmlhttp://www.americanprogress.org/issues/2011/05/atw_top_model.htmlhttp://brokercheck.finra.org/Support/TermsAndConditionsText.aspxhttp://data.gov/


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CFPB is on he righ rack in erms o building in ha consumer esing on he

ron end o make sure hey convey he desired inormaion, oper says.

o be sure, he SEC is under grea srains o implemen hundreds o new rules and

provisions under is purview in he Dodd-Frank Ac. Once i ges a breaher, he

commission should also ge serious abou enorcing he plain English require-men in he new disclosures.

Jus as i did when requiring muual und prospecuses be writen in plain

English, he SEC should oer model examples o wha a well-writen disclosure

looks like, and i should penalize advisory rms ha so brazenly ou he clariy

and conciseness rules.21

Te name o he game, as we all know wih regulaion, is enorcemen, says

Luz, he English proessor-urned SEC consulan. I people never go pulled

over or running red lighs, how many people would sop or hem? Go o Parisand youll nd ou.


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Conclusion

Te SECs plain English revamp o invesmen adviser disclosures, and is wise

decision o release hem online, presen an opporuniy or he commission olead a shif in governmen disclosure policy. By requiring money managers o

explain heir business in plain language brochures, he SEC is acknowledging

as i has in he pasha mere disclosure is insucien o proec invesors. For

markes o uncion well, all paricipans mus have access o useul and under-

sandable inormaion.

Te only way o know or cerain wheher a documen is comprehensible is o

es i on is inended audience. Te Consumer Financial Proecion Bureau is

conducing user esing o guide is revamp o morgage disclosures. Te SEC

should likewise conduc invesor esing o sudy how well he new invesmenadviser disclosures are working.

I i does, he commission will likely nd ha many o hese new plain English

brochures are sill oo conusing and dense o be useuland ha invesors

would more likely pay atenion i he daa were presened in online comparison

and search ools ha had more robus uncionaliy and inuiive inerace.

Tas why he SEC should vigorously enorce is new plain English sandard, and

also release all is adviser regisraion daa, so ha enerprising companies and

advocaes can explore ways o make his inormaion relevan o invesors when

hey need i, and in a orm has easy o use.


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About the author

Gadi Dechter is Associae Direcor o Governmen eorm a American Progress,

where he ocuses on inormaion policy. He previously worked as a reporer aBloomberg News, Te Balimore Sun, and Balimores Ciy Paper. A Bloomberg,

Gadi was an invesigaive reporer covering he inersecion o nance and poliics.

A Te Sun, he covered he Maryland General Assembly and higher educaion. He

received he American Associaion o Universiy Proessorss 2009 Iris Molosky

Award or Excellence in he Coverage o Higher Educaion and was a nalis in he

2008 Livingson Award or Young Journaliss compeiion. He holds a bachelors

degree in lieraure rom Yale and a masers in wriing rom Johns Hopkins. He

eaches public policy communicaions a George Washingon Universiys School

o Media and Public Aairs, and has also lecured a Georgeown Universiy, Johns

Hopkins Universiy, and he Maryland Insiue College o Ar.

Acknowledgments

Te auhor hanks Ed Paisley and he members o he CAP wriing workshop or

heir commens on a draf in progress.


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Endnotes

1 U.s. seure and Exange cn, sEc A-rve Dlure Fr cange prvde inverGreaer inran Abu ter inveen Adver,pre releae, July 2010, avalable a ://www.e.gv/new/re/2010/2010-127..

2 Ele B. Waler, saeen a sEc en eeng,July 2010, avalable a ://www.e.gv/new/

ee/2010/072110ebw-adv..

3 Barbara Rer, ne nervew w aur, June 6,2011.

4 Wlla Luz, ne nervew w aur, June 6,2011.

5 ofe inver Eduan and Advay, U.s. seur-e and Exange cn, inver Bullen:Aenden Fr ADV, newleer, July 2010, aval-able a ://www.e.gv/nver/aler/bullen-radv..

6 mary L. sar, saeen a sEc en eeng,July 2010, avalable a ://www.e.gv/new/ee/2010/072110l-adv..

7 AXA Advr LLc, sEc Fr ADV, par 2, avalable a

://www.advern.e.gv.

8 Gldan sa Ae manageen, L.p., sEc Fr ADV,par 2, avalable a ://www.advern.e.gv.

9 merrll Lyn pernal Advr prgra, sEc Fr ADV,par 2, avalable a ://www.advern.e.gv.

10 Angela A. hung and er, inver knwledge andExerene w inveen Adver and Brer-Dealer (sana mna: RAND inue r cvl Jue,2010); J Janen, onlne prdu Reear (Wang-n: pew inerne & Aeran Le prje, 2010).

11 U.s. seure and Exange cn, A planEngl handb: hw creae clear sEc DlureDuen (1999), avalable awww.e.gv/d/andb.d.

12 ofe inver Eduan and Advay, U.s. seur-e and Exange cn, sudy and Reen-dan n irved inver Ae Regran

inran Abu inveen Adver and Brer-Dealer (2011), avalable a ://www.e.gv/new/ude/2011/919budy.d.

13 ian salbury, inver Ge New tl pre FnanalAdver, Wall sree Jurnal, may 28, 2001, avalable a://nlne.wj./arle/sB10001424052748704281504576329590056065676.l.

14 me Alred, ne nervew w aur, July 6, 2011.

15 sunlae inveen manageen, sEc Fr ADV, par2, avalable a ://www.advern.e.gv.

16 cred sue Ae manageen, sEc Fr ADV, par 2,avalable a ://www.advern.e.gv.

17 Adran Day Ae manageen, sEc Fr ADV, par 2,avalable a ://www.advern.e.gv.

18 Adran Day, eal nervew w aur, July 6, 2011.

19 Ddd-Fran Wall sree Rer and cnuer pre-n A, publ Law 111-203, 111 cng., (July 21,2010), se. 912,

20 Rer, nervew.

21 U.s. seure and Exange cn, sEc seeVew Fr inver n pral irve muualFund Dlure, November 2007, available at hp://www.sec.gov/investor/enhanceddisclosure.htm.
http://www.sec.gov/news/press/2010/2010-127.htmhttp://www.sec.gov/news/press/2010/2010-127.htmhttp://www.sec.gov/news/speech/2010/spch072110ebw-adv.htmhttp://www.sec.gov/news/speech/2010/spch072110ebw-adv.htmhttp://www.sec.gov/investor/alerts/bulletin-formadv.htmhttp://www.sec.gov/investor/alerts/bulletin-formadv.htmhttp://www.sec.gov/news/speech/2010/spch072110mls-adv.htmhttp://www.sec.gov/news/speech/2010/spch072110mls-adv.htmhttp://www.adviserinfo.sec.gov/http://www.adviserinfo.sec.gov/http://www.adviserinfo.sec.gov/http://www.sec.gov/pdf/handbook.pdfhttp://www.sec.gov/pdf/handbook.pdfhttp://www.sec.gov/pdf/handbook.pdfhttp://www.sec.gov/news/studies/2011/919bstudy.pdfhttp://www.sec.gov/news/studies/2011/919bstudy.pdfhttp://online.wsj.com/article/SB10001424052748704281504576329590056065676.htmlhttp://online.wsj.com/article/SB10001424052748704281504576329590056065676.htmlhttp://www.adviserinfo.sec.gov/http://www.adviserinfo.sec.gov/http://www.adviserinfo.sec.gov/http://www.sec.gov/investor/enhanceddisclosure.htmhttp://www.sec.gov/investor/enhanceddisclosure.htmhttp://www.sec.gov/investor/enhanceddisclosure.htmhttp://www.sec.gov/investor/enhanceddisclosure.htmhttp://www.adviserinfo.sec.gov/http://www.adviserinfo.sec.gov/http://www.adviserinfo.sec.gov/http://online.wsj.com/article/SB10001424052748704281504576329590056065676.htmlhttp://online.wsj.com/article/SB10001424052748704281504576329590056065676.htmlhttp://www.sec.gov/news/studies/2011/919bstudy.pdfhttp://www.sec.gov/news/studies/2011/919bstudy.pdfhttp://www.sec.gov/pdf/handbook.pdfhttp://www.sec.gov/pdf/handbook.pdfhttp://www.adviserinfo.sec.gov/http://www.adviserinfo.sec.gov/http://www.adviserinfo.sec.gov/http://www.sec.gov/news/speech/2010/spch072110mls-adv.htmhttp://www.sec.gov/news/speech/2010/spch072110mls-adv.htmhttp://www.sec.gov/investor/alerts/bulletin-formadv.htmhttp://www.sec.gov/investor/alerts/bulletin-formadv.htmhttp://www.sec.gov/news/speech/2010/spch072110ebw-adv.htmhttp://www.sec.gov/news/speech/2010/spch072110ebw-adv.htmhttp://www.sec.gov/news/press/2010/2010-127.htmhttp://www.sec.gov/news/press/2010/2010-127.htm


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