Keep It Simple; Keep It Plain

After CFOworld spread the concern of finance executives about --- and how a patchwork of new requirements often force companies to make it an impenetrable document for the investor audience it's meant to inform -- former SEC chairman adds a nice exclamation point.

His position that financial disclosures should be written in plain English is nothing new, of course, although it's always refreshing. He's argued this for years now.

But the latest call has special meaning because of its timing, coming as it does on the heels of CFO complaints about the deterioration of 10-Ks as readable documents, and suggestions for their redesign. Capping the points made by various finance executives, Levitt notes that certain legal elements actually want most financial documents to be obtuse. That's because, he says, some reports "are written not to inform readers but to protect the provider of the information." Most issuers of equities, debt and other investment instruments "are deeply afraid that if they wrote plainly, someone might actually understand what was at stake," in his view. "Imagine what would happen if a stock prospectus said: 'You could lose your shirt on this'."."

It's an element worth considering, if financial executives are serious about speaking telling investors directly what's really going on in their companies -- and about making the case to regulators that candor and simplicity should be encouraged, not discouraged.

"You wouldn't buy an investment from a stranger," Levitt writes, "so why buy one wrapped in strange language."