In the latest SEC rulings on disclosure, the regulators apparently gave hedge fund managers their own version of Stunk and White’s “The Elements of Style,” a rule book on how hedge funds should write a “brochure.”
(Hedge funds give their clients brochures as a guide before they make their investment.)
The #1 rule: Use plain English.
So now hedge funds have to fill their brochures with information that is written well, rather than just spewing technically accurate information on the page to avoid litigation.
From All About Alpha:
In an effort to improve transparency, the SEC recently ruled that it must adhere to the Commission’s “Plain English Handbook”.
It’s great news. By requiring funds to explain it like they would to a five-year old, the SEC is essentially requiring managers to understand what they’re doing very well. It probably isn’t a coincidence that two great hedge fund managers are known for being able to communicate complex ideas in simple sentences: John Paulson and Warren Buffett.
Warren Buffett actually wrote the preface of the 83-page long “Plain English Handbook” Obviously it’s cute. Buffett tells everyone to write their reports as if they’re writing to his sisters. His tip:
Write with a specific person in mind. When writing Berkshire Hathaway’s annual report, I pretend that I’m talking to my sisters. No siblings to write to? Borrow mine: Just begin with “Dear Doris and Bertie.”
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