You might not have chosen the legal profession in becoming an investment writer. But the legal profession, in many ways, has already enlisted you—and will be paying you frequent visits over the course of your occupation. Keep the figurative counsel's cap at your desk and be prepared to don it as you write, because you'll need to conform to a host of rules and restrictions about what you can say to investors and how you can say it.

In many jurisdictions throughout the world, the investment business is highly regulated, and firms are bound by a fiduciary responsibility—one involving a legal and ethical relationship of trust with investors—to place a client's interests ahead of their own. That responsibility extends to you, as the communicator and mouthpiece of your firm, in the way you sort and express your thoughts; couch, present, and illustrate ideas; and choose your words. It's a deliberative process that requires circumspection at every step.

Failing to comply with regulatory requirements could result in misleading information to the investor and risks harming your firm—whether by damaging its reputation, subjecting it to such penalties as fines or sanctions, or heightening the potential for future litigation.

Rest assured that you'll have guardians to help you out—the specialists of your firm's legal and compliance department. Think of them as reverse gatekeepers: Not a word leaves the firm or sees the light of day without their review and approval to ensure your writing meets regulatory standards. Still, you'll need at least a general ability to distinguish compliant from noncompliant writing at the onset—and learn to recognize key pitfalls—so that by the time a legal specialist reviews your work, it will have already met a host of essential criteria.

Your initial legal qualification will help streamline and expedite the review process. It will allow the reviewer to focus on recondite issues and restrictions you might not have anticipated. It will also enable you to wrest editorial control over your message: The more legally airtight and unassailable your writing, the less you'll need to negotiate content during the review stage, and the faster you can launch your paper boat onto the tide, so to speak.

Rules and regulations for the legal compliance of investment writing vary by firm and jurisdiction. Some regional authorities of the world's largest financial markets include the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA); China's Securities and Banking Regulatory Commissions (CSRC and CBRC); Japan's Financial Services Agency; the Bank of England's Financial Conduct and Prudential Regulation Authorities; Brazil's Comissão de Valores Mobiliários; the Securities and Exchange Board of India (SEBI); Canada's Office of the Superintendent of Financial Institutions (OSFI); and Germany's BaFin (or Bundesanstalt für Finanzdienstleistungsaufsicht—quite a mouthful for non‐German speakers). Many investment firms across the globe also have their own internal legal guidelines to maintain or exceed the standards expected of them externally.

Regardless of your jurisdiction, there are fundamental legal and ethical principles that apply to the external communications of an investment firm. Whether they target the general public, current or prospective clients, financial advisors, consultants, or other intermediaries—and whether they are delivered electronically or in print—these communications include:

• Shareholder communications, such as performance commentary, personal letters, official notices, and account statements
• Invitations to calls, webcasts, and conferences
• Press releases, newsletters, and other circulars
• Promotional content and sales materials, such as foundational literature (e.g., brochures, product profiles, pitch books, and case studies), advertisements, presentations and telemarketing scripts
• Research and informational literature, from intellectual capital to educational materials
• Digital content such as videos, podcasts, website copy, and e‐mail
• Social‐media postings
• Reprinted materials from other sources such as trade publications or newspaper articles

Broadly speaking, investment writing should be fair and balanced. It should deliver a clear and evenhanded message that constitutes an adequate representation of your idea or offering, in good faith and honest dealing. It should provide a sound basis for the investor on which to evaluate your proposition. It ought not to contain misstatements, distortions, exaggerations, or unwarranted claims—nor should it make material omissions or seek to mislead readers in any way, such as when presenting selective information (also known as cherry‐picking) without qualifying it or disclosing its limitations. It must include all the material facts, disclose all risks and caveats, and never conceal or understate the perils or potential disadvantages of what you put forward for consideration. Finally, back up your factual assertions with proof and, if applicable, cite your sources.

How are these principles practiced in everyday writing? Let's review a host of guidelines in connection with some of the most common situations you'll encounter.

AVOID ABSOLUTES, SUPERLATIVES, AND DEFINITIVE STATEMENTS…

…unless you can fully substantiate them with evidence or attribute them to a reputable source—or unless they are demonstrably unimpeachable.

Remember this guideline whenever you feel your enthusiasm getting the best of you, your fingers straying a bit too far afield to key in such words as best, largest, first, last, highest, strongest, most, fullest, optimal, complete, supreme, perfect, lowest, weakest, least, cheapest, fastest, all, nothing, barring none, and their likes.

Yes, it's a common impulse of persuasion—albeit one that is to be resisted, or at least tamed. Is the fund you offer truly the largest by assets under management in its category, or the highest performer? Cite an official ranking. Was your organization indeed the first to have introduced a product or strategy? Show the historical record and mention dates.

If you must use superlatives, qualify them as subjective assessments or value judgments—and be sure to couch your objectives or ideals (e.g., attractive returns, satisfied investment goals, minimum risks) as pursuits, endeavors, aspirations, or possibilities rather than a fait accompli. For example:

Avoid making unwarranted claims and assurances about prospects, such as a supposed ability to provide safety, calm, stability, security, peace of mind, or satisfaction.

Unless they are self‐evident, factual assertions require specifying a source and date of attribution—whether in the body copy or a footnote. Here are some examples:

• Yields on 10‐year Turkish bonds (lira notes) have jumped 70 basis points over the past four days.
• There is an increase in the number of private‐equity deals underpinned by accommodative loan covenants, with more relaxed assurance requirements and lighter amortization schedules.
• Consumer confidence in Mexico continues to improve and is above the long‐run average.
• Institutional investors in Asia are becoming more averse to risks.

Specifically, in the last three examples, you may also need to cite quantitative or descriptive (soft) indicators revealing the phenomenon you're describing. For example, what is your gauge for estimating the volume of accommodative private‐equity deals? What indicator are you using to describe consumer confidence in Mexico? How is greater risk aversion expressed by Asian investors?

There are also restrictions on claiming that something is incontrovertible or giving the impression, by way of preface, that your statement is not open to dispute. Take the following two examples:

The first statement would handily pass muster with your legal department: It is too obvious to be doubted. As an aside, it's not only a truth but also a truism (read: hackneyed).

The second statement might be too definitive in certain contexts and could get you in trouble if, for whatever reason, X no longer remains the “more sensible” investment; if it falls short of delivering greater capital appreciation; or if it fails to achieve capital appreciation at all. Consider a more reserved alternative that still provides something instructive for the investor to consider—only without staking out such an indubitable claim for itself:

Consider additional examples of definitive statements—ones that may be true but cannot be fully substantiated, are difficult to substantiate, or are rooted in value judgments—and ways to qualify them:

YOU CAN BE PREDICTIVE—BUT NOT PROMISSORY

It was during the heyday of peace negotiations in the Middle East—back in the mid‐1990s—when the late Yitzhak Rabin was asked how confident he felt that peace would someday prevail in region. Rabin replied, “It's not advisable to become a prophet.”¹ This nugget of history, aside from its tragic irony, contains sage advice for the investment writer.

Investing is, by definition, an anticipatory activity aimed at capitalizing on a perceived future, and it is predicated on forecasts. Take away the ability of investment professionals to issue their prognostications, and you might as well sentence them—and all us writers—to eternal silence.

Yet there's a fine line between a prediction and a prophecy. The latter isn't just inadvisable but prohibited. The former is legitimate—so long as you qualify it as a possibility rather than a certainty. Thus:

A more cautious legal reviewer may require an additional qualifier stressing that even if demand for alternative fuels rises, it may not necessarily benefit biodiesel producers in particular:

You may also qualify a prediction as an opinion, like so:

If you'd like to present your prediction as a likely occurrence, qualify it as a subjective judgment or cite a reputable source. Hence:

Even when predicting an occurrence that is widely anticipated by sheer logic, avoid definitive statements for anything you cannot absolutely guarantee. Instead, use softer substitutes that imply expectation rather than presumption, like so:

Look for ways to sidestep promissory statements—such as by playing with metaphors, phrasing your proposition in the form of a question, recasting it as a viewpoint, or negotiating verbal minefields in other creative ways—as in the following hypothetical examples of investment‐paper titles:

BE SPECIFIC ENOUGH FOR CLARITY—YET GENERAL ENOUGH TO ACCOMMODATE EXCEPTIONS

The investment world embodies two opposing spheres. The first is one of precision: It involves performance metrics and measurement, pricing, numerical analyses, accounting, transaction mechanics, and processes. The second contains the vagueness, randomness, and unpredictability that govern social sciences, as expressed in the capricious forces of supply and demand. These two spheres make investments a tricky subject to write about: You must be definite in some respects while also allowing room for the anomalous, unknown, or unforeseen.

For example, a basic principle of bond investing is that interest rates and bond prices generally move in opposite directions—with an emphasis on generally. It makes sense that when rates rise, existing bonds that pay a fixed coupon would gradually decrease in value. But who is to say that this should always be the case? Theoretically, if investors found reason to cling to their bonds no matter what, bond prices would turn impervious to rate fluctuations.

Similar caveats apply to any so‐called “law” of the markets: Adding small but significant words of reservation—such as generally, typically, commonly, usually, mostly, broadly, normally, widely, ordinarily, traditionally—are we missing any?—can spell the difference between legal compliance and legal liability. Consider these examples:

Even the most seemingly obvious rules of investing may not always produce the intended result. Diversification, for instance, has failed to shield investors from losses during certain periods of severe market stress throughout history. In quant terms, they are known as periods when “all correlations go to one,” or when the prices of most or all asset classes across the board move down in unison. Hence:

TIME‐STAMP ANYTHING THAT'S IMPERMANENT

As circumstances change, so will your liability for anything you say that will not hold true forever:

CHERRIES ARE NOT FOR PICKING—AND SECURITIES COME AT A PRICE

To avoid the possibility of misleading the investor, you cannot selectively present information that bolsters your case, favors your agenda, or benefits your cause without disclosing other material information that does not.

For example, suppose you wrote a favorable investment review of a country and, to make your case, anecdotally singled out the names of a few local companies that do very well. Such mentions could be considered an inadequate demonstration of your thesis—what about other companies that may be floundering or failing?—and thus a prohibited instance of cherry‐picking.

On the other hand, you may be able to cite individual securities as representative examples of a broader idea in a fairer context. Let's say you're writing a brochure on the prospects of supercomputing and wish to mention some of the world's major manufacturers in your piece by way of example. Your legal reviewer may approve, provided that you disclose whether your company invests in them and to what extent (e.g., “The InvestorPro Technology Fund had 35% invested in Supercomputer Manufacturer A and 25% in Supercomputer Manufacturer B, as of [DATE]”).

NEGOTIATE GRAY AREAS WITH YOUR LEGAL REVIEWER

When it comes to communication—as with any soft skill—there are plenty of murky zones that don't readily conform to a category or lend themselves to unequivocal judgment. Try to work them out through give‐and‐take with your legal reviewer, assuming you have a receptive partner for negotiation.

References to opportunities, possibilities, and chances, to name just a few, are common focal points of deliberation. On one side are those who claim that opportunity requires no further qualification because it is just that: a set of circumstances making it possible to do something. They have a point. After all, there is no guarantee that an opportunity proper—with or without action—would result in a positive or negative outcome.

Some legal reviewers occasionally disagree. In certain contexts, they claim that references to opportunity could create a promissory impression, imply a guarantee, or induce a course of action without the requisite reservations. They, too, have a point. Consider the justifiable verdicts they might render for the following:

Then again, some realms are hazier:

USE CAUTION WHEN NAVIGATING WORD SUBTLETIES

To avoid misleading the investor (and also reduce your chances of being edited by a legal reviewer), be judicious about every word choice and what it connotes in the context at hand. It helps to distinguish between soft and strong words, such as the following:

Here are some examples of admissible soft language and its strong, inadmissible counterpart:

AVOID REDUNDANT QUALIFICATIONS

Protecting your firm—and doing everything you can to avoid misinforming the investor—are imperatives. But even verbal hedging has its upper limit of prudence beyond which you risk being perceived as lacking all conviction. Here are three examples:

UNLESS YOU'RE PERMITTED, DO NOT DISPENSE INVESTMENT ADVICE

Some firms may not—or do not wish to—provide advice in a fiduciary capacity, whether because of their mandate in a particular jurisdiction or their internal legal guidelines. Often they will disclose such a limitation as variations of the following:

Such a prohibition would affect your writing in important ways. First, when promoting an investment offering, you would need to couch it not as a recommendation but rather as something investors may wish to explore, examine, or consider in keeping with their individual risk tolerances, return objectives, and financial goals.

Second, if you want to provide meaningful viewpoints or substantive commentary on a particular investment, you'll need to do so without explicitly steering an investor toward a specific investment, as in the following examples:

On a related note, your firm may be subject to limitations on publishing research reports that analyze individual securities in detail and provide reasonably sufficient information on which to base an investment decision. To shape your editorial agenda, find out what would qualify as such a report and whether your firm is authorized to issue one. The United States (SEC), for example, does not consider the following—among several other communications—to constitute a research report:²

• Discussions of broad‐based indices
• Commentaries on economic, political, or market conditions
• Technical analyses concerning the demand and supply for a sector, index, or industry based on trading volume and price
• Statistical summaries of multiple companies' financial data, including listings of current ratings
• Recommendations regarding increasing or decreasing holdings in particular industries or sectors

SOCIAL (MEDIA) BUTTERFLIES ARE NOT EXEMPT FROM REGULATORY REQUIREMENTS

With social media gaining popularity as a communication tool in the investment industry, regulators and companies have adopted rules governing its use. In addition to the standard legal requirements for all external communications that apply to posts and tweets, you may need to conform to more specific policies, which can vary by firm and jurisdiction. Some firms, for example, allow employees to share, retweet, or register “like” comments on posted material (such as on LinkedIn or Facebook) so long as they do not add extra commentary trying to sway opinions—and only if the material in question has been approved as legally compliant for publishing and is already featured on any of the firm's digital properties.

You may need to abide by additional rules—such as with regard to creating, altering, or uploading content—depending on whether you use social media for personal purposes or are authorized to conduct firm business on it.

CONSULT A LEGAL SPECIALIST WHEN WRITING ABOUT INVESTMENT PERFORMANCE

You may need one before you even begin to write. Typically, addressing your investment performance—and comparing it to that of benchmarks or peers, as when discussing your rankings—entails a raft of requirements to ensure an ethical and transparent representation of past results (which, as the disclaimer's cliché goes, are no indication of future returns).

Here again, rules may vary by firm and jurisdiction. Inquire about them—preferably while your canvas is still blank—and brace yourself for the possibility of having to make elaborate disclosures that would have editorial implications for your piece.

Consider U.S. requirements, for example. When comparing your fund's performance to that of peer groups, you must exhibit a comparison of returns not just across one period, but multiple—such as 1, 5, and 10 years, or since inception—and disclose the influence of such factors as fees, expenses, and dividend reinvestments. When discussing rankings, you need to specify the ranking category, the number of companies in the category, the name of the ranking entity, the length of time to which the ranking applies, the criteria on which it is based (e.g., total returns or risk‐adjusted performance), and other parameters. When addressing retail (mass‐market) investors, you are not permitted to demonstrate how your investment strategy would have performed had it been enacted on, say, a basket of securities years ago under past conditions (an exercise known as backtesting).

And there are plenty of other stipulations, requirements, and limitations to consider for these and other performance‐related communications.

SEEK WAYS TO STREAMLINE THE LEGAL REVIEW

Front‐load some of the work in the drafting stage to reduce the reviewer's burden and avoid bottlenecks toward the end in your rush to publish. Consider the following tips:

• Legal disclaimers: Maintain a running list of boilerplate disclaimers to use for predetermined occasions. Ensure that disclaimers relegated to legends, footnotes, or the end of your piece do not inhibit the reader's understanding of your communication. Make certain they are written clearly and printed legibly, in the appropriate size and typeface as required for their particular application, and within mandated proximity to what they're referencing. See to it that all references to past performance are paired with the caveat that they do not guarantee future results. Finally, confirm that the disclaimers, which commonly vary by audience, are appropriate for the constituency you're targeting, such as retail investors, high‐net‐worth investors, institutional investors, financial advisors of private clients, institutional investor consultants, or the general public.
• Leveraging existing material: Lift or replicate as much previous material as you can—or at least portions of it—that has already been certified as legally compliant for reuse.
• Visuals: Make sure that all graphs, charts, and illustrations are properly labeled and proportioned so that their dimensions aren't skewed to overstate a point (such as in instances of disproportionate spacing on an axis to exaggerate performance)
• Periodic workshops: Every now and again, hold meetings with representatives from your legal and compliance department to address recurring issues, set expectations, and establish agreed‐upon workarounds for overcoming the limitations of prohibited language.

DIVERSIFY YOUR LANGUAGE

By now you have a sense of the most common ways to reserve, qualify, restrict, temper, and modulate investment writing to make it legally compliant. Avail yourself of them ever so frequently. At the same time, avoid excessive repetition of the same qualifiers and vary your word choices so as not to sound stale and monotonous. Here are some examples of words and phrases between which you can alternate:

ON LEGALITIES, CREATIVITY, AND INTEGRITY

Those who enjoy unfettered liberties to express themselves as they wish may occasionally view legal strictures as burdensome or confining. They include the creative community, of which writers are a part (or, in the spirit of qualified statements, I should say typically a part).

That's not an unreasonable sentiment. But don't let “legal” get you down. View it as a blessing rather than a burden: an opportunity to summon your finest—in creativity and ethics—within the protective perimeter of the law from which we all benefit. In fact, the imposition of legal requirements should sharpen rather than blunt the edge of your writing skill, hone your sensibilities for nuance and subtlety, recommit you to the highest code of our trade, and make you a more astute communicator all around.

Above all, view legal compliance not just as an enforcement of rules, but a reinforcement mechanism for the integrity of your firm and the industry as a whole.

And with that, good luck!