It's Official! SEC Agrees "Shall" Is Ambiguous

Allen Matkins
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Allen Matkins

Nearly a decade ago, I commented on the ambiguity that inheres in "shall":

"Although "shall" is a perfectly fine word,I'mtrying to eschew using it in legal documents.  In my view, it has the potential for ambiguity.  As a test, take a set of bylaws and then try to substitute "will", "may" or "must"for "shall".  For example, a bylaw might provide that board meetings shall be called by the Chairman of the Board, the President or any Vice President.  This doesn't mean that these individuals must call special meetings - only that these are the persons that maydo so.  Another bylaw may provide that expenses incurred in defending a proceedings shall be advanced."

Therefore, I was pleasantly surprised to see that the Securities and Exchange Commission now agrees.  In adopting rules to "modernize, simplify, and enhance certain financial disclosure requirements in Regulation S-K", the SEC explained:

"As proposed, our amendments replace the word “shall” with “must” throughout Item 303 to clarify the rule and avoid any ambiguity associated with the use of “shall.”

Release No. 33-10890 n.98.  I wonder what would John Wallis would have to say about the fact that "shall" is still engendering confusion some four centuries after he noted the problem in  Grammatica Linguae Anglicae.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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