Boundary of Mandatory Disclosure in Securities Law and Its Alternatives: A Perspective

 

Title
Boundary of Mandatory Disclosure in Securities Law and Its Alternatives: A Perspective
Author
Chien-Chung Lin
Keywords
Securities Law, Mandatory Disclosure, Caveat Emptor,
Transaction Costs and Information Process, Externality in
Disclosure
Abstract
Securities laws are, in reality, a congeries of mandated disclosure. The underlying
assumption is that a well-functioning securities market needs to aggregate
information. Individual investor in this market then can benefit from more disclosure
as this team-work of market—information, allow investors make the decision
according to their best interest. This reasoning is followed both in the United States
and Taiwan persistently. But the prevalence of mandatory disclosure in securities
laws is not accepted without challenge. On the one hand, the failure of mandatory
disclosure is well documented in many empirical studies in securities laws as well
as in many other areas of law. On the other hand, the critics of its theoretical foundation
continuously question mandatory disclosure’s effect and necessity. Using the
benefit of these criticisms, this article first examines the nature of securities transaction
and how the intended audience/participants interact with the information
circulated in the securities market. With the attempt to understand the limits of
mandatory disclosure regime, this article secondly explores the deficiency in the ideological foundation of mandatory disclosure, which can be traced back to Former
Justice Brandeis in the early 1910s. Last, an agenda for future reform is proposed
to better meet the need of “efficiency” in the ever-changing world of transaction.
Abstract Article

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