The limits of disclosure regime: Penalising industry, confusing investors

Like any other organisation facing public outcry, perception management becomes the regulator's foremost priority

Across the world, financial market regulation is largely built on the edifice of a disclosure regime. Regulated entities are mandated to make periodic and event-based disclosures. This is surely a time-tested and sound practice — after all, more sunlight is always welcome. 

 

The disclosure system, combined with the principle of caveat emptor — or “let the buyer beware,” which implies that the buyer purchases at their own risk — is also comforting for regulators. In a way, prescribing disclosures gives them a certain satisfaction of a job well done. This column examines the efficacy of the much-touted disclosure regime in