Can There Be Too Much Disclosure?

In an effort to provide transparency, the Dodd-Frank Act has previously formed an Investor Advisory Committee to assist the SEC on various issues including regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace.

One of the goals of the Committee is to ensure the effectiveness of corporate disclosures that are made for investors. In keeping with this goal, the Committee recently issued a letter in which it said that it supports reducing redundancies, but wants to make sure that in doing so the benefits of the disclosures are not jeopardized. The Commission has also instituted a "disclosure effectiveness project" to "simplify paperwork and modernize rules." Many recognize that the amount of information that is currently disclosed can be overwhelming for investors, and some of the "useless" information can be eliminated.

However, it is a fine line determining whether to reduce certain information that is currently being disclosed. While more disclosures may be better, it could lead to "information overload." On the other hand, eliminating the amount of information disclosed could be misleading and could lead to allegations of lack of disclosure. Consideration needs to be given on whether to eliminate information that may otherwise be disclosed.

Posted in: Dodd-Frank, SEC
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