Law professor suggests that mandatory disclosure may not be justified for primary offerings

By Andrew Abraham Schwartz, University of Colorado School of Law

Mandatory disclosure is a foundation of modern securities law, but University of Colorado School of Law professor Andrew Abraham Schwartz argues that it has become so costly that it is time to consider whether it is really necessary. He believes that the key economic concepts that underlie the modern theory of mandatory disclosure–agency costs and information underproduction–make sense in the context of secondary markets, but are largely irrelevant for primary offerings. In his opinion, the distinction between primary and secondary markets, if accepted, could usher in a new era of simplified, low-cost primary offerings to the public.

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