Unit 4: Disclosure Requirements
4.1 Importance of Disclosure in Securities Markets
The disclosure doctrine — securities law’s founding philosophy: the regulator does not judge merit (no “good investment” certificates — the merit-vs-disclosure regulatory contrast, the exam’s classic pair); it forces the truth’s production so the investor can judge. Why disclosure (the fourfold case): (1) the information asymmetry’s cure (U1.3); (2) the price’s honesty (the informed market’s discovery — the disclosure as the price’s raw material); (3) the accountability’s infrastructure (the disclosed company is the governable company — Unit 7’s link); (4) the fraud’s pre-emption (the lie’s structure destroyed before the sale).
4.2 Periodic and Event-Based Disclosures
The periodic calendar — the clockwork disclosures: the quarterly financials (the unaudited progress), the audited annual report (the year’s account: the financials + the directors’-and-auditors’ reports + the corporate-governance section), the half-yearly faces. The event-based (continuous) duties — the material events’ prompt publication: the dividends-and-bonuses, the mergers-and-acquisitions, the major contracts, the board-and-management changes, the litigation-and-regulatory actions, the plant closures-and-disasters, the substantial-shareholding changes — anything the price would want to know (“materiality” as the trigger-test: the reasonable investor’s decision-relevance).
4.3 Prospectus Requirements for Public Offerings
The prospectus = the offering’s bible — the issuer’s full-and-fair disclosure (the Securities Act 2063’s approval regime: SEBON’s vetting before the issue): the company’s business-and-history, the financials (the audited statements-and-forecasts’ discipline), the risk factors (the honest warnings — the risk-disclosure’s craft), the use of proceeds (the raised money’s promised destination), the management-and-promoters’ detail, the issue’s mechanics (the pricing-and-the allotment), the underwriting-and-guarantee faces, and the expertised portions (the auditors’-and-valuers’ signed sections — the experts’ own liability). The liability principle (the exam’s core):
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