Securities Law Expertise and Corporate Disclosure
61 Pages Posted: 18 Sep 2015 Last revised: 24 Aug 2018
Date Written: August 1, 2018
We examine whether securities lawyers involved in SEC comment letter inquiries act as client advocates by resisting disclosure changes or as gatekeepers by encouraging disclosure transparency. Consistent with an advocacy role, we find that securities lawyers’ involvement in SEC comment letters is associated with resisting disclosure inquiries through redacting information from filings and issuing fewer amendments to previous disclosures. Our evidence also supports the view that the role of securities lawyers extends beyond the specific inquiry; their involvement is associated with improved readability and more cautionary language in the subsequent 10-K and fewer future restatements and comment letters. Lastly, we find that securities lawyers serve more of an advocacy role when proprietary costs are high and when the inquiry involves a possible amendment, but more of a gatekeeper role when an inquiry is more complex.
Keywords: External advisor, legal counsel, securities law, disclosure, SEC, comment letters, regulation
JEL Classification: M41
Suggested Citation: Suggested Citation