Information-Dissemination Law: The Regulation of How Market-Moving Information Is Revealed
78 Pages Posted: 27 Apr 2016 Last revised: 29 Apr 2018
Date Written: April 26, 2016
Corporate information that moves stock-market prices sits at the center of modern securities regulation. The Great Depression-era securities laws at the foundation of the field require much mandatory disclosure of this type of information. They also include a strict anti-fraud regime to ensure the credibility of those disclosures of that information. And for a half century now, that regime has been interpreted to prohibit insiders from trading on the same information.
Today, a new body of securities law is emerging on top of this regulatory structure built around corporate information. That body — which we call “information-dissemination law” (IDL) — focuses on how important information is revealed to the market. The current defining feature of IDL is found in requirements that such information must be disseminated to all investors at the same exact time in the name of ordinary-investor fairness. Yet, using a market-microstructure-based understanding of securities markets, our analysis shows that the ordinary-investor benefits of such equal-timing efforts are far from clear. Indeed, it shows that simultaneity is perversely harming the most vulnerable ordinary investors. Accordingly, the Article defines this nascent area of law, subjects its fairness rhetoric to economic realities, and explores ways in which it might be reformed to further its primary stated goal or those of the field more generally — or even better, both.
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