Information Asymmetry and the Protection of Ordinary Investors

62 Pages Posted: 14 Aug 2018 Last revised: 16 Aug 2019

Date Written: June 21, 2019

Abstract

To some, the reductions in information asymmetry provided by the main securities-specific disclosure, fraud, and insider-trading laws help ordinary investors in meaningful ways. To others, whatever their larger social value, such reductions do little, if anything for these investors. For decades, these two sides of this investor-protection divide have mostly talked past each other.

This Article builds on economic theory to reveal something striking: The reductions in information asymmetry provided by the core securities laws likely impose a long-overlooked cost on buy-and-hold ordinary investors. More specifically, I explain why there is much reason to believe that the reductions take away investment return from these investors, while providing them with only limited benefits. Thus, the article presents a serious challenge to conventional wisdom on information asymmetry and the protection of ordinary investors, and argues in favor of a shift in investor-protection efforts away from the main securities laws and to areas of regulation that have received relatively little attention to date.

Keywords: Securities Regulation, Capital Markets Regulation

Suggested Citation

Haeberle, Kevin S., Information Asymmetry and the Protection of Ordinary Investors (June 21, 2019). 53 UC DAVIS L. REV __ (Forthcoming). Available at SSRN: https://ssrn.com/abstract=3222292 or http://dx.doi.org/10.2139/ssrn.3222292

Kevin S. Haeberle (Contact Author)

William & Mary Law School ( email )

613 South Henry St
Williamsburg, VA 23185
United States

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