Marginal Benefits of the Core Securities Laws

Abstract

To every thing there is a season. In the area of securities regulation, it is the season for expansion. In this Article, I show why this anticipated expansion should not be pursued in the name of investor protection. More specifically, the Article demonstrates that the reductions to stock market information asymmetry provided by the core securities laws provide, at best, extremely limited benefits on the margin for passive investors today. Importantly, this conclusion holds true even if one disagrees with the dominant law and economics thinking about these disclosure, fraud, and insider trading laws (i.e., that there is little to no relevant investor-protection problem in the first place). Thus, I conclude that the investor-protection benefits of the core securities laws that regulate public companies and the market in which their stock is traded are marginal in another sense of the word as well.

Keywords: Securities Regulation, Securities Law, Mandatory Disclosure, Securities Fraud, Insider Trading