More JoMo Less FoMo: The Case for Voluntary Disclosure of Uncertain Information in Securities Regulation

Abstract

The “fear of missing out” (“FoMo”) is a phenomenon that influences human behavior with regard to future events, and helps explain why investors have such a high demand for information regarding unfolding corporate events. Given the imprecise nature of this information, the uncertainties that it implicates, and its importance to investors, information about unfolding events has received special attention in securities regulation. Although the disclosure regimes of securities regulation appear to operate in a globally harmonized and synchronized system, this Article reveals the stark differences that currently exist between the United States’ and European Union’s rules governing the disclosure of this crucial type of information. Moreover, this Article counterintuitively argues that, in the case of information about future events, less is more. Specifically, this Article reveals that the trend towards the “joy of missing out” (“JoMo”) is in fact a better response for regulating the disclosure of uncertain future information. This Article innovates by demonstrating how a regulatory architecture that builds on the interplay between insider trading prohibitions and voluntary disclosure is superior to a mandatory disclosure regime. This type of regulatory structure creates a more efficient and less cluttered supply of material information to investors, while also reducing compliance and enforcement costs, thereby bolstering the performance of financial markets.

Keywords: securities regulation, voluntary disclosure, mandatory disclosure, materiality, insider trading, corporate governance, cross-border mergers and acquisitions