Mandatory disclosure is the first principle of securities regulation, both in New Zealand and around the world—but is it actually necessary?  After all, anyone who wants to sell securities for their full value already has an economic incentive to voluntarily provide all relevant information; otherwise investors would offer only a pittance per share.  Furthermore, the cost of complying with disclosure requirements are so expensive that many promising companies cannot even afford to go public, to the detriment of public investors and the economy as a whole.  In a recent paper, Professor Schwartz examines the conventional arguments in favour of mandatory disclosure and shows that they are really only relevant to secondary trading markets (where investors trade securities with one another).  Accordingly, he claims that mandatory disclosure is unnecessary for primary securities offerings (where companies offer securities directly to investors), and uses equity crowdfunding in New Zealand as a real-world demonstration of his thesis.

Andrew Schwartz is a Professor of Law at the University of Colorado in the United States, where he teaches contracts and company law, and is currently a visiting scholar at the University of Auckland.  He practised in New York City and clerked for two federal judges before commencing his academic career.  He holds a law degree from Columbia University and a bachelor’s degree from Brown University.

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