The timely publication of all facts about a company that can affect an investor’s choice is referred to as disclosure in the financial industry. It makes public both good and bad news, statistics, and operational information that affect its business.
The idea is that, in the interest of fairness, all parties should have equal access to the same set of information, similar to the disclosure in the law.
In the United States, the Securities Exchange Act of 1934 and the Securities Act of 1933 brought about federally compelled disclosure. In response to the 1929 stock market crash and the ensuing Great Depression, both statutes were passed.
For all businesses with U.S. incorporation, the Securities and Exchange Commission (SEC) develops and enforces disclosure regulations. Companies that are listed on the main U.S. stock exchanges are required to abide by SEC rules.
The financial crisis was attributed by both the general public and lawmakers to a lack of corporate openness, if not its direct cause.
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