Chair Gary Gensler reflects on the case for mandatory disclosure
In a recent address at Columbia Law School US Securities and Exchange Commission (SEC) Chair Gary Gensler delivered a defense of mandatory disclosure. Gensler’s remarks paid homage to Jack Coffee’s seminal work and underscored the enduring importance of robust disclosure frameworks in modern financial markets.
Reflecting on Coffee’s influential 1984 paper, “Market Failure and the Economic Case for a Mandatory Disclosure System,” Gensler highlighted the foundational principle of mandatory disclosure as a cornerstone of investor protection and market integrity.
Gensler explained three tenants behind the historical drive for mandatory disclosure: the public good nature of securities information, misalignment between management and shareholder interests, and the imperative for efficient valuation. Drawing parallels between historical debates over mandatory versus voluntary disclosure, Gensler reinforced the necessity of regulatory intervention to ensure consistent, comparable, and reliable information dissemination.
Throughout his address, Gensler underscored the pivotal role of mandatory disclosure in fostering efficient markets, facilitating capital formation, and engendering investor trust. With a nod to recent regulatory developments, including enhanced disclosures on climate, cybersecurity, SPACs, and executive compensation, Gensler reaffirmed the SEC’s commitment to upholding rigorous disclosure standards grounded in materiality.
As Gensler quoted in his speech, “sunlight really is the best disinfectant” – and with digital disclosure practices, the benefits Gensler highlights are boosted with additional potential for data access and analysis.
Read the speech here for a 101 on the history behind mandatory financial disclosure in the US.
