Voluntary Disclosure for Primary Securities Offerings

Mandatory disclosure is a foundation of modern securities law, both in the United States and around the world.  But is it really necessary?  After all, corporate promoters wishing to sell securities for their full value already have an economic incentive to voluntarily provide information to potential investors; otherwise they would receive only a pittance per share.  Furthermore, mandatory disclosure is so expensive  that it now costs millions of dollars to file for an IPO, with the result that startups and small businesses may not be able to afford to go public.  Even many billion-dollar private companies (“unicorns”) have declined to … Read more

Resolving the Tension Between Efficiency and Inclusivity in Crowdfunding

There’s a contradiction at the core of securities crowdfunding, a form of Internet-based public stock market modelled on Kickstarter and its ilk.  On the one hand, crowdfunding seeks to create an inclusive system where entrepreneurs, regardless of where they are or whom they know, are invited to pitch their company directly to “the crowd” (the broad public).  On the other hand, crowdfunding is supposed to be an efficient system that allows startups and small businesses to be financed so that they can grow, create jobs, and contribute to the economy.  Unfortunately, these policy goals of inclusivity and efficiency are in … Read more