Anne M. Tucker (University of Georgia School of Law) and Timothy D. Lytton (Georgia State University College of Law) have posted The Hidden Work of Disclosures on SSRN. Here is the abstract:
Most investors do not read mutual fund disclosures, yet disclosure remains the central regulatory tool of U.S. securities law. This gap between regulatory design and investor behavior has led many scholars to conclude that disclosure is largely ineffective. This Article shows why that conclusion is wrong.
Drawing on original interviews with investment advisers, fund managers, compliance officers, and fund counsel, we demonstrate that the principal consumer-protection effects of disclosure occur before any document reaches the public. The process of drafting, reviewing, and revising mandated disclosures activates professional norms, legal oversight, and organizational routines that shape how mutual funds design products, market shares, manage portfolios, and comply with the law. Across institutions, disclosure operates as a powerful private-governance mechanism organized around a simple norm: “say what you do and do what you say.”
By revealing the hidden work of disclosure, the Article reframes decades of skeptical scholarship and offers a more accurate account of how modern securities regulation protects the more than 120 million Americans who invest in mutual funds to finance retirement, education, and long-term financial security. Our argument has particular urgency in an era of administrative atrophy, as reduced enforcement capacity has intensified calls to weaken, if not abandon, disclosure-based regulation. Reconceptualizing disclosure as a form of co-regulation that mobilizes private governance inside firms, the Article explains why disclosure may continue to protect investors ex ante even as public oversight weakens. More broadly, the Article offers regulatory design principles for leveraging private governance to protect consumers in complex, information-dense markets.
Recommended.
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