Investors in securities normally keep stock markets alive and active due to the fact that they are the daily instant fuel of the market. The demand and the offer process in relation to investment in stocks and securities are the tools to make the fuel that leads the market machinery going in track. Potential investors in shares, securities, bonds or others should be provided with the required information that is necessary to enable them to take or make an informed and planned investment decisions that are based on clear facts of an on-going and continuous basis. The principle of full, timely and accurate disclosure of current and reliable information that is material to investment decisions is directly related to the objectives of investors protection as well as towards fair, efficient and transparent markets.
For any disclosure of information to be effective it should be clear, reasonably specific and timely. As a rule, all specific disclosure of information needed, in some certain instances, should always be augmented by a general disclosure requirement. Such a general disclosure requirement normally provides that, disclosure is required to all material information that is relevant to a particular investment decision before taking such decision by the potential investor or otherwise. Another approach for such general disclosure requirement provides that, disclosure is required of all material information that is required and necessary to keep disclosure made away from being misleading and accordingly leading to unexpected results or failure. Laws and regulations issued by competent authorities should ensure the sufficiency and accuracy of information all along the investment tenure. Generally speaking, this will involve necessary sanctions or liability to be imposed on the issuer company, in addition to all those responsible persons who fail to exercise due diligence in the gathering and provision of such information.
Regulations should ensure that proper legal and professional responsibility is taken for the content and substance of the information given. Depending upon the circumstances, those liable to take responsibility may include the issuing company underwriters, promoters, directors, authorizing officers of the company and those experts and advisors who consent to be named in the documentation or provide advice. Regulators or other competent authorities may, also, need to give careful consideration to the presence of certain circumstances under which it may be necessary “to the proper functioning of the market” to allow something less than full disclosure or partial disclosure. For example, the partial disclosure could happen in case of trade secrets or in other cases of incomplete negotiations that may affect the legal, financial or corporate status of the concerned company. In limited circumstances where the market requires some derogation from the objective of full and timely disclosure, there may be need for temporary suspensions from trading or restrictions on the trading activities of those who possess more complete information. In such circumstances trading should be prohibited in the absence of full disclosure. Sure, this is a very important point and should be strictly observed by regulators and implementing authorities. To safeguard the fair and equitable treatment of potential investors and current shareholders, regulations should require full disclosure of the security holdings of management and of those persons who hold a substantial beneficial ownership interest in a company. This is generally regarded as information necessary to enable certain informed investment decisions in the secondary market.
Some famous names in this respect, like Bill Gates, will definitely encourage many people to take active positive steps towards investment in that particular company. It goes without saying that the contrary could also happen because certain names or persons could encourage some people not to invest in a particular company. This is why disclosure is an important legal necessity required by the law everywhere with the aim of protecting investors. Regulators and other competent authorities, in each country, shall prepare certain format to be filled by concerned companies in compliance with the disclosure requirements provided by the law. Ready-made formats will help in covering and pin-pointing the needed information to be disclosed to potential investors.
To sum up, transparent disclosure is always helpful and of good impression to all. Should be the duty of all.
Dr. AbdelGadir Warsama Ghalib
Founder and Principal Legal Counsel
C \ O Dr. AbdelGadir Warsama Consultancy
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