Selective Disclosures

1. Introduction

Over the years, many countries have experienced occurrences of corruption via the unlawful use of public office for private gain.  Exposer to equities, asset defaults, illiquidity, disintermediation and policy guarantees have also increased the need to have disclosure requirements in place.

In the past, selective disclosures were becoming a major problem for investors, because of insider trading. These persons would illegally trade on the stock exchange, to their advantage, because they had access to confidential information. As a result, strict rules and regulations about disclosing financial information were implemented to ensure that both private and public companies knew exactly how to operate and conduct their investment activities, in accordance with the law.

According to Investopedia (n.d.), a disclosure can be defined as “the act of releasing all relevant information pertaining to a company that may influence an investment decision.” In today’s society, in order to be listed on major stock exchanges, companies must adhere to the complete list of the Securities and Exchange Commission's disclosure requirements. This disclosure requisite is enforced by law to ensure that all investment activities are impartial and free from unethical, illegal or unjust behavior.

Apart from companies falling subject to disclosure regulations, persons who hold financial positions, or engage in financial activities on behalf of an establishment, such as a brokerage firm or an analyst, under the law, must disclose all information relating to their investment decisions. For example, an analyst must disclose any equities that he/she may own, in order to limit issues that could potentially cause a conflict of interest.

In this paper, we will be comparing ethical standards, with respect to disclosure requirements, between the United States and the United Kingdom. Furthermore, we will list the benefits of reporting financial data, while carefully analyzing and identifying key information about the disclosure requirements of publically traded companies between the U.S and U.K. markets.

Moreover, we will highlight which country in our opinion, provides the best disclosure safeguards for investor protection, by illustrating with examples of actions taken by authorities in each jurisdiction. Lastly, this paper will summarize and analyze any findings uncovered while using secondary data sources, in order to make accurate conclusions.

1. Benefits of Financial Statement Disclosures
   

In today’s economic age, government agencies as well as private and public companies, now understand the importance that accountability plays within the financial sector. Public administrators have now put in place strict procedures to monitor, analyse and disclose both economic and financial information. Below are the following benefits that we believe are derived from financial statement disclosures: