Abstract
To every thing there is a season. In the area of securities regulation, it is the season for expansion. In this Article, I show why this anticipated expansion should not be pursued in the name of investor protection. More specifically, the Article demonstrates that the reductions to stock market information asymmetry provided by the core securities laws provide, at best, extremely limited benefits on the margin for passive investors today. Importantly, this conclusion holds true even if one disagrees with the dominant law and economics thinking about these disclosure, fraud, and insider trading laws (i.e., that there is little to no relevant investor-protection problem in the first place). Thus, I conclude that the investor-protection benefits of the core securities laws that regulate public companies and the market in which their stock is traded are marginal in another sense of the word as well.
Highlights
I do so by looking closely at how the reductions to information asymmetry provided by the core securities laws affect diversification-driven investors in the stock market
The most prominent manifestation of the inter-investor information asymmetry comes in the form of increased spreads between bid and ask prices—and higher costs for investors
Even that penny spread is the product of more than just information asymmetry. On top of this not very disconcerting picture lie a number of market mechanisms that allow diversification-driven investors to escape the brunt of whatever harm these spreads and related manifestations of information asymmetry impose
Summary
William & Mary Law School Scholarship Repository Marginal Benefits of the Core Securities Laws Haeberle William & Mary Law School, kshaeberle@wm.edu Follow this and additional works at: https://scholarship.law.wm.edu/popular_media Part of the Securities Law Commons
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