Regulating issuers' disclosure of inside information: the diverging approaches in the European Union and the United States

Abstract

Significant differences persist among the European Union and the United States in the regulation of issuers’ disclosure obligations on material corporate information. Lawmakers on either side of the Atlantic strive to pursue the same general objectives of market transparency and efficiency. However, in the European Union issuers are under a duty to disclose as soon as possible all precise, price-sensitive information that directly concerns them (so-called inside information), while in the United States the disclosure of corporate information is mostly periodic or triggered by the occurrence of specific events or changes. By comparing the EU and the US disclosure regimes, this chapter questions whether broad, principle-based continuous disclosure obligations such as the European ones actually represent the most balanced approach to achieve market transparency and efficiency. It argues that the European approach results, in practice, in entrusting issuers with the daunting task of selecting which corporate information must be made public to satisfy such ambitious goals, placing on them a significant compliance and organizational burden that might be particularly difficult to meet for SME issuers, potentially discouraging these companies from accessing the capital markets.