What is the main role of disclosure in the securities market?

The main role of disclosure in the securities market is to ensure that investors have access to relevant information necessary for making informed and sound investment decisions. Disclosure helps level the playing field among all participants in the financial markets, including individual investors, institutional investors, and other stakeholders. By mandating that companies provide transparent information about their financial health, operations, and potential risks, regulators aim to reduce information asymmetry between firm insiders and the investing public.

This enhances market efficiency and trust, allowing investors to evaluate securities based on comparable information, which ultimately contributes to informed investment choices based on accurate data. When investors are well-informed, they can better assess the risk-return profile of their investments, leading to more rational decision-making.

The focus on transparency and fairness in the markets is vital for fostering investor confidence, which is crucial for the functioning of the overall economy.