The Value of the SEC's Accounting Disclosure Requirements.

Abstract

Abstract The Securities Exchange Act of 1934 are aptly referred to as "disdosure" statutes. This early, major New Deal legislation was enacted in the aftermath of the stock market "crash" of 1929 and in the depths of the Great Depression, as a remedy to the faults that many believed characterized the stock markets. Considering the current possibility that the SEC will require more disclosure from conglomerates and the 35 years that have elapsed since the Acts were enacted, people should examine whether or not the legislation was, in fact, justified and what its impact has been. This examination is limited to the accounting disclosure requirements of the Securities Acts. While the Acts include provisions for regulating the operation of stock exchanges, registration of brokers, etc., the required disdosure of financial accounting information by corporations is of primary importance. This study sought to answer several questions related to the impact of the SEC's accounting disclosure requirements. The author found that there was little evidence of fraud related to financial statements in the period prior to the enactment of the Securities Acts. Nor was there a widespread lack of disclosure. A considerable number of corporations traded on the New York Stock Exchange disclosed at least sales, gross profit, and depredation and almost all reported net income and detailed balance sheets with current assets and current liabilities given. Investors who wanted accounting data had many investment opportunities available. Hence, the author conclude that there was little justification for the accounting disclosure required by the Acts.

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