College of Law Faculty Scholarship


Personal Facts About Executive Officers: A Proposal for Tailored Disclosures to Encourage Reasonable Investor Behavior

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Required disclosures under U.S. securities laws, whether mandated by line-item disclosure rules, gap-filling regulations, or antifraud provisions, tend to focus principally, although not exclusively, on corporate facts - information about an issuer of securities or a transaction involving an issuer of securities. Although there are line-item disclosure rules that require the public revelation of personal facts about executive officers (both by the issuer and by the executive himself or herself), these rules are limited in scope.

However, public disclosure of executives' personal facts not covered by these line-item rules still may be required under applicable gap-filling regulations or antifraud provisions. The analysis of whether and, if so, when to disclose personal facts about an executive officer under these regulations and provisions may be difficult. The lynchpin in that analysis is a decision as to whether the personal facts are material under applicable formulations of the judge-made materiality standard. These materiality determinations may be complex and emotionally laden.

This paper argues for an enhancement of federal disclosure rules as they relate to personal facts about executive officers of public companies. The paper first summarizes significant existing requirements for disclosure about executive officers. Then, the paper argues that the existing federal securities law regime applicable to public company executive disclosures of personal facts is deficient in three respects. Specifically, existing disclosure requirements place too much discretion in the hands of executives, cause pressure on important individual rights, and tend to cause investors and markets to overreact. As a response, the paper proposes limited federal securities rule changes designed to more effectively and efficiently manage the public release of personal facts about public company executives.