Public-company information has great social value. However, it is widely thought that left to their own devices, firms will under-disclose information about their condition and prospects. This thinking is embodied in the mandatory-disclosure regime that sits at the foundation of modern securities law. But government-compelled disclosure in this area—including piecemeal additions to the disclosure regime based on the latest Washington fad—leaves much to be desired.

In our recent article, Making a Market for Corporate Disclosure, we argue that the under-disclosure concern could be addressed in a far broader way by constructing a well-regulated market for tiered access to corporate disclosure. We contemplate a transparent market for early-access rights to corporate information. In this market, firms could sell access to information that they soon would release to the public. For example, when they have new information that they are willing to share with the public, firms could offer a well-advertised early peek—say, starting at 11:00 a.m.—to anyone willing to pay the market price for it. So long as firms had to make any selectively released disclosure products with material information available to the public by, say, 1:00 p.m., market supply of and demand for those products could generate improved public disclosure. All the while, the current floors of mandatory disclosure need not be changed.

Read more at The CLS Blue Sky Blog