how full disclosure works
full disclosure laws began with the securities act of 1933 and the securities exchange act of 1934 the sec combines these acts and subsequent legislation by implementing related rules and regulations 2congress and the sec realize full disclosure laws should not increase the challenge of companies raising capital through offering stock and other securities to the public because registration requirements and ongoing reporting requirements are more burdensome for smaller companies and stock issues than for larger ones congress has raised the limit on the small issue exemption over the years in 1933 the exemption was 100 000 whereas in 1982 it became 5 million therefore securities issued up to 5 million are not subject to the sec s registration requirements 3publicly owned companies prepare a form 10 k annual report for the sec the report s content and form are strictly governed by federal statutes and contain detailed financial and operating information management typically provides a narrative response to questions about the company s operations public accountants prepare detailed financial statements 4due to sec regulations annual reports to stockholders contain certified financial statements including a two year audited balance sheet and a three year audited statement of income and cash flows annual reports also contain five years of selected financial data including net sales or operating revenue income or loss from continuing operations total assets long term obligations redeemable preferred stock and cash dividends declared per common share real life example of full disclosurea real estate contract often contains a full disclosure requirement the real estate agent or broker and the seller must be truthful and forthcoming about all material issues before completing the transaction if one or both parties falsifies or fails to disclose important information that party may be charged with perjury full disclosure typically means the real estate agent or broker and the seller disclose any property defects and other information that may cause a party to not enter into the deal the agent or broker must disclose whether the agent or broker has any interest in the property being sold or any personal relationship with the seller figures and estimates of the property value how long the property has been on the market and updates on offers or counteroffers placed on the property 