The Erosion of the Materiality Standard in the Enforcement of the Federal Securities Laws

摘要

The disclosure requirements at the heart of the federal securities involve a delicate and complex balancing act. Too little information provides an inadequate basis for investment decisions; too much can muddle and diffuse disclosure and thereby lessen its usefulness. The legal concept of materiality provides the dividing line between what information companies must disclose—and must disclose correctly—and everything else. Materiality, however, is a highly judgmental standard, often colored by a variety of factual presumptions. Recent years have witnessed an effort by the Securities and Exchange Commission to recast certain such presumptions to make the standard more inclusive. This article examines the practical effects of this development on corporate disclosure obligations and considers how well it squares with judicial pronouncements on the materiality standard.