The Political Economy of Statutory Reach: U.S. Disclosure Rules in a Globalizing Market for Securities

This Article addresses the appropriate reach of the U.S. mandatory securities disclosure regime. While disclosure obligations are imposed on issuers, they are triggered by transactions:- the public offering of, or public trading in, the issuers’ shares. Share transactions are taking o n an increasingly transnational character. The barriers to a truly global market for equities continue to lessen: financial information is becoming increasingly globalized and it is becoming increasingly inexpensive and easy to effect share transactions abroad. There are approximately 41,000 issuers of publicly traded shares in the world. For an ever larger portion of these issuers, there will be significant numbers of transactions in their shares that have at least one U.S. dimension – the investor will be a U.S. resident, the transaction will occur in the United States, or the issuer itself will be from the United States – thereby generating some kind of claim for the United States to apply its disclosure regime. On which of these issuers is it in fact in the enlightened best interest of the United States to do so? In a previous article in this Review, I addressed the question of what apportionment of regulatory authority among the countries of the world would most enhance global economic welfare. The concern here is with the practical choices faced by U.S. officials as to the reach of their particular country’s regime. Building on the earlier article, this piece thus extends the inquiry by examining the legal and political environment in which these officials operate and the impact of their decisions on U.S. economic welfare.