CFA Level I · CFA Level I Exam · Equity Issuance and Trading
Which of the following is the most likely reason that securities market regulation requires issuers to disclose material information?
Disclosure rules mainly aim to reduce information asymmetry between issuers and investors. Better information supports fair, efficient pricing and investor protection. Regulators cannot guarantee positive returns, and disclosure requirements do not set maximum trading prices for securities.
- ATo reduce information asymmetry between issuers and investorsCorrect
- BTo guarantee that investors earn positive returns
- CTo set a maximum price at which securities may trade
Explanation
Disclosure requirements exist mainly to reduce information asymmetry so investors can make informed decisions and prices reflect information. Regulation cannot guarantee returns, and disclosure rules do not cap prices.
Did you get it right without looking?
One question tells you little. A timed set on Equity Issuance and Trading shows your real accuracy, how long you take and where you lose marks.
More Equity Issuance and Trading questions
- An index provider constructs an equal-weighted index of 50 stocks and rebalances it quarterly. Compared with a market-capitalization-weighte…
- An investor sells shares short and the share price subsequently rises sharply. Compared with an investor holding a long position in the same…
- An investor buys 1,000 shares at $60 with 50% initial margin, borrowing $30,000. The maintenance margin is 30%. Ignoring interest and commis…
- An investor buys 1,000 shares at $50 per share with an initial margin requirement of 40%. The investor borrows the remainder. The amount bor…
- An investor who believes markets are semi-strong form efficient is most likely to choose which approach to portfolio management?
- An investor buys 1,000 shares of a listed company from another investor through a stock exchange. Compared with the company's IPO, this trad…