In the context of securities, the term disclosure refers to the release of facts and all kinds of information related to a security or fund. Disclosure is also made for companies and various business operations. The release of such information is required by the Securities and Exchange Commission, which ensures that registered companies abide by the legal regulations. Disclosure is a matter of great importance for both the company and prospective investors, because it includes information which could affect the company’s stock price. It functions to ensure fair dealings by avoiding price manipulation and other similar activities.
Disclosure, or full disclosure may also refer to the required release of information in other legal transactions. This is done in order to ensure that all parties are aware of the situation they are entering, including possible risks. Disclosure thus allows the parties involved to make informed decisions.
For example, in the context of real estate, the owner of a piece of property must inform the prospective lessee or buyer about all pertinent details in relation to the property. If there are any existing defects which may not be so obvious, these should be stated beforehand. Should the lessee or buyer discover any undeclared defects, the original owner is responsible for making the necessary repairs to the property. In such situations, as well as in other cases where violations of disclosure laws are violated, nullification of the contract may also be a consequence. In the case of prenuptial contracts, for instance, false declaration of financial assets may be enough justification for voiding the marriage.
