The most frequent argument against requiring issuers to provide more disclosure is “investors are lazy and don’t use the information that is disclosed.”  Really?

Is there any proof all investors don’t use the disclosed information?  Of course not!

Is there any evidence some investors will invest even if the disclosure is inadequate and prevents them from knowing what they own?  Yes!

We know Wall Street perceives it makes more selling high margin, opaque securities than it does selling low margin, transparent securities.  Hence, it has an incentive to create these securities.  We also know for Wall Street to sell a security, it doesn’t need every investor to buy the security.  As a result, Wall Street looks for investors willing to trust the valuation story Wall Street tells without being able to verify if the story is true or not.

The fact Wall Street can find investors who Trust, but don’t Verify the valuation story Wall Street tells doesn’t mean additional disclosure is not needed.

For example, investors purchased the opaque sub-prime mortgage-backed securities at the heart of the Great Financial Crisis trusting, but not verifying the valuation story.  When the valuation story was called into doubt, these investors went looking for the data so they could independently value the securities.  What they found was the necessary data was not disclosed.