Full disclosure is a legal term used to refer to the practice of complete transparency, in which all material facts and information relevant to a certain situation are provided upfront. It is an important concept in many areas of law, most notably securities regulation, where full disclosure is required of publicly traded companies.
The idea behind full disclosure is that providing material facts to affected parties in a timely manner will help eliminate misunderstandings and potential disputes. By requiring the party with the information to make a full disclosure, there is less of a chance that a court will find that the disclosing party had acted in a negligent or willful manner. Disclosing all material facts upfront also reduces the risk of legal disputes based upon failure of the disclosing party to disclose the information.
For example, when a seller is making a transaction involving a stock, they must make full disclosure of all material facts related to the stock, such as its past performance and risk levels, before the transaction can be executed. This ensures that the buyer is making an informed decision and is not misled by any undisclosed information.
Full disclosure is necessary to ensure that everyone involved in a transaction is making fully-informed decisions. This helps to create a level playing field of honest and educated decision-making in the legal arena, and also promotes trust between both parties.