In 1934, in response to the wild market fluctuations of the Depression era, members of Congress came to the conclusion that companies that publicly traded their shares would be required to disclose data regarding their past performance on a yearly basis. The idea was simple: Individuals who purchased and sold securities required available data in order make sound decisions about the health of the companies in which they were investing. This idea was codified in a series of regulatory statues that culminated with the Securities and Exchange Act of 1934. Notably, the 1934 act also created the Securities and Exchange Commission. This regulatory body was designed, in part, to enforce the disclosure requirements newly created by Congress.
The notion that relevant financial data was necessary in order to evaluate a companies’ performance was not exactly groundbreaking in 1934. For example, in 1602, the newly formed Dutch East India Co. announced that it would publish its profit and loss statements through a disclosure to anyone willing to buy one of its shares. The company, formed by the Dutch government to maintain ties with lucrative Asian trading outposts, was one of the first to disclose financial data to its shareholders.
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