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What is a Disclosure Statement?

Mary McMahon
By
Updated May 16, 2024
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A disclosure statement is a statement written in plain language that is easy to understand and provides disclosures of information that may be relevant or important. Such statements are used in a wide range of contexts, from those of bias provided by researchers when submitting material for publication in a scholarly journal to others that may be mandated by law when people open certain types of retirement accounts, such as IRAs. When a disclosure statement is provided, people should take the time to read it because it is being provided for a reason, and the failure to read the statement could expose someone to problems in the future.

In the financial world, disclosure statements are used to provide information to people who are about to embark on financial contracts so that they clearly understand what is involved in the contract. Classic examples include those that are sent out before loans can be originated, and those that accompany the opening of retirement accounts. These statements must be issued before arrangements are finalized so that people have an opportunity to revoke or cancel arrangements if they learn about something important in the disclosure.

When such statements are required by law, people may also be asked to sign forms indicating that they have read and understood them. It is important for individuals to carefully review the document and to ask for clarification on any points that are confusing before signing such a release, even if someone is being pressured to sign and get the transaction over with. Failure to exercise due diligence may mean that people do not have legal recourse if problems related to the contract develop.

They are also used in real estate transactions. A property disclosure statement must be provided by a seller in many areas of the world when a property enters escrow. The seller must disclose any problems that he or she is aware of in connection with the property, such as the presence of known toxins, faulty wiring, and other issues. If the seller does not disclose a problem and a buyer can prove that the seller was aware of the issue, there can be legal consequences.

In areas where such a statement is required by law, it is typically printed out on a form. Using a form ensures that all of the legally required information is present and helps people interpret the statement by presenting it in a standardized way.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By anon255172 — On Mar 16, 2012

This has to be a ripoff of my $38 as I have tried at least eight times to log in and have reset my password three times. Any time I try, I get told either my email is already in the system or that it doesn't recognize the new password I have been given.

By bobcat60 — On Feb 09, 2011

With the huge increase in recent years of marketing online through blogs, regulations have had to be set regarding disclosure on certain types of web posts. For example, if a poster is writing a review of a product they received for free, they have to have a disclosure statement that says as much. Sometimes companies give a sample disclosure statement to use as a guideline. Other times they provide the exact statement they want posted. Remember though that bloggers are supposed to post a statement whether or not they are prompted or reminded by the company they are posting for.

By behaviourism — On Jan 24, 2011

Without business disclosure statements, many of us would probably be a lot less capable of understanding where our money is going when we buy a house or a car or open a bank account. I cannot imagine trying to do any sort of business with large sums of money in the times, which really were not even that long ago in many places, where there were few statements of disclosure or laws about contracts.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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