Securities laws and behavioural psychology

I just finished reading one of the best non-fiction books I have read in the recent past - by Daniel Kahneman: "Thinking Fast and Slow". You can buy it at your local book-store, or read it on a Kindle like I did. The description of what it covers according to Amazon: "In Thinking, Fast and Slow, Kahneman takes us on a groundbreaking tour of the mind and explains the two systems that drive the way we think and make choices. One system is fast, intuitive, and emotional; the other is slower, more deliberative, and more logical. Kahneman exposes the extraordinary capabilities-and also the faults and biases-of fast thinking, and reveals the pervasive influence of intuitive impressions on our thoughts and behaviour. The importance of properly framing risks, the effects of cognitive biases on how we view others, the dangers of prediction, the right ways to develop skills, the pros and cons of fear and optimism, the difference between our experience and memory of events, the real components of happiness-each of these can be understood only by knowing how the two systems work together to shape our judgments and decisions."

He has important lessons for securities regulations, in particular disclosures laws, which over-rely on the overall level of disclosure rather than on making a document readable and understandable. 

Here is a para which securities regulators and all financial regulators would be wise to adopt on a religious scale:

"An unscrupulous firm that designs contracts that customers will routinely sign without reading has considerable legal leeway in hiding important information in plain sight. A Pernicious implication of the rational-agent model in its extreme form is that customers are assumed to need no protection beyond ensuring that the relevant information is disclosed. The size of the print and the complexity of the language in the disclosure are not considered relevant-an Econ knows how to deal with small print when it matters. In contract, the recommendations of Nudge require firms to offer contracts that are sufficiently simple to be read and understood by Human customers. It is a good sign that some of these recommendations have encountered significant opposition from firms whose profits might suffer if their customers were better informed. A world in which firms compete by offering better products is preferable to one in which the winner is the firm that is best at obfuscation."