Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Disclosure Statement

What it is:

A disclosure statement is an official document that outlines the terms, conditions, risks and rules of a financial transaction, such as a loan or an investment.

How it works (Example):

In the case of a loan, the disclosure statement describes the terms of the loan, such as the interest rate, the amount borrowed, the repayment schedule, fees, disbursement conditions, collateral requirements, insurance requirements, prepayment rights (or penalties), and any other expectations of the lender and any additional obligations of the borrower.

The disclosure statement is part of the loan documentation and may be referenced and used as a part of other legal documentation, including the loan agreement, note, security agreements, pledge agreements, and other documents signed when the loan is closed.

The disclosure statement for investments, such as IRAs, explains the rules of the investment in simple, non-technical language. The disclosure statement includes the rights and restrictions of deposits, redemptions, withdrawals and penalties of the investments. In these cases, the disclosure statement is provided in advance of the execution date of the investment, allowing the investor time to consider the requirements and make a decision.

Why it Matters:

The disclosure statement is an important source of clear, concise, non-technical information about the loan or investment. It is usually written without the legal-speak or complex financial language found in other official documents. It provides the borrower, lender or investor with straightforward information about the obligations, commitments, and rights.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...