What risk arises from selective disclosure of nonpublic issuer information?

• A. It has no impact on fairness.
• B. It improves market transparency for all investors.
• C. It can create unfair advantages for some investors and undermine market integrity.
• D. It only affects issuers' costs.

Answer: (C)

Selective disclosure of nonpublic issuer information creates information asymmetry in the market: some participants learn material details before others. Those with the information can trade on it or influence decisions ahead of public disclosure, potentially earning unfair profits and causing price moves others cannot anticipate. This undermines market integrity and fairness, which is why such disclosure is risky and often unlawful; regulators require broad, timely public disclosure to level the playing field. The other statements don’t fit: it does impact fairness; it does not improve transparency for all investors; and it does not only affect issuer costs.