SEC limits stock buybacks, faces backlash from firms and investors.

SEC Implements New Rules to Increase Transparency in Stock Buybacks

Corporate Lobbyists Criticize SEC’s Move

The Securities and Exchange Commission (SEC) has recently announced changes to share-repurchase disclosure rules, which have drawn criticism from corporate lobbyists. The new updates aim to increase transparency, competition, and efficiency in the $25 trillion marketplace for hedge fund and private equity fund advisors.

Amendments to Form PF

The SEC’s new rules will amend Form PF, which was created in 2008-09 during the Great Recession to monitor risks in the stock buybacks, faces backlash from firms and investors.”>rapidly growing private equity fund sector. The rule was meant to enhance the quality of confidential regulatory disclosures by large equity and hedge fund advisors regarding their investment strategies and leverage so that investors can better assess issuer buyback programs.

Opposition from the US Chamber of Commerce

The U.S. Chamber of Commerce (USCC) has objected to the SEC’s move, saying that altering the rules to stock buybacks would actually be counterproductive and slow growth at a time when the economy faces uncertainty.

Increased Disclosures for Issuers

The SEC’s updates to share-buyback disclosures rules force domestic and foreign companies to file quantitative disclosures forms for daily repurchases on a quarterly or semiannual basis, depending on the type of issuer. Issuers will now have to periodically disclose the prior period’s daily buyback activity, including information such as the date of the purchase, the amount of shares repurchased, and the average purchase price for the date.

More Details Required

Additional disclosures will mandate further details stating the objectives or rationales for the buyback as well as the process or criteria used to determine the buyback amount. The aim of the rule is to provide investors with more information to assess the purposes and effects of share repurchases, which last year amounted to nearly $950 billion, the SEC said.

Protecting Investors and Promoting Financial Stability

“I think that this final rule, through the greater visibility into funds it will provide to regulators, will help protect investors and promote financial stability,” SEC chair Gary Gensler announced at a meeting ahead of the vote.

Notification to Financial Regulators

Financial advisors will also have to notify financial regulators within 72 hours of certain events, which may indicate significant stress or otherwise signal the potential for systemic risk and investor harm, such as significant margin calls or counterparty defaults.

Quarterly Disclosures

Finally, the latest amendment will require new quarterly disclosures related to an issuer’s adoption and termination of certain trading arrangements.

The SEC’s new rules aim to increase transparency and integrity in stock buybacks, which have become a significant means by which issuers manage extra capital. While some critics oppose the use of share-repurchase plans, the SEC’s new rules will provide investors with more information to assess the purposes and effects of share repurchases.

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