FOR IMMEDIATE RELEASE
May 3, 2023
SEC Brings Much-Needed, Long-Overdue Transparency to Stock Buybacks, But Falls Short of Initial Proposal’s Promise
Washington, D.C. – The Securities and Exchange Commission (SEC) today finalized a plan to bring long-overdue transparency to the practice of companies buying back their own stock. However, the final rule weakened key aspects of the initial proposal.
Even though stock buybacks were largely considered market manipulation before the early 1980s and are now widespread — reaching $6.3 trillion in the decade ending in 2019 and not missing a beat during the COVID-19 pandemic — the market has only been receiving information about buybacks on a quarterly basis disaggregated by month. Under the new rule, disclosures will have to be disaggregated by day.
“The increased transparency this rule will bring to public equity markets will help investors properly evaluate the practice of stock buybacks in the companies they are invested in,” said Natalia Renta, senior policy counsel for corporate governance and power at Americans for Financial Reform Education Fund. “Long-term investors like pension funds and individuals saving for retirement will be able to assess whether money spent on stock buybacks to increase share price in the short-term would be better spent on investments needed for the long-term viability and growth of the company — like research and development, worker safety and wages, and consumer protection.”
However, the final rule differs from the proposed rule in key respects, including by requiring daily stock buybacks disclosures to be reported quarterly in most cases, as opposed to within one business day of execution. Additionally, the window within which a company must disclose insider trades before or after a stock buybacks announcement decreased from ten business days to four business days.
“Although we celebrate this important milestone in stock buybacks disclosure, we are disappointed that the final rule fell short of the more robust disclosures the SEC initially proposed, which would have more comprehensively addressed the information asymmetries that currently exist between insiders and other investors that leave the door open to market manipulation and insider advantages,” said Renta.
For more information, read the AFREF-led coalition comment letter submitted to the SEC and a blog post about the harms of stock buybacks.
AFREF Project on Corporate Governance & Power
Towards corporate decision-making that is people-driven, not Wall Street-driven