U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler testifies before the Senate Committee on Banking, Housing and Urban Affairs during a surveillance hearing in Capitol Hill, Washington, Sept. 15, 2022 .
Evelyn Hochstein | Reuters
WASHINGTON — The Securities and Exchange Commission quietly adopted new rules this week as investors focused on earnings and local banks. This will require public companies to disclose more information about share buybacks than ever before.
SEC Chairman Gary Gensler said in an updated disclosure statement that the new rule would “increase the transparency and integrity” of corporate stock buybacks overall and allow investors to “enable an issuer buyback program.” to better assess the
Gensler also noted that US corporate share buybacks have surged in recent years, rising from a total of $950 billion in 2021 to more than $1.25 trillion last year.
This year could be just as big. Google’s parent company, Alphabet, announced last month that its board of directors has approved a $70 billion share buyback this year. This matches the amount the company spent on his 2022 share buyback. This week, Apple announced plans to buy back more shares than Google. Equivalent to $90 billion. This year will follow his $90 billion in 2022.
of New disclosure rules It will apply when U.S. companies report their fourth quarter 2023 earnings, with a longer timeline for foreign issuers.
What do listed companies need to disclose?
- Daily log of share repurchase activity disclosed at the end of each quarter as a source of the 10-Q Report and the annual 10-K Report.
- A description of the rationale behind each buyback and the goals of that buyback. The issuer should also explain the criteria used to determine the number of shares to be repurchased.
- Whether any particular director or officer of the company bought or sold the stock in question within four days before or after the buyback.
- Details of the company’s stock trading agreement with its directors and officers, known as a 10b5-1 plan. This includes start and end dates, total number of shares, and key terms of these plans.
Approved by a 3-2 committee vote on Wednesday, new rule A long-standing battle over how much information the public and shareholders have a right to know about the increasingly common practice of corporate stock buybacks has ended.
It also reflects a significant national debate about share buybacks. Buybacks typically increase the value of a company’s shares by reducing the total number of shares on the market.
Since executive compensation is often linked to stock performance metrics, share buybacks have emerged over the past decade as a relatively simple and quick means of boosting a company’s stock price. It’s often much simpler than increasing sales or expanding your business. , or increase profits.
In the market The Corporation’s practice of issuing bonds to buy back its own shares. some economists We believe it poses a threat to the long-term health of the US economy.
The changes approved Wednesday represent a relaxation of disclosure rules originally proposed by the SEC, requiring public companies to report trading by corporate insiders on a daily basis. The commission said its final decision was influenced by concerns raised in public comments that daily reporting was too costly and time consuming.
Many public interest groups have become increasingly critical of the broader corporate takeover and applaud the new rules.
“Share repurchases have increased significantly in recent years, reinvesting capital to ensure long-term company productivity, profitability and employee well-being,” said Stephen Hall, legal director at the nonprofit Better Markets. “It’s being used more and more to enrich executives rather than improve welfare.” “This final rule will certainly improve the quantity, quality and timeliness of reporting on these controversial transactions.”
But industry supporters called the new rules onerous and unfair, and accused the SEC of trying to keep companies from buying back their own shares.
Chris Netrum, managing vice president of the National Association, said: “Overly complex, costly and impracticable disclosure orders attempt to discourage these mundane and common sense transactions. The Commission’s attempt strays from its mandate to strengthen capital formation and protect investors.” of the manufacturer.
The US Capitol has seen bipartisan support for tougher takeover disclosure rules since the SEC began the rulemaking process more than a year ago.
Capital markets “provide a means for companies to raise capital and invest it productively for their investors, workers, communities, and ultimately the nation as a whole,” said Senator Tammy Baldwin, Wisconsin. Democrat, Sen. Marco writes. Rubio, R-Fla., in a Letter to Gensler 2022.
The surge in corporate share buybacks, they write, represents a “shift to securities trading for the purpose of financial engineering rather than to raise funds for productive investment in trade and industry.”
The SEC has no opinion on whether corporate share buybacks are good or bad, and has repeatedly said the new disclosure rule only reflects the growing importance of buybacks as a key component of corporate strategy. I have said
