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April 1, 2022

Better Markets Backs SEC Rule to Improve Disclosures of Stock Buybacks

Better Markets filed a comment letter in response to the Securities and Exchange Commission’s proposed rule to modernize and improve disclosure about a company’s repurchasing of its own stock.

Why It Matters. Stock buybacks, especially by the largest corporations, have grown dramatically in recent years, both in terms of dollar amount and percentage of net income. In fact, for the last two decades, corporate spending on buybacks has represented roughly half of total net income. This type of activity is increasingly viewed as a way for corporate executives to line their pockets at the expense of the long-term health of the company, its employees, and its shareholders— further contributing to financialization and undermining the real economy.

The SEC’s proposal would increase transparency around stock buybacks by requiring daily reports of share repurchasing activity by a company on a new Form SR. It would also expand the existing periodic disclosure requirements about such repurchases through Forms 10-Q and 10-K as well as Form 20-F for foreign private issuers and Form N-CSR for certain closed-end funds.

What We Said. The enhanced disclosures will go a long way in addressing the information asymmetries that currently exist between insiders on the one hand and investors, analysts, workers, and regulators on the other.  With more detailed and timely information, investors will be better equipped to assess the impact of repurchases on stock price and to evaluate the underlying purposes of the repurchases—whether they are opportunistic choices made in the self-interest of management or genuinely prudent strategies in the interest of the company and its stakeholders.

Bottom Line. Better Markets strongly supports the Proposal and urges the SEC to strengthen it in certain respects, including by expanding the required disclosures, increasing accountability for filing accurate and timely reports, and restricting the ability of executives to trade for a period surrounding the repurchases.

Read our full Comment Letter here or click the button below.

Comment Letters
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