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April 5, 2022

Better Markets Urges SEC to Shine More Light on Stock Buybacks, Transactions Under Fire for Benefiting Management Over Companies and Shareholders

WASHINGTON, D.C.—Legal Director and Securities Specialist Stephen Hall issued the following statement on the filing of Better Markets’ comment letter to the Securities and Exchange Commission (SEC) in response to the agency’s proposal on share repurchases, also known as stock buybacks:

“Stock buybacks have grown substantially in recent years and with that trend has come increasing public scrutiny and criticism.  They are often viewed as a strategy that corporate insiders can use to line their pockets instead of re-investing capital in the company to enhance long-term productivity, profitability, and employee welfare.  The existing disclosure requirements applicable to buybacks are weak, and we applaud the SEC for taking action to enhance the quantity, quality, and timeliness of reporting on these controversial transactions.

“Announcements of repurchases, along with the repurchases themselves, tend to exert short-term upward price pressure on a company’s stock.  This creates opportunities for management to directly increase their profits from repurchases of their own stock.  It also may enable management to boost their executive compensation in other ways by triggering certain performance metrics.  Investors need more information to understand the price fluctuations and the potential for management abuses associated with repurchases.

“The Proposal would go a long way toward satisfying this need.  It would require much more timely reporting, moving from a molasses-like quarterly timetable to an “end of next business day” deadline following repurchases. And it would enhance the quality of the reporting by requiring disclosure of the objective or rationale for the repurchases and whether any of the issuer’s officers or directions purchased or sold shares 10 business days before or after the announcement of a repurchase plan.

“In our comment letter, we urge the SEC to follow through with all of these beneficial reforms in the final rule.  And we identify a number of ways in which the final rule could be improved by requiring additional disclosures, incentivizing accurate reporting, and limiting the participation of management in repurchases to mitigate the conflicts of interest in play.”

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.

Contact: Evelyn Swan, Press Secretary, at 202-618-6433 or eswan@Bettermarkets.org

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