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November 1, 2023

Fifth Circuit Issues Flawed Decision Sending Stock Buyback Rule Back to the SEC, But There’s Light at the End of the Tunnel

WASHINGTON, D.C.— Stephen Hall, Better Markets’ Legal Director and Securities Specialist, issued the following statement in connection with the decision of the Fifth Circuit Court of Appeals finding that the Securities and Exchange Commission (SEC) acted arbitrarily and capriciously when it adopted the Share Repurchase Disclosure Modernization Rule.

“The Fifth Circuit’s decision remanding the Share Repurchase Rule got several key issues right, but one key issue wrong.  Although the Fifth Circuit rightly rejected the forced speech and cost-benefit analysis claims, it erred in holding that the SEC violated the Administrative Procedure Act (APA) by failing to respond to issues raised by commenters and by failing to conduct a proper economic analysis.  Such a ruling inappropriately saddles the Commission with extraordinary and unnecessary burdens in the rulemaking process.

“This important disclosure rule was designed to provide investors with key information to enable them to understand whether a company’s decision to repurchase its shares was in the best interest of the company and its shareholders or instead a maneuver intended to increase executive compensation.  Fortunately, the Fifth Circuit got it right when it firmly rejected the notion that such requirements violate the First Amendment limits on compelled disclosure, which is the outcome we urged in our amicus brief.  A contrary result would have threatened the foundation of securities regulation, which is based on disclosure, and the ability of the Commission to require companies to provide investors with all sorts of material information they need.

“The Court also acknowledged the appropriately limited statutory obligation of the SEC to conduct economic analysis, joining other circuits in clearly explaining that the SEC need not engage in a cost-benefit analysis on the impact of its rules.  But from there, the Court got it wrong, holding that the SEC violated the APA by failing to respond to suggestions from commenters about how the agency could quantity the rule’s economic effects.  These suggestions pointed the SEC to data that it could use to attempt a quantitative analysis.  But the law imposes no requirement on agencies to conduct their own empirical or statistical studies.  And agencies receive hundreds if not thousands of comments on their significant rulemakings.  The Fifth Circuit’s ruling thus imposes unreasonable and unnecessary burdens on the already exhaustive rulemaking process.

“However, the court recognized that there was ‘at least a serious possibility’ that the Commission could cure the defects that it identified if given the opportunity to do so.  For this reason, rather than vacate the rule, it remanded the matter to the SEC to address the issues it identified with the rule in 30 days.  Thus, the Commission still has the opportunity to further detail the basis for its decision-making and ensure that investors receive the material disclosures that the rule mandates.”


Better Markets is a non-profit, non-partisan, and independent organization founded 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

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