WASHINGTON, D.C.—Today, the U.S. Securities and Exchange Commission (SEC) finalized an important rule that will increase corporate transparency for the benefit of shareholders. Stephen Hall, Legal Director and Securities Specialist, issued the following statement on the approved rule.
“Stock buybacks have grown substantially in recent years and increasingly they are used to enrich executives instead of re-investing capital to advance a company’s long-term productivity, profitability, and employee welfare. Shareholders are entitled to know when and why management is engaging in these transactions and whether they are involved in self-serving trading in connection with those repurchases. The existing disclosure requirements applicable to buybacks are weak, and this final rule will certainly increase the quantity, quality, and timeliness of reporting on these controversial transactions.
“Specifically, the final rule will require disclosure of daily repurchase activity; whether officers and directors purchased or sold shares that are the subject of a repurchase plan within four business days before or after the announcement of that plan; and a narrative explanation as to the objectives or rationales for its share repurchases and the process or criteria used to determine the amount of repurchases.
“We are disappointed that the final rule is weaker than the proposed rule. For example, the disclosure of daily repurchase activity will be required quarterly rather than within one business day, representing a lost opportunity to provide investors with virtually real-time disclosure. Nevertheless, these enhanced disclosure obligations will increase transparency and better equip shareholders to hold corporate management accountable.”
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