Today, the Commission considers adopting a final rule to enhance the disclosures related to share buybacks. I support this final rule because it will increase the transparency and integrity of this significant means by which issuers transact in their own securities.
Share buybacks have become an important method through which issuers return capital to shareholders. In 2021, these buybacks amounted to nearly $950 billion and reportedly reached more than $1.25 trillion in 2022.
Today’s final rule will enhance the transparency and integrity of the buyback process in two ways.
First, the rule will require issuers to disclose periodically the prior period’s daily buyback activity. This will include such information as the date of the purchase, the amount of shares repurchased, and the average purchase price for the date. Under the rule, such information will be reported quarterly by domestic public companies and foreign private issuers as well as semi-annually by certain close-end funds.
Second, the rule will require issuers to provide disclosure about their buyback programs. Such disclosure will include details about the objectives or rationales for the buyback as well as the process or criteria used to determine the buyback amount. Further, under the rule, issuers will detail whether the buyback was intended to make use of the affirmative defense or safe harbor available under Rules 10b5-1 and 10b-18. As relates to directors or executives, the rule requires disclosure of any policies and procedures relating to their trading activity during a buyback as well as whether, during the four-day period just before or after a buyback was announced, any of them traded in the shares subject to such buybacks. Finally, the amendments will add new quarterly disclosure related to an issuer’s adoption and termination of certain trading arrangements.
Through these disclosures, investors will be able to better assess issuer buyback programs. The disclosures also will help lessen some of the information asymmetries inherent between issuers and investors in buybacks. Based on public comment, the final rule adjusts the proposed cadence of the daily-buyback disclosure to be provided periodically rather than one business day after execution.
I think the final rule will improve investors’ visibility into buyback programs and their transaction history. That’s good for investors, issuers, and the markets.
I’d like to thank the members of the SEC staff who worked on this final rule, including:
- Erik Gerding, Brian Galle, Betsy Murphy, Felicia Kung, John Fieldsend, Deanna Virginio, Emma O’Hara, Michael Coco, Rolaine Bancroft, Sean Harrison, and Benita Talati from the Division of Corporation Finance;
- Oliver Richard, Lauren Moore, Erin Smith, Charles Woodworth, Angela Huang, Mengxin Zhao, Mikhail Pevzner, Vlad Ivanov, Mariesa Ho, Dennis Hamilton, PJ Hamidi, and Matthew Pacino from the Division of Economic and Risk Analysis;
- Rami Sibay from the Division of Enforcement;
- Megan Barbero, Bryant Morris, Dorothy McCuaig, Evan Jacobson, Cynthia Bien, Marie-Louise Huth, Natalie Shioji, Monica Lilly, Sean Bennett, and Ted Weiman from the Office of General Counsel;
- Josephine Tao, Elizabeth Sandoe, and Joan Collopy from the Division of Trading and Markets; and
- Brian Johnson, Bradley Gude, and Quinn Kane from the Division of Investment Management.