A federal court should dismiss a lawsuit brought by business groups challenging the Securities and Exchange Commission's new rule requiring enhanced public company stock buyback disclosures, said Better Markets, a non-profit investor advocacy group, in a court filing.
The SEC in May finalized a rule requiring companies to disclose daily stock buyback information either quarterly or semiannually. The required disclosures include the number of shares repurchased each day and the average daily price paid per share.
The rule also expands narrative buyback disclosure requirements to include a company's objectives or rationales for buybacks and the process or criteria used to determine the amount of repurchases; and any policies and procedures relating to buybacks and sales of the company's securities during a buyback program by its officers and directors, including any restriction on such transactions.
Since the rule was finalized, the fight over stock buyback disclosures has picked up.
The U.S. Chamber of Commerce, the Texas Association of Business and the Longview Chamber of Commerce filed a lawsuit May 12 in the 5th U.S. Circuit Court of Appeals, New Orleans, arguing that the SEC rule creates disincentives for companies to use stock buybacks and violates the Administrative Procedure Act and U.S. Constitution.
But Better Markets on Wednesday filed an amicus curiae with the 5th Circuit in support of the SEC's position and calling for the lawsuit to be thrown out.
"The share repurchase rule simply requires that issuers provide investors with information about stock repurchases," Better Markets said in its filing. "Vacating this important requirement in the name of 'compelled speech' will set a dangerous precedent that will call into question any number of disclosure requirements necessary to ensure that our securities markets remain the most fair, transparent, and robust in the world."
Such disclosures are necessary to enable investors to make optimal decisions about how to allocate their investment funds, Better Markets added.
Global stock buybacks in 2022 reached an all-time high $1.3 trillion, 22% higher than the previous year, according to research from asset manager Janus Henderson Investors.