SEC Plans to Demand More Information About Companies’ Stock Buyback

The Securities and Exchange Commission (SEC) is preparing to impose additional disclosure requirements on public companies regarding their share buyback activities. 

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The move follows Congress' introduction of a new 1% excise tax on stock buybacks, which President Biden has proposed quadrupling. Share repurchases, which tend to drive a company's stock price higher, are one of two primary methods for returning capital to investors. 

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The SEC's new rule would require public companies to provide more detailed information in their quarterly reports about the number of shares repurchased, money spent, and average share price. Under the proposed new rules, companies would have to provide daily tallies of their buybacks, enabling analysts to better compare the timing of buybacks and insider trades. 

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Corporate officers and directors would also have to disclose whether they purchased or sold shares within four business days of the announcement of a buyback program. 

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Additionally, companies would have to explain their reasons for conducting buybacks and any policies in place to limit insider transactions during a repurchase program. The SEC's five commissioners are set to vote on the new rule, which would take effect in the fourth quarter of this year.

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In a separate move, SEC commissioners will also vote on expanding Form PF, a confidential document filed by private-equity and hedge funds to give regulators visibility into potential risks in private funds. 

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The new rule would require larger hedge funds to report "trigger events" within 72 hours, such as significant losses, large withdrawals by investors, and counterparty defaults. Larger private-equity funds would have to report annually on "clawbacks," whereby a fund's managers are forced to return some of their performance-based compensation. They would also have to report more information on their strategies and use of leverage. 

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The rapid growth of private funds and other nonbank financial entities has unsettled U.S. policymakers, and a group of regulators recently proposed making it easier to designate nonbanks as "systemically important."

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