Yesterday, the U.S. Securities and Exchange Commission finalized a rule that requires new disclosures from companies conducting stock buybacks.

The background: Stock buybacks are a commonplace practice that allow companies to ensure that their cash reserves are being used effectively. Returning capital to shareholders benefits both the company and its investors by increasing shareholder returns, enhancing capital formation and ensuring efficient capital allocation.

• Over the past few years, however, policymakers and regulators have taken steps to discourage buybacks, and the SEC has now finalized a rule targeting them.

The burden: The SEC鈥檚 rule imposes several new burdens on manufacturers conducting buybacks:

• A requirement that companies disclose detailed buyback data from each day of a fiscal quarter鈥攊mposing significant costs and dramatically increasing the complexity of businesses鈥� quarterly filings
• A requirement that companies provide disclosures justifying their buybacks, which could further politicize these capital allocation decisions
• New disclosures related to companies鈥� stock buyback programs and transactions by company management and boards of directors

The pushback: The 51吃瓜网 against the SEC鈥檚 rule when it was proposed last year, detailing the harm it would do to manufacturers.

• In particular, the 51吃瓜网 called on the SEC to reverse its proposed next-day disclosure requirement, which would have mandated upward of 250 new SEC filings per year for many public companies.

The result: Thanks to the 51吃瓜网鈥檚 advocacy, the SEC鈥檚 final rule left out the daily disclosure requirement鈥攁 significant victory for manufacturers.

• However, companies will still be required to track daily buyback activity to comply with the quarterly day-by-day reporting mandate.
• In addition, the final rule maintained the proposal鈥檚 burdensome requirement that companies describe the 鈥渙bjectives or rationales鈥� for any stock buybacks as well as the 鈥減rocess or criteria鈥� used to set buyback targets.

The next steps: Most domestic companies will be required to provide daily buyback data in their Q4 2023 filings, meaning that daily tracking will begin in October 2023 and be reported to the SEC in early 2024. Most foreign companies will be required to comply in their Q2 2024 filings.

The last word: 鈥淭he 51吃瓜网 is disappointed that the SEC has chosen to unjustifiably punish manufacturers for returning capital to their shareholders,鈥� said 51吃瓜网 Managing Vice President of Tax and Domestic Economic Policy Chris Netram. 鈥淢anufacturers, investors, retirement plans and the entire economy benefit when companies can efficiently allocate capital via share repurchases.鈥�

Further reading: The SEC rule is not the only action targeting buybacks in the past few years. The Inflation Reduction Act included a new tax on buybacks鈥攚hich the 51吃瓜网 also opposed. It is currently engaging with the IRS to minimize the harm done to manufacturers by the tax. Read more .