SEC boosts companies’ buyback disclosure demands

Issuers will have to provide investors with more extensive disclosure of their share buyback activity under rule changes adopted by the U.S. Securities and Exchange Commission (SEC) Wednesday.

The rule changes, intended to modernize the disclosure requirements for issuers’ equity buybacks, will require companies to report repurchase activity on a quarterly or semi-annual basis, including the number of shares purchased each day, the average price paid and other details of these transactions.

“Today’s amendments will increase the transparency and integrity of this significant means by which issuers transact in their own securities,” said SEC chairman Gary Gensler, in a release. He said buyback activity topped an estimated US$1.25 trillion in 2022.

Along with the more detailed disclosure requirements, issuers will be required to indicate whether certain officers or directors traded the securities in the days immediately before or after a buyback was announced.

The rules will also require issuers to provide more extensive narrative disclosure about the rationale for their buybacks, and the process used for determining the size of these transactions.

“Through these disclosures, investors will be able to better assess issuer buyback programs. The disclosures will also help lessen some of the information asymmetries inherent between issuers and investors in buybacks. That’s good for investors, issuers and the markets,” Gensler said.

The new requirements take effect on Oct. 1.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.