U.S. Sens. Marco Rubio (R-FL) and Tammy Baldwin (D-WI) offered support for Securities and Exchange Commission (SEC) Chair Gary Gensler’s proposed Share Repurchase Disclosure Modernization rule.
The proposed amendments would require an issuer to provide more timely disclosure on a new Form SR regarding purchases of its equity securities for each day that it makes a share repurchase. The proposed amendments would also enhance the existing periodic disclosure requirements about these purchases.
The lawmakers point out that share repurchases have risen to eclipse total capital raised by public companies and coincided with a period of relative decline in investment in tangible assets. Rubio and Baldwin say this is an inversion of the conventional role that Congress has long expected securities markets to perform.
“The unprecedented magnitude of share repurchases occurring in capital markets today represents a shift in capital markets toward transactions in securities for the purposes of financial engineering over raising capital to invest productively in trade and industry,” the lawmakers wrote to Gensler. “As such, we believe it appropriate that the Commission exercise its authority to ensure that share repurchases do not interfere with the proper functioning of the securities markets. We support the Commission’s efforts to increase the disclosure of share repurchases and ensure that share repurchases are not used unlawfully by company insiders.”
Rubio and Baldwin sponsored an amendment to the Fiscal Year 2020 Financial Services and General Government Appropriations Act that required the SEC to report on the effect of share repurchases on investment, corporate leverage, and economic growth.
“We support the proposal that issuers should describe the objective or rationale for their share repurchases,” they wrote to Gensler. “However, in order to avoid vague or boilerplate disclosure, we encourage the Commission to consider incorporating in the disclosure of objectives or rationale for share repurchases any consideration by the issuer of share repurchases relative to other possible uses of capital.”
They also support the amendment requiring issuers to disclose how share repurchases are financed.
“The disclosure of the means of financing would provide valuable information not presently available to public markets that would suggest helpful context for an issuer’s objective in repurchasing its stock,” the lawmakers added.