The U.S. Chamber of Commerce has filed a lawsuit against the Securities and Exchange Commission (SEC) to stop it from implementing a rule that disincentivizes companies from using stock buybacks.
The lawsuit challenges the SEC’s rule under the Administrative Procedure Act, as well as the U.S. Constitution.
“Stock buybacks play an important role in the functioning of healthy and efficient capital markets,” U.S. Chamber Executive Vice President and Chief Policy Officer Neil Bradley said. “The SEC’s stock buyback rule doesn’t protect investors. Instead, it puts the thumb on the scale to discourage buybacks despite the fact that the repurchasing of shares improves returns for savers and investors across the economy.”
Buybacks distribute capital to where it is most likely to result in investments that grow businesses and add value for shareholders and investors, the Chamber said.
The lawsuit seeks to protect returns for investors as well as the ability of companies to make decisions free from government micromanagement. It adds that disincentivizing the use of stock buybacks undermines the SEC’s core mission and will hurt investors. Further, it says that mandatory disclosure requirements risk the public airing of important managerial decisions and compel speech in violation of the First Amendment.
The chamber is joined in the suit by the Texas Association of Business and the Longview Chamber of Commerce.