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’s rule imposes several new burdens on manufacturers conducting buybacks:
- A requirement that companies disclose detailed buyback data from each day of a fiscal quarter—imposing significant costs and dramatically increasing the complexity of businesses’ quarterly filings
- A requirement that companies provide disclosures justifying their buybacks, which could further politicize these capital allocation decisions
- New disclosures related to companies’ stock buyback programs and transactions by company management and boards of directors
The pushback: The NAM spoke out against the SEC’s rule when it was proposed last year, detailing the harm it would do to manufacturers.
- In particular, the NAM 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 NAM’s advocacy, the SEC’s final rule left out the daily disclosure requirement—a 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’s burdensome requirement that companies describe the “objectives or rationales” for any stock buybacks as well as the “process or criteria” 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: “The NAM is disappointed that the SEC has chosen to unjustifiably punish manufacturers for returning capital to their shareholders,” said NAM Managing Vice President of Tax and Domestic Economic Policy Chris Netram. “Manufacturers, investors, retirement plans and the entire economy benefit when companies can efficiently allocate capital via share repurchases.”
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—which the NAM also opposed. It is currently engaging with the IRS to minimize the harm done to manufacturers by the tax. Read more here.
Washington, D.C. – Ahead of the midterm elections, the National Association of Manufacturers released its policy roadmap, “Competing to Win,” a comprehensive blueprint featuring immediate solutions for bolstering manufacturers’ competitiveness. It is also a roadmap for policymakers on the laws and regulations needed to strengthen the manufacturing industry in the months and years ahead.
With the country facing rising prices, snarled supply chains and geopolitical turmoil, manufacturers are outlining an actionable competitiveness agenda that Americans across the political spectrum can support. “Competing to Win” includes the policies manufacturers in America will need in place to continue driving the country forward.
“‘Competing to Win’ offers a path for bringing our country together around policies, shared values and a unified purpose,” said NAM President and CEO Jay Timmons. “The NAM is putting forward a plan filled with ideas that policymakers could pursue immediately, including solutions to urgent problems, such as energy security, immigration reform, supply chain disruptions, the ongoing workforce shortage and more. Manufacturers have shown incredible resilience through difficult times, employing more workers now than before the pandemic, but continued resilience is not guaranteed without the policies that are critical to the state of manufacturing in America.”
The NAM and its members will leverage “Competing to Win” to shape policy debates ahead of the midterm elections, in the remainder of the 117th Congress and at the start of the 118th Congress—including in direct engagement with lawmakers, for grassroots activity, across traditional and digital media and through events in key states and districts as we did following the initial rollout of the roadmap in 2016.
The document focuses on 12 areas of action, and all policies are rooted in the values that have made America exceptional and keep manufacturing strong: free enterprise, competitiveness, individual liberty and equal opportunity.
Learn more about how manufacturers are leading and about the industry’s competitiveness agenda at nam.org/competing-to-win.
The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org