SEC Stock Buyback Rule Tossed After Missed Deadline for Fix

A federal appeals court vacated a Securities and Exchange Commission rule that required companies to provide more information about stock repurchases, after the agency said it couldn’t meet the court’s deadline to fix the rule’s problems.

The SEC was given until Nov. 30 to correct issues the US Court of Appeals for the Fifth Circuit identified when it found the rule’s adoption was arbitrary and capricious. The agency told the court earlier this month it wasn’t able to meet the deadline.

The Fifth Circuit vacated the rule in an opinion Tuesday.

Adopted in May, the rule required companies to disclose a rationale for a stock repurchase. Companies also had to report share repurchase data aggregated on a daily basis.

Business groups that brought the legal challenge, including the US Chamber of Commerce, argued the rule was based on “politically-driven concerns.”

The Fifth Circuit said in an Oct. 31 ruling the SEC failed to conduct a proper analysis of the costs and benefits of the rule. It also said the agency didn’t respond to comments about the rule’s economic justifications.

“The rule remains no less flawed—and no less unlawful—than it was on October 31,” the appeals court said Tuesday.

The SEC asked the court to extend the deadline, but the Fifth Circuit refused. Business groups led by the Chamber asked the court to vacate the rule after the SEC missed the deadline.

Jones Day and the US Chamber Litigation Center represent the business groups. The SEC represents itself.

The case is Chamber of Commerce of the United States of Am. v. SEC, 5th Cir., No. 23-60255, opinion issued 12/19/23.