(The Center Square) – Utah Attorney General Sean D. Reyes led 14 other states in filing an Amicus Brief on July 18 in support of the U.S. Chamber of Commerce, which is challenging the Securities and Exchange Commission's new rules on stock buyback reporting.

The coalition of attorneys general pointed out in the brief, "..stock buybacks are an important, economically beneficial way companies return value to shareholders and reallocate capital. Corporate governance traditionally is a matter of state, not federal regulation, and Amici States oppose inefficient, burdensome regulations on stock buybacks."

"We are leading this coalition of states in opposition to the SEC buyback rule because the federal government again overreaches with a shortsighted and misguided policy," Reyes said.

May 3, 2022, the Securities and Exchange Commission adopted a new rule on stock buybacks. The new rule requires daily stock buybacks to be reported on a quarterly basis reflecting detailed characteristics about the shares, the issuers - both domestic and foreign, the class of stocks, the repurchase plans, the trading plans and compliance dates, among other details, to be filed on regulation forms.

Reyes noted, "This rule will have severe consequences not only for investors and companies, but for everyday Americans and retirement account holders. We applaud the advocacy of the U.S. Chamber in this matter and join with it in standing up for the people of America."

May 12, 2023, the U.S. Chamber of Commerce, the Texas Association of Business, and the Longview Chamber of Commerce sought to stop the SEC from implementing the rule in a lawsuit filed with the U.S. Court of Appeals for the Fifth District.

"Stock buybacks play an important role in the functioning of healthy and efficient capital markets," said U.S. Chamber Executive Vice President and Chief Policy Officer Neil Bradley. "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."

The coalition believes that the SEC's rule will make buyback programs of companies less attractive as it forces a public disclosure of sensitive financial information about companies, and the strategies and reasoning behind their buyback decisions.

"Research has found that buybacks save investors hundreds of millions annually by stabilizing prices and reducing risk," the Utah Office of the Attorney General stated. 

Disclosing company strategies "may provide competitors with critical insights or (become) fodder for lawsuits."

That concern which may cause companies to reduce buyback programs is a risk acknowledged by the SEC's statement "the potential legal risk stemming from such disclosures, and the potential costs of leaking valuable private information to competitors that may infer proprietary information about the issuer," can be derived from reports.

The brief presents two arguments against the SEC rule:

1. Stock buybacks provide substantial benefits for both retail and institutional investors, including state pension and retirement funds - they increase investor returns, improve market liquidity and reduce volatility, enable efficient capital allocation, allow companies to obtain shares to be used for equity compensation, and are a tax-efficient way to return cash to shareholders.
2. By making stock buybacks a less attractive means of returning value to shareholders, the Final Rule will harm investors and the public at large - it compels companies to file a publicly available "narrative," exposes the company to risk associated with public disclosure of stock buyback strategies, and imposes a tedious process of data reporting that itself presents risks to the company.

Joining Utah on this brief are the States of Alabama, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia, and Wyoming.