SEC introduces XBRL for private and public securities in modernisation of Share Repurchase Disclosures
Share buybacks are a significant chunk of US market demand for stocks, amounting to more than $1.25 trillion in 2022. Issuers use buybacks to return capital to shareholders, in some ways turning public markets upside down: traditionally companies come to stock exchanges to raise capital, not return it. They are also an area with inherent information asymmetries – as the issuer categorically knows a lot more than investors. In order to shine some light onto buybacks and help investors make informed assessments, the US Securities and Exchange Commission (SEC) has proposed a set of final amendments to provide enhanced transparency into timing, volumes and policies surrounding issuer’s share repurchases. The amendments include several disclosure requirements designed to give investors better access to data, including the requirement to tag disclosures using Inline XBRL.
The new rule requires issuers to disclose daily repurchase activity on a quarterly or semi-annual basis, to indicate if directors traded in the relevant securities in the four days before or after the repurchase announcement, to provide narrative disclosure about repurchase programs, and to provide quarterly disclosure related to adoption and termination of specified trading arrangements.
This rule should increase transparency and clarity in this significant area of the US economy – issuers transacting in their own securities. The additional disclosure requirements, and crucially, the application of machine-readable digital standards to those disclosures, will offer investors comparable, structured, and comprehensive information about corporate share buybacks. This is an area that has had significant legislative attention recently, with a little-noticed provision of the Inflation Reduction Act imposing a 1% tax on buybacks, which will presumably encourage companies to pay investors dividends instead.
Read the press release here, the fact sheet here, and the comments from Commissioners here.