Senate Dems urge SEC to review stock buyback rules

Senate Dems urge SEC to review stock buyback rules
© Greg Nash

A group of Senate Democrats is pushing the Securities and Exchange Commission (SEC) to review its rules about stock buybacks, following an increase in share repurchases after the passage of the Republicans' tax law.

In a letter penned Thursday to SEC Chairman Jay Clayton, Democrats wrote that a review of the rules is warranted given developments in executive compensation, shareholder activism and buyback activity.

More than 20 Senate Democrats signed on to the letter, including Senate Minority Leader Charles SchumerCharles (Chuck) Ellis SchumerKrystal Ball: Is this how Bernie Sanders will break the establishment? TikTok chief cancels Capitol Hill meetings, inflaming tensions Overnight Health Care — Presented by That's Medicaid — Deal on surprise medical bills faces obstacles | House GOP unveils rival drug pricing measure ahead of Pelosi vote | Justices to hear case over billions in ObamaCare payments MORE (D-N.Y.), Tammy BaldwinTammy Suzanne BaldwinIt's time for Congress to establish a national mental health crisis number The Hill's Morning Report - Presented by Better Medicare Alliance - Dems unveil impeachment measure; Vindman splits GOP The Hill's Morning Report - Presented by Better Medicare Alliance - Dems shift strategy on impeachment vote MORE (D-Wis.) and Chris Van HollenChristopher (Chris) Van HollenDemocrats rip Barr over IG statement: 'Mouthpiece' for Trump The Hill's Morning Report - Dem dilemma on articles of impeachment Graham, Van Hollen warn Pompeo that 'patience' on Turkey sanctions 'has long expired' MORE (D-Md.).

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The letter comes as Democrats seek to leverage growth in stock buybacks as a key part of their messaging against the tax law. Democrats argue that the plethora of buybacks indicates that the law's benefits are going to wealthy shareholders, rather than middle-class workers.

Republicans have pushed back, arguing that there are many non-wealthy taxpayers who own stocks through their retirement accounts.

The Senate Democrats, however, said they are also troubled by a spike in stock sales seen by corporate insiders following their companies' buyback announcements. Earlier this month, SEC Commissioner Robert Jackson, a Democrat, called for a review of the stock-buyback rules, given that trend.

The senators argued that the SEC needs to review its 1982 rule that shields companies offering stock buybacks from securities-law violations if they follow certain criteria. The review, Democrats wrote, is needed "to ensure that corporate executives are not using the rule inappropriately to enable advantageous sales of their own stock while ignoring the needs of their companies' workers."

The senators also noted that Clayton, an independent aligned with Republicans, said at a hearing last year that he would be troubled if buybacks are motivated by companies' short-term interests.

"We, too, are concerned that short-term interests are too often driving stock buybacks," the senators wrote. "Shareholders, employees and the American public will benefit when executives have the appropriate incentives to facilitate job growth and long-term investment in their firms."

The senators requested that Clayton start reviewing its buyback rules by starting a public comment period.