From pionline.com: Corporate stock buybacks benefiting executives are growing to the point where the Securities and Exchange Commission should protect investors by revisiting outdated rules governing them, Commissioner Robert Jackson Jr. said Monday at a Center for American Progress event in Washington.
“It is troubling because it is yet another piece of evidence that executives are spending more time on short-term stock trading than long-term value creation.”
– Robert Jackson Jr., SEC Commissioner
In the first quarter of 2018 alone, American corporations bought back a record $178 billion in stock. “Because we at the SEC have not reviewed our rules governing stock buybacks in over a decade, I worry whether these rules can protect investors, workers and communities from the torrent of corporate trading dominating today’s markets,” Mr. Jackson said. “Even more disturbing, there is clear evidence that a substantial number of corporate executives today use buybacks as a chance to cash out the shares of the company they received as executive pay.”
Mr. Jackson said he is also asking his fellow commissioners to allow an open comment period “to re-examine our rules in this area to make sure they protect employees, investors and communities, given today’s unprecedented volume of buybacks,” he said.
According to research Mr. Jackson released Monday, stock buybacks are increasingly used by executives to cash out. His staff studied 385 buybacks over the last 15 months, matched to executive stock sales available in SEC filings.
One finding was a jump in stock price of more than 2.5% in the 30 days after the announcements studied. And in half of the buybacks studied, at least one executive sold shares in the month following the buyback announcement, and twice as many companies have insiders selling in the eight days after a buyback announcement than on any other trading day.
“Thus, executives personally capture the benefit of the short-term stock-price pop created by the buyback announcement,” said Mr. Jackson. While such trading is not necessarily illegal, “it is troubling because it is yet another piece of evidence that executives are spending more time on short-term stock trading than long-term value creation,” he said.