US Chamber of Commerce sues securities regulator over new share buyback rule

FILE PHOTO: The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C.

By Chris Prentice

NEW YORK (Reuters) -A powerful U.S. business lobby group sued the Securities and Exchange Commission on Friday over a new regulation requiring publicly traded companies to disclose more information about share buyback programs.

The Chamber of Commerce says the new requirements, which SEC commissioners approved last week in a 3-2 vote, will hurt public companies and their investors. The group accused the SEC of failing to properly weigh the costs and benefits of the plan or to give industry enough time to react to the proposal. It also said the regulation violates companies' free speech.

The rule requires public companies share the rationale for their repurchases, details about company policies and daily tally of buybacks on a quarterly or semi-annual basis. It takes effect later this year.

Tom Quaadman, executive vice president of the Chamber's Center for Capital Markets Competitiveness, said in an interview that buyback programs return money to investors and give companies a way to handle excess cash.

"Are investors better off or worse off after this rule? We would argue they are worse off," Quaadman said.

Critics of share buybacks say they give a short-term boost to share prices at the expense of long-term investment and extra liquidity during downturns. Democratic lawmakers including Senator Elizabeth Warren have slammed such programs.

SEC chair Gary Gensler has said the new requirements will improve investors' visibility into companies' buyback programs.

An agency spokesperson said the commission undertakes rulemaking in line with its authorities, adding: "We will vigorously defend the challenged rule in court."

The Chamber's lawsuit marks the latest challenge facing an ambitious policy agenda being rolled out by Democratic SEC Chair Gary Gensler. The agency faces criticism from industry and lawmakers over the speed and breadth of a slew of new rules. A decision last year by the increasingly conservative Supreme Court threatens Gensler's climate policy agenda.

The Chamber's lawsuit was filed in the 5th U.S. Circuit Court of Appeals, a conservative-leaning court that has issued several high-profile rulings adverse to the Biden administration.

The SEC has also been defending against another lawsuit from the Chamber and others over the agency's decision to roll back a 2020 proxy advisor rule. The business group is appealing a decision by a federal judge in Tennessee to dismiss that case.

(Reporting by Chris Prentice; Editing by Dave Gregorio)