Pensions & Investments, December 11, 2018 article: "SEC chairman shares priorities in Senate oversight hearing" [Regulatory priorities for supporting public capital investment in the production of goods and services]

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For previous reports of the regulatory concerns about buybacks addressed by SEC Chairman Clayton in his testimony reported below, see

June 25, 2018 Pensions & Investments: "Wary investors applauding SEC call to examine stock buybacks" [Investor views of regulator's concerns about stock buybacks]

June 11, 2018, Commissioner Robert J. Jackson, Jr., of the U.S. Securities and Exchange Commission, speech at the Center for American Progress: "Stock Buybacks and Corporate Cashouts" and June 19, 2018 Bloomberg video interview [Research and data supporting regulator's concerns about misuse of stock buybacks]

The full transcript of Chairman Clayton's testimony is available on the SEC website here.

Other reports and research addressing the use of corporate capital to repurchase stock can be found in the "Stock Buyback Policy" reference section of a Forum project that had addressed a company-specific example, and in the online user-input "Buyback Analysis" calculator developed in a Forum workshop.

For past Forum attention to required regulatory updating of proxy processes noted below, see the reports cited in the "Legal and Regulatory" section of the reference page for the Forum's public program that established marketplace standards for shareholder "E-Meetings."

Source: Pensions & Investments, December 11, 2018 article

Washington

SEC chairman shares priorities in Senate oversight hearing

BY HAZEL BRADFORD • DECEMBER 11, 2018 3:34 PM

Securities and Exchange Commission Chairman Jay Clayton Bloomberg

Corporate stock buybacks and Brexit's impact on U.S. markets were the biggest questions for Securities and Exchange Commission Chairman Jay Clayton at a Senate Banking Committee oversight hearing Tuesday.

Other issues raised were possible proxy voting reforms, executive compensation and ESG investing factors including climate change.

Maryland Democrat Chris Van Hollen pressed Mr. Clayton on whether 2017 tax cuts intended to stimulate more capital investment were being misdirected to company executives. With an estimated $800 billion in stock buybacks since tax reform legislation passed, there is "mounting evidence that insiders are cashing out after a buyback," Mr. Van Hollen said, telling Mr. Clayton, "I think a little more work needs to be done on that."

Questioned by Sen. Jack Reed, D-R.I., about whether buybacks harm long-term Main Street investors. Mr. Clayton said the SEC does not have authority over a company's capital allocation decisions, "but I agree with a number of observers in terms of how a company communicates. We can do a better job around disclosure," including on executive pay.

"If the purpose is to drive up value for an individual (executive) ... that's a problematic situation," Mr. Clayton told the committee.

Brexit "is very much front of my mind," Mr. Clayton said. "One reason I am worried about Brexit is that there are a number of issues that seem to get kicked down the road."

On proxy voting, Mr. Clayton said the SEC is looking for short-term fixes to "proxy plumbing" — how votes travel from end investors back to the company — and wants industry to propose them. On the issue of proxy advisers, "I think there's broad agreement that there are elements of the proxy ecosystem that can be improved," said Mr. Clayton, adding that he is not "wedded" to running a potential vote recommendation through the company before it is published.

One near-term priority for the SEC is finalizing a Dodd-Frank Act hedging disclosure regulation calling for companies to report whether they permit directors, officers and employees to hedge against drops in company stock, Mr. Clayton told the panel.

Contact Hazel Bradford at hbradford@pionline.com ·

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