In a significant setback for the SEC, the Fifth Circuit Court of Appeals struck down the agency's stock-buyback rule on Tuesday, reports WSJ.
Gamza KhanzadaevRipple's Chief Legal Officer Stuart Alderoty promptly criticized the SEC's actions, pointing out what he saw as arbitrary decision-making. Alderoty's comments reflect a growing concern within the industry about the SEC's recent rulings.
The invalidated rule, implemented by the SEC in May, aimed to compel public companies to disclose their daily share of repurchases and provide explanations for their stock buybacks. Gensler's rationale behind the rule was to prevent companies from using buybacks to artificially inflate executive compensation, often linked to metrics like earnings per share.
However, reports from the Wall Street Journal suggested a different motivation: Gensler's desire to support securities litigation lawyers in suing companies over their buybacks.
His loss
The U.S. Chamber of Commerce challenged the rule, arguing that the SEC violated rules by failing to quantify its costs and benefits. The Fifth Circuit panel agreed with the chamber, criticizing the agency's inconsistent arguments.
The court highlighted the agency's conflicting stance, pointing out that the SEC simultaneously claimed that disclosing proprietary information would have modest costs while providing valuable information for investors. The court concluded that the commission cannot maintain such contradictory positions.
Alex DovbnyaThis ruling adds a new chapter to the ongoing Ripple vs. SEC saga. As the case advances to the remedies stage, the court will determine appropriate actions concerning institutional sales by Ripple, deemed by the court as sales of securities.
Given the SEC's losing streak and the current chairman's growing discontent, the outcome of this case could have an irrevocable impact on securities regulation in the United States.
Arman Shirinyan
Dan Burgin
Alex Dovbnya