The U.S. Court of Appeals for the Fifth Circuit has made a ruling against the Securities and Exchange Commission (SEC) regarding a rule requiring issuers to report day-to-day share repurchase data. This decision, issued on December 19, 2023, is a setback for the SEC in its regulatory oversight.
Background of the SEC Rule
The SEC’s rule mandated issuers to disclose daily repurchase activity quarterly or semi-annually, with the aim of increasing transparency in financial markets. However, legal challenges led by the U.S. Chamber of Commerce and other business entities opposed the rule. Judge Jerry E. Smith of the Fifth Circuit Court found the SEC’s actions as “arbitrary and capricious” and in violation of the Administrative Procedure Act (APA).
Timeline of the Legal Battle
Initially, the court ordered a limited 30-day remand to rectify the rule’s deficiencies, but the SEC’s motion to extend the remand period indefinitely was denied. With the SEC unable to rectify the rule’s flaws, the Court vacated the rule, in compliance with the APA.
This ruling is a significant legal defeat for the SEC and may prompt a reevaluation of its regulatory strategies, particularly concerning transparency requirements in financial markets.
Hot Take
This ruling represents a significant legal defeat for the SEC and may prompt a reevaluation of its regulatory strategies, particularly concerning transparency requirements in financial markets. It underscores the importance of rigorous procedural compliance and thorough impact analysis in regulatory rule-making.
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