Letter to SEC on Share Repurchase Disclosure Modernization and Insider Trading

Secretary
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–1090

To Whom It May Concern:The Bank Policy Institute and the American Bankers Association (together, the “Associations”) appreciate the opportunity to comment on the Securities and Exchange Commission’s proposals relating to Share Repurchase Disclosure Modernization (the “Share Repurchase Proposal”) and Rule 10b5-1 and Insider Trading (the “10b5-1 Proposal”). The Associations understand the SEC’s efforts to provide investors with more meaningful disclosure pertaining to share repurchases and to limit opportunities for inappropriate use of plans designed to benefit from the Rule 10b5-1(c) safe harbor; however, the Associations share the concerns of issuers across industries that, contrary to the SEC’s intentions, certain elements of the proposals would disrupt markets, facilitate manipulation and harm investors. The Associations encourage the SEC to accept recommendations to address these concerns.

In addition to agreeing with those broad concerns, the Associations are further concerned that, due to the interplay between these proposals and the extensive capital and capital planning regulatory requirements already applicable to large bank holding companies and savings and loan holding companies (collectively, “Regulated Banking Institutions”), certain elements of the proposals would adversely and disproportionately impact Regulated Banking Institution issuers and would contradict longstanding U.S. bank regulatory policy to encourage Regulated Banking Institutions to use share repurchases rather than dividend distributions as the preferred mechanism for returning capital to shareholders. For this reason, it is imperative that the SEC consult with the Board of Governors of the Federal Reserve System, which is primarily responsible for administering the capital requirements applicable to Regulated Banking Institutions, prior to finalizing these proposals. Doing so would help to ensure that any securities regulations that might impact the share repurchase practices of Regulated Banking Institutions will harmonize with the important safety, soundness and financial stability policies of the Federal Reserve.

This harmonization is particularly important because, due to the extensive capital and capital planning regulatory framework applicable to Regulated Banking Institutions, and the frequency with which Regulated Banking Institution issuers typically engage in share repurchases, the general concerns cited in the proposals with respect to inappropriate and opportunistic use of share repurchases should not apply in the same way to Regulated Banking Institution issuers. Thus, the benefits of applying the proposals to Regulated Banking Institution issuers would not outweigh the costs.

Part I of this letter details how the 10b5-1 Proposal’s cooling off period could make it difficult for a Regulated Banking Institution to execute the share repurchases contemplated by its capital plan. Part II of this letter describes how the new disclosures that would be required under Item 703 of Regulation S-K could require Regulated Banking Institutions to publicly disclose information that is competitively sensitive or confidential supervisory information. Part III of this letter explains how, taken together, the various elements of the proposals could impact Regulated Banking Institutions’ share repurchase practices in a way that runs counter to longstanding Federal Reserve policy.

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