The proposed easing of stock buyback regulations would allow companies to purchase 100% of the stock’s average daily trading volume following a market-wide suspension, as opposed to the current regulations, limiting companies to 25%. Additionally, “actively traded” companies would be allowed to buy stocks up to 10 minutes before trading closes, instead of the current limitation, requiring companies to make purchases 30 minutes before market close.
In an attempt to gain greater transparency into company stock buyback programs, the SEC also proposes a requirement for companies to make quarterly disclosure of stock buyback activity. This disclosure would include the amount, the average price, identity of the broker-dealer and how many shares remain in the company’s repurchase program.
A public comment period of 60 days will transpire before the SEC votes on the proposed buyback changes.
The SEC also wants to allow biotechnology and high-technology companies more flexibility to make strategic investments. Currently these companies, usually with few tangible assets, are subject to investment company rules when making strategic minority investments and alliances.
The relaxation would allow a company to invest up to 20% in strategic investments, provided 75% of the investment goes to qualified research arrangements. Additionally, companies would be able to accumulate investment income up to twice the amount of their research and development expenses. If investment-related expenses do not exceed 5% of its total expenses for the last four quarters combined, a company would be eligible for protection under safe harbor rules.
The SEC is seeking public comment on this proposal until January 15, 2003.