Regulators to Temporarily Ease Rules On Companies Buying Their Own Stock
By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- Fearing that a rush of orders could cause
volatility in stock prices, the Securities and Exchange Commission
on Friday said it would ease limits on companies repurchasing
their own stock to help assure orderly markets when trading
resumes Monday.
"These market's are the world's strongest and most vibrant, in
spite of the heinous acts of last Tuesday," the SEC said in a brief
announcement. "Investors should be assured that U.S. markets
will function effectively and fairly, and that market and investor
protections are squarely in place."
The regulation, which is designed to prevent market manipulation,
restricts companies from trading in the first and last 30 minutes of
each market day. The SEC said it also will set the amount of
shares each company can repurchase, pegged to a formula related
to recent average daily trading volume.
The commissioners, who are concerned with how the markets will
respond when trading resumes Monday morning after a four-day
hiatus, are exercising their authority to grant relief for up to 10
days from its rules. After the 1987 crash, the SEC took a similar
emergency action.
The idea for the relief came from the SEC. "We reached out to
the issuers for suggestions on things we could do to provide the
most liquid markets when trading resumes," said Annette
Nazareth, SEC's director of market regulation.
She said the SEC approached pension funds, broker-dealers, and
trade associations for recommendations on easing rules that could
allow for the orderly reopening of markets.
Harvey Pitt, who represented many major companies as a private
attorney for over two decades before he became SEC chairman
last month, specifically proposed the idea of easing the rule
governing company stock repurchases, SEC officials said.
Brian Borders, executive director of the Association of Publicly
Traded Companies, said the SEC action may be coming too late
for companies to make decision about repurchasing plans. He said
boards of directors, who normally must approve stock
repurchases, likely won't have time to meet until next week.
Mr. Borders said he approached the SEC and voiced his support
for easing the rule.
In addition, the SEC also may lift restrictions on officers, directors
and big holders from trading in their related company stock.
Regulations stipulate that if insiders trade more frequently than six
months, they must return profits from such trades.
The SEC also is considering waving a new auditor independence
rule that prohibits auditors from doing bookkeeping services. An
SEC officials said the commission recognizes the need for auditors
to help reconstruct books and records for client companies from
Manhattan's financial district which may have lost all their records
in the terrorist attack.
House Financial Services Chairman Michael Oxley (R., Ohio)
said, "Those are the kinds of things that can facilitate the market
working better and provide some confidence, particularly in the
early going on Monday."
SEC officials said there have been suggestions that the regulator
temporarily restrict short sales and trading by certain investment
groups, such as hedge funds. Some companies fear that stock
prices could be beaten down, for instance, if there were a flood of
short sales, in which investors borrow shares with the expectation
that they will replace them with cheaper shares if the price
declines.
"There will be no prohibition on short sales or trading by any
other market participant," Ms. Nazareth said.
Write to Michael Schroeder at michael.schroeder@wsj.com |
