I commend to your attention a CLS Blue Sky blog post by George Ugeux, which makes some interesting points.
First, he makes the point that the differential tax treatment of dividends and stock buybacks is all that really differentiates the two, which raises the pertinent question of why people like Senator warren are so worked up about them. In addition, the recent surge in stock buybacks is probably Congress' fault, since it is probably linked to the recent tax cuts.
Second, "a share buyback is a recognition that the company does not have anything better to do with its money than return it to shareholders." In other words, when people like Senator Warren advocate restricting stock buybacks, they are essentially arguing that corporations should make negative net present value investments. See generally Jensen, Michael C. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers." The American Economic Review 76, no. 2 (1986): 323-29. http://www.jstor.org/stable/1818789
Third, he argues that:
Despite the good intentions of politicians who aim to limit or even ban buybacks, the issue is much more nuanced. ...
The SEC polices the fairness and the transparency of corporate actions. The capital increase of a listed company is accompanied by an underwriting process, due diligence, and justification of the board in a prospectus. Share buybacks deserve similar transparency and authorization requirements – perhaps more than under the current Rule 10B-18 regime that covers buybacks. The SEC is right to assess the wider implications of buybacks.
There's an error in there and also a misapprehension. As to the error, in general, the SEC is not allowed to regulate the substantive fairness of transactions. Consider that when the SEC adopted its going private rule, it did not adopt a proposal "that would have gone beyond disclosure requirements and placed substantive fairness limitations on an issuer's attempt to go private." § 48.3.Federal regulation of going private transactions, 20 Ind. Prac., Business Organizations § 48.3. As another example, the Supreme Court has consistency described "the ‘fundamental purpose’ of the [Securities Exchange] Act as implementing a ‘philosophy of full disclosure’; once full and fair disclosure has occurred, the fairness of the terms of the transaction is at most a tangential concern of the statute." Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 477–78 (1977). "The SEC has no authority to decide whether a particular security may be offered to the public or if the terms of an offering are fair; it can only insist that the issuer make full disclosure of all material facts." Stephen H. Case & Mitchell A., Current Issues in Prepackaged Chapter 11 Plans of Reorganization and Using the Federal Declaratory Judgment Act for Instant Reorganizations, 1991 Ann. Surv. Am. L. 75, 121 (1992).
The misapprehension is that the SEC is somehow a nonpartisan regulator. As Roberta Karmel observes, however: "The SEC is supposed to be a collegial agency of nonpartisan experts. Instead it has become an agency riven by partisanship due to politicians trying to score points and gain publicity." Roberta S. Karmel, Threats to the SEC's Independence, 2016 Bus. L. Today 1, 3 (December 2016).
