Coronavirus

SEC Head: COVID-19 Bailouts Must Be Transparent

SEC

The head of the U.S. Securities and Exchange Commission (SEC) said companies seeking federal bailouts from the economic havoc wreaked by the coronavirus crisis should tell investors where they stand.

Going into earnings season, SEC Chairman Jay Clayton said in an interview with CNBC, “investors in our markets generally are thirsting for information about our companies… we recognize here that it’s a different earnings season.”

Last month, Congress enacted a $2 trillion coronavirus relief package that offers cash for airlines and cargo carriers, $17 billion for businesses deemed critical to national security, and nearly $350 billion for small businesses to stay afloat amid the COVID-19 pandemic.

In light of that, “Companies are going to be talking about where they stand, whether they need new capital, their plans going forward,” Clayton said. “Those plans are sensitive information. I encourage companies to get out there, disclose where they stand and limit the amount of — now it’s not possible to limit all sensitive information. You have to be in negotiations, but limit speculation as to where your company stands, as we move forward.”

In response to a question about how Wall Street is seeking information about the most promising drugs that could help conquer COVID-19, Clayton called for caution.

“Companies should take precautions to prevent leaks of market-moving information before that data is revealed to the entire market,” he said.

On the question on how companies should communicate they’re thinking about buybacks and dividends in this environment, Clayton said communication is key.

“Communicating to your shareholders how you see the company performing under different scenarios, and then what that means for your capital structure, your liquidity position and your capital needs, that’s the kind of communication,” he said. “We did see a number of the large banks say they were going to suspend buybacks during this period and preserve that capital. You know, communicate. And then tell people why you’re making that decision. Investors want to know why.”

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