December 16, 2021

Buybacks: SEC Proposes to Ramp Up Disclosure Requirements for Repurchases

At yesterday’s open meeting, the SEC also issued proposed rules addressing disclosure requirements for issuer repurchases. Here’s the 101-page proposing release along with the two-page fact sheet. This excerpt from the SEC’s press release summarizes the proposal:

The proposed rules would require an issuer to provide a new Form SR before the end of the first business day following the day the issuer executes a share repurchase. Form SR would require disclosure identifying the class of securities purchased, the total amount purchased, the average price paid, as well as the aggregate total amount purchased on the open market in reliance on the safe harbor in Exchange Act Rule 10b-18 or pursuant to a plan that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c).

The proposed amendments also would enhance existing periodic disclosure requirements regarding repurchases of an issuer’s equity securities. Specifically, the proposed amendments would require an issuer to disclose: the objective or rationale for the share repurchases and the process or criteria used to determine the repurchase amounts; any policies and procedures relating to purchases and sales of the issuer’s securities by its officers and directors during a repurchase program, including any restriction on such transactions; and whether the issuer is making its repurchases pursuant to a plan that it intends to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) and/or the conditions of the Exchange Act Rule 10b-18 non-exclusive safe harbor.

SEC Chair Gary Gensler mentioned that buybacks were on the SEC’s agenda when he discussed his desire to make changes to Rule 10b5-1, but the release notes that some of the disclosure proposals date back to the 2016 Reg S-K concept release. As Broc pointed out at the time, footnote 625 of that release noted that Australia required next day disclosure of buybacks. Well, G’day America! because it looks like that requirement may be heading your way.

Unlike the Rule 10b5-1 proposal, this one prompted a dissent from Commissioner Peirce (here’s her statement) and Commissioner Roisman (here’s his statement).  Speaking of statements, the SEC acted on the PCAOB’s budget and proposed rule amendments on securities-based swaps & money market funds yesterday as well, and every commissioner issued a statement on every action.  If you subscribe for updates from the SEC’s website, you already noticed this, because your inbox started exploding early yesterday afternoon.

John Jenkins