May 4, 2023

SEC Adopts Share Repurchase Disclosure Amendments: It Could Have Been Worse

Yesterday, by a 3 to 2 vote, the SEC adopted amendments to the share repurchase disclosure requirements. As originally proposed back in December 2021, the amendments would have required that a company furnish a new Form SR before the end of the first business day following the day on which the company executes a share repurchase. As adopted, the amendments require disclosure of daily repurchase data, but only on a quarterly basis and, for domestic issuers, in an exhibit to their periodic reports. The changes from the proposal prompted Commissioner Peirce to note in her statement: “The final rule is not as bad as it could have been, but better-than-it-might-have-been is not my standard for supporting a final rule.”

As noted in this fact sheet describing the rule changes, under these amendments domestic companies will be required to:

– Disclose daily quantitative repurchase data at the end of every quarter (rather than on a daily basis as proposed) in an exhibit to their periodic report on Form 10-Q and Form 10-K (for a company’s fourth fiscal quarter);

– Include a checkbox above the tabular disclosures indicating whether certain officers and directors purchased or sold shares or other units of the class of the company’s equity securities that are the subject of a company share repurchase plan or program within four business days before or after the announcement of a company share repurchase plan or program.

– Disclose in each periodic report on Form 10-Q and Form 10-K the objectives or rationales for the company’s share repurchases and the process or criteria used to determine the amount of repurchases and any policies and procedures relating to purchases and sales of the company’s securities during a repurchase program by its officers and directors, including any restriction on such transactions.

– Disclose in periodic reports on Forms 10-Q and 10-K (for the company’s fourth fiscal quarter) the company’s adoption and termination of Rule 10b5-1 trading arrangements.

Further, the amendments eliminate the current requirements in Item 703 of Regulation S-K to disclose monthly repurchase data in periodic reports. In a change from the proposal, the daily quantitative repurchase data required by the final amendments will be treated as “filed” instead of “furnished.” Information required pursuant to these disclosure requirements must be tagged using Inline XBRL.

Domestic companies will be required to comply with the new disclosure and tagging requirements in their periodic reports on Forms 10-Q and 10-K (for their fourth fiscal quarter) beginning with the first filing that covers the first full fiscal quarter that begins on or after October 1, 2023. As a result, a company with a December 31, 2023 fiscal year end will be required to begin complying with the new disclosure and tagging requirements in their Form 10-K for the fiscal year ending on December 31, 2023 as it relates to repurchases made during the quarter ending December 31, 2023.

We will be posting memos regarding the new rules in our “Stock Repurchases” Practice Area and we have updated Cheat Sheet to reflect the adoption of the final rules.

– Dave Lynn